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30 Tax Foundation's Tax Review 1 (1969)

handle is hein.tera/tafoutaxt0033 and id is 1 raw text is: Tax Review JANUARY,199 .0 Vol. XXX, No. 1 Some International and Domestic Aspects Of Tax and Expenditure Policy By Hon. Wilbur D. Mills Unted States Representative from Arkansas The relationship of our tax policy and the bal- ance of international payments is a subject that deserves far more attention than it has received domestically. The essential relationship is certainly not lost on foreign observers. Indeed, the dollar could not have played the role it has since World War II as the principal reserve currency were it not for the ac- ceptance by others of the slogan that we have long had here at home-It is as sound as the dollar. Because of its soundness and universal acceptance, the dollar has fulfilled the world's need for an ex- panded international currency and has contributed much to economic growth and the expansion of world trade during that period. Nevertheless, because of developments both at home and abroad, the stability of the dollar has been questioned by some. We are finding more and more that the responsibilities which accompany the dollar's role as an international reserve currency emphasize and re-enforce the need for pursuing those policies which maintain the soundness of the dollar domestically. Particularly in the last several years, we have found that the stability of the dol- lar has been questioned not alone for the balance of payments deficits due in part to our many com- mitments abroad. It is clear that the lack of suffi- cient fiscal restraint domestically has also contrib- uted to the loss of confidence in the soundness of the dollar. In our concern with the balance of payments and its importance to the monetary and financial position of the dollar internationally, we often underestimate the contribution that our foreign trade makes to our own economic progress. United States exports or imports only account for about 6 percent of the gross national product. Here again, however, recent trends in our foreign trade account remind us of the impact of our tax and expenditure policy on exports and imports. In recent years, as perhaps never before, we are reminded that each addition to the cost that United States producers bear in exporting abroad or in competing in our own domestic market deserves careful consideration in terms of employment and investment opportuni- ties and profit positions. At the same time, we must This Issue in Brief The 1968 Revenue and Expenditure Con- trol Act's embodiment of the principle of expenditure control, says Rep. Mills, is im- portant with respect to the nation's balance of payments position. Important as this Act was for the short run, its greater significance, he says, lies in hopes that the planning of total Federal government spending in rela- tion to revenue, can continue. The payments problem is one reason why the issue of government spending is so critical, he says, noting that since 1965, Federal expenditures have taken off like the Apollo spaceship. He foresees this spend- ing ranging from $192-$195 billion in fiscal 1970. Unless this upward spending trend is reversed or lessened, he says, it can only mean either increasing deficits with its un- fortunate international as well as domestic consequences, or higher tax burdens. - Copyright 1969 by Tax Foundation, Inc., 50 Rockefeller Plaza, New York, N.Y. 10020, Judson 2-0880 1

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