Treasury Secretary W. Michael Blumenthal said yesterday that the U.S. will not be "indifferent" to the continuing larger deficit in its trade balance. At the same time, he said that "Americans and everyone throughout the world have reason to be confident about the soundness of our economic performance."
Blumenthal's remarks to the Chamber of Commerce in Louisville, Ky., followed by a day the government's report that the June trade deficit had soared to $2.8 billion.
Blumenthal also revealed for the first time, in discussing tax law changes that the administration is "considering" a change in allowances for typical expense-account deductions, such as meals, travel and entertainment expenses, including "the present deductibility of such expenses as club dues, theater tickets and travel to conventions outside of the United States.
He said no final decisions had been made on this question, or other alternative tax changes almost all of which have been detailed before in Treasury statements.
Supplementing the June trade deficit report, the Commerce Department yesterday also revealed that on balance of payments basis, the trade deficit had soared to $7.79 billion in the second quarter from $6.98 billion in the first quarter.
The balance of payments calculation is different from the monthly "census" basis, notably in inclusion of the substantial imports of oil to the American Virgin Islands.
Petroleum imports in the second quarter rose to about $12 billion, with an average 9.8 million barrels a day in the second quarter, compared to $11 billion and a 9.3 million barrel daily average in the first quarter.
"Clearly, we cannot be indifferent to these large [trade deficit] numbers," Blumenthal said, "and we are carefully watching developments on a continuing basis."
Blumenthal repeated his belief that "a strong dollar is of major importance not only to the United States but to the rest of the world."
But he stressed that the way to "assure the strength of out currency" is to follow "sensible economic policies, by keeping inflation under control and introducing an effective program for conserving energy and by improving the vitality and efficiency of our economy."
Blumenthal conspicuously omitted any suggestion that the U.S might intervene to prop up the dollar in foreign exchange markets, a tactic that the West German Ministry of Finance has unofficially recommended, according to a report in The Washington Post from Bonn this morning.
Blumenthal made no direct reference to concern expressed Tuesday by Federal Reserve Board Chairman Arther F. Burns over depreciation of the dollar.
Despite his expressed concern over dollar depreciation, Burns has not yet recommended an active intervention policy.
Coincidentally, Rep. Henry S. Reuss (D-Wisc.) said yesterday that the dollar is not weak. He said the Fed and other central banks "should keep their hands off and not intervene" to shift the value of their currencies, except when necessary to maintain "orderly market conditions."