Treasury Secretary-designate W. Michael Blumenthal yesterday strongly endorsed the intention of the Tax Reform Act of 1976 to withdraw certain tax benefits from American companies cooperating in the Arab boycott of Israel.
In his confirmation hearing before the Senate Finance Committee, Blumenthal said he is "strongly opposed to these sort of boycotts."
When Sen. Abraham A. Ribicoff (D-Conn.) charaterized Treasury regulations drawn up under Secretary William E. Simon as "totally unacceptable." Blumenthal promised a review, "immediately on taking office," to make sure the regulations carry out the intent of the law.
Blumenthal offered carefully hedged views on a wide variety of domestic and international economic affairs, and was favorably received by all members of the committee.
Committee chairman Russell B. Long (D-La.) referred to Blumenthal's rise from young immigrant to chairmanship of the Bendix Corp. as "a modern Horatio Alger story" and praised his willingness to take a government salary at a "great (financial) sacrifice."
Blumenthal said he would sever all relationships with Bendix prior to being sworn in, but would exercise options to buy an unspecified amount of stock in the company and hold the shares until Oct. 31, 1977, when they would go into a blind trust with Morgan Guaranty Trust Co. of New York.
In addition, he will receive a lump sum payment - reportedly about $90,000 - prior to taking office to liquidate other Bendix benefits to which he would have been entitled in the next several years.
In an imprompts press conference following the hearing, Blumenthal said that to avoid a possible conflict of interest, he will "rescue" himself from dealing with Bendix. That is, no Bendix matter can be brought to him during his term as Secretary.
Blumenthal said that "the resolution of my potential conflicts of interest" had been discussed with the Finance Committee and Carter transition staff, and with his own counsel. He submitted a statement outlining the details of his plans, but no member of the committee asked any questions about his proposals.
Controversy has raged over the regulations relating to the Arab boycott for some months. Ribicoff earlier charged that the Treasury guidelines are actually designed to help corporations circumvent the law. This, says Assistant Treasury Secretary Gerald L. Parsky, has "no basis in fact."
Companies complying with the Arab boycott under a section of the tax law introduced by Ribicoff can lose foreign tax credits and the privilege of deferring taxes on certain earnings abroad.
Like other Carter spokesman testifying this week, Blumenthal defended the $23 billion to $30 billion economic stimulus package being developed by the incoming Administration as the best combination to promote growth without inflation. Responding to the interests of the Finance Committee, he also assured that "tax reform and tax simplification" are high on the Carter priority list.
He added little new to illuminate the specifies of the Carter package, but he gave several insights into his own economic philospohy, including strong opposition to the "monetarist" view that the supply of money is "the main factor" in determining the course of the economy.
Blumenthal also came down hard against wage and price controls, "indexing" taxes or other payments in the economy according to some measure of inflation, and any alteration in the independence of the Federal Reserve System, including a change in the term of the chairman to make it start and end simultaneously with the President's four-year term. President-elect Carter endorsed the latter idea during the campaign.
On foreign economic affairs, Blumenthal soberly warned that the large debt of poor countries, and the disparity between their economic growth rates and those of the rich nations raises "a real threat to peace in the long run."
With some exceptions, he indicated a strong commitment to "an open trade policy." But he also warned that U.S. policy toward Japan, while reconginzing the U.S. "stake" in a stable Japanese industry and labor are not harmed by "excessive imports from Japan."