Still Serious

During his presidential campaign and throughout his first year in the White House, President Kennedy expressed frequent concern about the depletion of U.S. gold reserves. Yet despite his best efforts to reduce the gold outflow, the situation, as described in a report to Congress from Treasury Secretary Douglas Dillon last week, is still serious.

Dillon's report noted that in 1960 the Treasury Department lost $1.7 billion in gold. Last year the gold loss was $857 million. These deficits occur largely because foreign nations have been buying U.S. gold with their U.S. dollars, which flow generously into foreign coffers as the U.S. continues to spend more abroad than it gets back. The deficit in the U.S. balance of payments, predicted Dillon, will not be eliminated in 1962. Although Dillon did not estimate just what the deficit will be, it is possible that there may be no reduction at all this year in the gold outflow.

Dillon was, however, optimistic that the problem can be licked, and he suggested three immediate steps to give a new push to the Government's drive to solve it: 1) the addition of a high level Commerce Department official to coordinate all efforts to increase exports; 2) new tax legislation to eliminate the incentive for U.S. corporations to transfer funds abroad (its main aim: to nullify a recent Canadian tax change that encourages U.S. companies doing business in Canada to shift funds from U.S. to Canadian banks) ; 3) a study to see if U.S. export sales are being hurt by the federal program under which U.S. farm surpluses are exchanged for foreign commodities.

Beyond these specific proposals, both Dillon and President Kennedy, in a letter accompanying Dillon's report, emphasized that the U.S. must reduce all unnecessary Government spending abroad and get other nations to assume a larger share of military defense costs. At the same time, the U.S. must work toward a balanced budget, check inflation and meet foreign business competition. Said the President: "We must harness the energies of all of our people to the vital task of keeping our industry competitive and expanding our exports." Said Dillon: "Above all else is the compelling need for business and labor to exert conscious restraint in shaping wage and price policies."

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