sionary at best, and several years of budget surplus were experienced. As a result, economic growth remained sluggish and two recessions took place, during which times the Federal Reserve did ease up on credit and government spending increased. These events hindered the efforts of the Treasury to meet its goal. For example, in 1955 the Secretary of the Treasury reported, During the earlier part of the fiscal year, when the Federal Reserve was still emphasizing its policy of credit ease to smooth the readjustment to lower levels of government spending, the Treasury purposely refrained from putting out any long-term issues which might interfere with the flow of long-term money into mortgages, corporate securities and State and municipal bonds. 30 A year later, the Secretary of the Treasury could report that the debt management program was showing signs of progress, resulting in the Treasury being able to reduce the number and amount of its offerings. Only 4 major loans were undertaken in 1956, in comparison to about 12 a year in the early post-war period. This improvement permitted the Federal Reserve more freedom "during the fiscal year 1956 in which to exercise an independent money and credit policy." 31 With an economic recovery in place at this time, no further issues of long-term securities were contemplated. 32 Economic conditions handicapped the Treasury in meeting its debt management goals after the turmoil of the Korean conflict. The Treasury believed that it would not be able to sell long-term bonds in a weak market, while in periods of recovery it refrained from selling long-term bonds to avoid competing with business for investment funds. As a result, while some initial gain was made in terms of lengthening the maturity of the debt, by the end of the decade there was little overall progress (see Table Six). The inability of the Treasury to lengthen the average maturity of its securities caused bank ownership of public debt, mostly short-term, to decline only slightly during the same time period (see Table Seven). Finally, because of the independent activity of the Federal Reserve, interest rates drifted up slightly during the 1950s. In 1959, the rate on long-term bonds reached the ceiling of 4 1/4 percent imposed by the 2nd Liberty Bond Act of 1917. The Treasury had to sell short-term securities at rates (4.625 percent) above the long-term rate, a very 30 Secretary, Annual Report, 1955, 25. 31 Secretary, Annual Report, 1956, 23. 32 Secretary, Annual Report, 1956, 23. unusual situation. The overall effect on computed interest rates is given in Table Eight. The total public debt outstanding was $287.5 billion at the end of fiscal year 1960. Source: Annual Report of the Secretary of the Treasury, 1953, 1956 and 1960. Source: Annual Reports of the Secretary of the Treasury, 1956 and 1960. Year Computed Interest TABLE EIGHT Computed Rate of Interest on the Public Debt 1952 1953 1954 1955 1956 1959 1960 2.38 2.28 2.35 2.58 2.87 3.30 Source: Annual Reports of the Secretary of the Treasury for the given years. Meanwhile, progress was being made in making the operations of the Bureau of the Public Debt more efficient. The total number of employees at the Bureau had been reduced by October 1, 1952, to 3,806, with an annual payroll of $13.5 million. 33 This was a considerable decrease from the more than 12,000 employed during World War II and closer to the figures given for 1936. The number of employees continued to decline in the early 1950s (see Table Nine). Administrative expenses for fiscal year 1952 were $50.9 million, a reduction of nearly $35 million from fiscal year 1945. Despite these improvements in operations, there were still troublesome areas. It was calculated that on June 30, 1952, the $25 Series E Bonds represented 68.4 percent of Series E Bond sales and 73.6 percent of redemptions, but only 16.8 percent of the total amount of Series E Bonds outstanding. 34 Reviewing the same situation during the Korean War, Commissioner Kilby concluded, "On the present volume of sales, over $6,000,000 of administrative costs could be saved annually if this denomination were discontinued." 35 The savings Kilby projected would have amounted to more than 10 percent of the administrative expenses of the Bureau at that time. However, the sale of $25 denomination savings bonds was not discontinued, and in order to handle the high volume of bonds that this policy made necessary, the Bureau had to find better ways of performing all the tasks associated with a bond sale at a reduced cost. The predominant method of choice was use of electronic data processing through the installation of a new computer facility in Parkersburg, West Virginia. Source: Annual Reports of the Secretary of the Treasury for the given years. 33 Document contained in Important Data File D-120, History of the Public Debt Organization. 34 Fiscal Assistant Secretary, Report, (Washington, D.C.: December 1, 1952), 21. 35 Kilby, Report, 9. |