who
resigned last month as U.S. Treasury Under-Secretary for Monetary Affairs, warned that the Administration must take action within the next few months to curb the deteriorating external payments deficit. In an interview in the current issue of U.S. News and World Report Mr. Roosa declared that there had been a “serious worsening” in the U.S. balance of payments position in the final quarter of 1964. “We are nearing the end,” he declared, “of any period of support that we can expect from the rest of the world through their holding the additional dollars—our I.0.U.s—to cover our foreign deficit.” Although official figures of the payments deficit for the whole of last year have not yet been published, there have already been various private forecasts that, after averaging $500m. in each of the first three quarters, it deteriorated in the final three-month period to between $1,100m. and $1,500m. The worsening position has caused alarm within the Administration, which is known to be contemplating a package of monetary and qualitative measures aimed at reducing the deficit. Announcement of the package, however, has so far been delayed by a serious controversy among various Government Departments and the Federal Reserve concerning the actions which would prove most appropriate. Mr, Roosa, ruling out any possibility of a devaluation of the dollar, declared that a protection programme should include such steps as tying a greater amount of U.S. foreign aid to purchasers of American products. But the contemplated package would probably extend far beyond such a relatively mild project which, after being partially in operation for some years, has already tied the bulk of foreign aid outlays to purchasers in the U.S. The Administration has become disturbed for two major reasons by the growth in the U.S. external deficit. First, it fears a possible loss of confidence in the dollar abroad which could persuade some Governments to exchange part of their large
dollar holdings for gold (as France
has already done) and thereby cause
further outflows from declining U-S.
gold reserves. Gold purchases in
London by private speculators in
response to weakness of the dollar
would have a similar, if more indirect,
impact.
Secondly, there is concern about
U.S. bargaining power in crucial
international financial negotiations
which have now been in progress for
more than a year.
Among qualitative controls said to
be under discussion, meanwhile, are
the following:—
1—The introduction of an exit visa,
costing $50 or $100, for tourists
purchased each time an individual
left the country. This tourist “tax”
would be aimed both at reducing
foreign travel — which results in
foreign expenditures by Americans
Feb. 10. 1965 —- THE WEEK
averaging $3,000m. annually—and at
cutting expenditures abroad by indi-
viduals who still decide to make the
trip;
2—Limitations on direct invest-
ments abroad by U.S. corporations;
3—Withdrawal of American troops
from overseas bases;
4—Tax concessions aimed at en-
couraging American companies to
remit profits from their overseas sub-
sidiaries.
Each of these and other recom-
mendations, however, have as many
opponents as advocates. While some
members of the Federal Reserve
Board, for instance, favour tighter
money President Johnson went out of
his way to explain in his economic
message last week that he did not
wish to disturb domestic economic
growth by such a move.