Summary and Highlights of Fiscal Operations July 1959-December 1960 Budget results The Government's operations resulted in a budget surplus of $1.2 billion in the fiscal year 1960. The outcome for 1960 was in marked contrast to that for 1959 when a deficit of $12.4 billion had occurred. Changes in both receipts and expenditures contributed to the change of $13.7 billion between the two years. Receipts rose $9.8 billion above the previous year, while expenditures decreased $3.8 billion. Receipts of $77.8 billion in 1960 were substantially greater than in any previous year. They exceeded by $7.2 billion the total of the previous peak year, 1957. Although there was a surplus of receipts over expenditures of $1.2 billion in 1960, the total public debt increased by $1.6 billion during the year primarily because of an increase of $2.7 billion in the balance of the Treasurer of the United States above the level at the end of 1959. As of June 30, 1960, the total public debt outstanding 5 amounted to $286.3 billion compared with $284.7 billion as of June 30, 1959. The Government's fiscal operations in 1959-60 and their effect on the public debt are summarized as follows: Trust account and other transactions, excess of expenditures, or receipts (-)2. * Includes net trust account transactions, etc.; net investments by Government agencies in public debt securities; net sales or redemptions of obligations of Government agencies in the market; changes in clearing and other accounts necessary to reconcile to Treasury cash; and changes in amount of cash held outside the Treasury. Because the Government's expenditures are spread somewhat evenly during the fiscal year while tax receipts are not, the Treasury is required to provide some interim financing even in periods when the Government's expenditures in the fiscal year are in balance or result in a surplus. Receipts from corporation income taxes and from individual income taxes not withheld are much less in the first half than in the second half of the fiscal year. For this reason, fiscal 1959 showed a deficit of $11.0 billion in the first six months. This accounted for almost 90 percent of the deficit for that year. Although fiscal 1960 ended with a surplus, the deficit for the first six months of the year amounted to $5.6 billion. Although a small surplus is expected for the full fiscal year 1961, the deficit for the first six months was $4.9 billion. Public debt operations Debt management, which may be defined as decisions by the Treasury concerning the types of securities to be issued in raising new funds or in refunding maturing obligations, is an integral part of Federal financial responsibility The major objectives of debt management are twofold: To contribute to an orderly growth of the economy without inflation, and to achieve a balanced maturity structure of the public debt. The latter was the most pressing debt management problem during the fiscal year 1960. During this period new offerings of U.S. securities with maturities of more than 5 years were not competitive within the range allowed by the statutory maximum rate for such issues of 44 percent. Despite repeated requests from the President urging removal of the interest rate ceiling, Congress failed to act on this matter. The net effect was a relentless increase in the short-term debt since the Treasury was forced to rely almost exclusively on new issues of Treasury bills, certificates, and notes which mature in 5 years or less and on which no interest rate ceiling existed. Early in the fiscal year the Congress enacted legislation which removed a major impediment to the exchange of Treasury securities in advance of their maturities. Under this legislation the Secretary may designate any advance refunding, involving the same face amounts of old and new issues, as a nontaxable exchange; that is, one in which no gain or loss is recognized until the new securities are sold or redeemed. This legislation makes it feasible for the Treasury to engage in refunding operations in advance of maturity dates which would encourage the owners of existing securities to exchange their holdings for new and longer term issues. It was not until June 1960, however, that the Treasury was able to make effective use of this authority. An advance refunding operation was undertaken in that month, followed by a second in September 1960. A general discussion of the principles of advance refunding will be found in this report on pages 305 to 318, and an account of the two financing operations in which the advance refunding technique was used will be found on page 29. Although the Treasury issued mainly short-term obligations during the fiscal year, the inflationary potential of this type of financing was held to a minimum by the success of the Treasury in issuing securities in the 4- to 5-year maturity range and in increasing private holdings. of Federal securities outside the commercial banking system. A more detailed review of debt management objectives and public debt operations during the fiscal year will be found beginning on page 25. International financial and monetary developments United States international financial policies during the year were directed especially toward the continued expansion of free world facilities for assisting economic development in the less-developed countries and toward supporting, through measures relating to the U.S. balance of payments, the strength of the dollar as the world's major monetary reserve currency. For several years it had been recognized that existing national and international agencies could not, within the financial framework established by their organic acts, undertake certain kinds of financing needed to accelerate the pace of development in the less-developed countries. In 1960 there was established by international agreement, on the proposal of the United States, the International Development Association (IDA) as an affiliate of the International Bank for Recon |