At a time when the oil producing countries are levying an initial tax of $60-billion a year on the rest of the world, the United States has become capital-poor. The possible impact on this country's welfare, as well as its security, of foreign control of major enterprises has not been evaluated. The premise that, under such circumstances, the country has to husband its resources more carefully, allocate them more prudently and match its financial capabilities with its social priorities would appear to be worth considering. What many will call state planning would, to the average family, be no more than prudent budgeting.
There are many who believe that longrange economic planning, at the Federal level will become a necessity. A plan without instruments to bring it to reality, however, is simply one more piece of paper. The R.F.C. could be one of the key instruments in this kind of approach. By injecting equity capital where none is available in quantity, it could facilitate major-restructuring for the public purpose.
For instance, if a merger of Pan American World Airways and Trans World Airlines appears to be nationally desirable, a $250million equity investment in the merged company could accomplish much. It could cause the lenders of both corporations to convert some of their debt to equity, or reduce carrying charges or stretch out maturities. It could insure the merged company's ability to ride through the storm, achieve its savings and efficiencies and ultimately be profitable enough to provide a fair return to the investors (including the R.F.C.), a viable employer and pass some savings on in lower fares.
The R.F.C. should, thus, become a permanent part of our economic establishment, not just as a last-ditch creditor but as a vibrant instrument of both rescue as well as stimulus. It need not, and should not, be a permanent investor in any one particular enterprise. It should only remain as an investor, either as a part-owner or creditor, until such time as it can, in the public interest, divest itself of the enterprise in which it invests and this investment is eligible for normal market channels or until the markets are capable of performing their function.
The R.F.C., therefore, should, in effect, become a revolving fund--hopefully a profitable one--which steps in where no alternatives are available and which steps out when the public interest has been served and normal market forces can again operate.
An initial capitalization of $5-billion in commonstock subscribed to by the Treasury, and the authority to issue up to $10- billion in United States guaranteed obligations would provide a major safety factor to the economy in the coming times of peril, as well as simultaneously taking pressure off the banking system. These obligations could provide a logical investment for the surplus dollars of oil- producing countries.
Financing the capital subscription should come from the private sector. It could take the form of a levy of 1 per cent of pretax profits of all enterprises earning over $1- million per annum. This would reimburse the Treasury's subscription in less than five years.
The R.F.C. should combine public purpose with prudent business practice and, with the proper leadership and oversight, should accomplish both to the ultimate benefit of the tax payers.
Helen Ginsburg. The strategy of misery.
Gerald Ford may not agree, but unemployment is already at a disaster level. In December 1974, it shot up to 7.1 per cent. That means 6.5 million human beings are officially without work (unofficially, there are many more). In just three months, 1.2 million people have become jobless, and layoffs are still spreading. All kinds of workers are being cut, even the "safe" civil servants. The list grows daily, along with