COUNTER-DEFERENCE AND THE ABM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP70B00338R000300100063-5
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 2
• Document Creation Date: December 19, 2016
• Document Release Date: January 12, 2006
• Sequence Number: 63
• Publication Date: August 29, 1967
• Content Type: OPEN

Approved For Release 2006/01/30 : CIA-RDP70B00338R000300100063-5
August 29, 1967 CONGRESSIONAL RECORD - APPENDIX
through the underbrush and went di-
rectly to the point.
In order that his statement may re-
ceive wider attention, I insert his state-
ment in the RECORD following my re-
marks:
STATEMENT ON PRESIDENT'S TAX INCREASE
PROPOSALS BEFORE THE HOUSE COMMITTEE
ON WAYS AND MEANS
(By William Jackman, president, Inves-
tors, League, Inc., August 25, 1967)
My name is William Jackman. I am Presi-
dent of the Investors League, a non-profit,
non-partisan organization of thousands of
individual investors from every state in the
nation with offices at 84 Fifth Avenue, New
York, New York,
Mr. Chairman and distinguished members
of your Committee, I wish to thank you for
the privilege of presenting to you our views
on the President's proposals to increase cor-
porate and individual income taxes now be-
fore you for consideration.
The President asks for an individual and
corporate income tax surcharge of 10% start-
ing on October 1, 1967 for individuals and
July 1, 1967 for corporations. These sur-
charges would be "temporary" and expire in
June 1969. He also asks for an extension of
automobile and telephone excise taxes.
The principal reasons given by the Admin-
istration for these recommendations are to
head off inflation and soaring interest rates.
The proceeds of $7.4 billions presumably
would be used to reduce the 1968 federal
budget deficit now estimated at $29 billions
(instead of the $8 billions estimated at the
beginning of the year).
PROPOSALS WOULD BE INEFFECTIVE
Gentlemen, it is our opinion, that these
tax increases are unnecessary at this time
and would prove ineffective. The only way
to put our government's financial house in
order would be to drastically curtail non-
defense federal spending programs and to
defer other ones now under consideration.
Every businessman knows that high taxes,
just like high wages, are inflationary. They
represent costs of doing business, and these
increased costs, when they exceed increased
production, must be passed along in higher
prices to the consumer.
As regards higher interest rates, excessive
government debt competes for the people's
savings and naturally forces up interest
rates. This is exactly what has been hap-
pening in recent years. In the long run, in-
terest rates are controlled by the laws of
supply and demand, and not by government
fiat.
CUT FEDERAL SPENDING
Since 1960 the U.S. population has grown
by only 10%. In the same period, the per-
sonnel comprising the civilian bureaucracy
of the Federal government has grown by
25%; the cost of government payrolls, in-
cluding military, has grown by 75%; the
total of all government spending has grown
by 83%; non-defense expendtlures of the
Federal government are up 97%.
It is obvious that the only sensible step
toward curbing inflation and huge deficits,
is to cut federal spending.
There is a bill, S. 538, passed by the Senate
in May, now pending before the House. It
provides for creation of a Joint Committee
on the Budget. It should be passed.
A NEW COMMISSION NEEDED
A more fundamental, additional approach
to expenditure control is envisioned in a
proposal by the distinguished Chairman of
this Committee, Congressman Wilbur D.
Mills. His bill, H.R. 10520 would create a
12-member bipartisan Government Program
Evaluation Commission, its members drawn
from private life, to examine all Federal
program and activities, old, new and pro-
jected, and assign priorities among them.
The yardstick would be "the fundamental
needs and vital objectives of the Nation".
The Commission would ask of each program:
What is its effectiveness in terms of pres-
ent and future costs? Should it be con-
tinued? If so, at what level of funding? A
companion Senate bill, S. 2032, has been
introduced by Sen. William Proxmire (D-
Wis.), Chairman of the Joint Economic Com-
mittee. He calls the idea "a fresh look" at
government expenditures needed to instruct
Congress and the President as to how much
should be appropriated in a given fiscal
year for each Federal activity.
The rationale of expenditure control was
outlined by Rep. Mills in a speech in late
May, before he introduced H.R. 10520. Among
his points: After taxes were reduced in 1964,
it appeared that the rate of Federal spending
had moderated.
But in September 1965, the spending rate
rose quickly and this year, if certain con-
tingencies occur, the Nation is faced with
the prospect of a possible fiscal year 1968
budget deficit of nearly $30 billion-the larg-
est since World War II. Though urgent de-
fense costs account for part of the spending
rise, non-defense costs also have risen and
this is where controls must be applied. First-
year costs of a new program are only part
of the story; of more concern is what future
costs will be-5, 10 even 15 years ahead. As
these rise, they can impose a "straitjacket"
on tax policy and endanger the desired goal
of spending controls coupled with "regular,
frequent and significant reductions in tax
rates" which will free the private economy
to help solve problems "which many people
are urging that the Government solve di-
rectly". Therefore, priorities must be set on
non-defense programs.
EXCISE TAX REVISION
The Administration proposals to extend
excise taxes on automobiles and telephone
services are likewise inflationary. The F.C.C.
is trying to reduce telephone rates. Why not
let the "temporary" Korean War excise taxes
expire? The same thing applies to automobile
excise taxes. Threatened strikes and other
factors are going to force up automobile
prices. Continuation of the excise tax will
force prices even higher.
If there is to be an excise tax, which might
be a saving grace if applied fairly, it should
be at a very low rate applied equally to all
industry at the manufacturer's level, with
the possible exception of food and drug in-
dustries.
The President estimates that "extension"
of scheduled reductions in telephone and
automobile excise taxes would provide addi-
tional Federal revenues of $300 millions for
fiscal 1968 and over $2 billions in 1969. The
$2 billion figure for 1969 seems to be a highly
questionable estimate.
A SOURCE OF NEW REVENUES
It would be much more simple to collect
such additional revenues by a simple tax re-
duction. This could be done promptly by en-
acting H.R. 8146, a bill introduced on April 6,
1967 by Congressman James B. Utt. This bill
provides for a 50% reduction in the maxi-
mum tax rate on long-term capital gains,
from 25 % to 12% %. Dependable surveys in-
dicate that if this bill were enacted, the
Treasury would receive nearly $700 million
more than under present rates. If these sur-
veys were updated, they would indicate that
the Treasury's increased revenues from this
source would be even greater.
TIMING WRONG
The timing of the President's tax increase
proposal seems all wrong. We can as yet see
no indication of a big business boom. Ask the
steel and auto boys. These are basic indus-
tries. Labor uncertainties in the near future
are alarming to these industries and could
well result in a slump, certainly not a boom.
CONSIDER THE STOCKHOLDER
Under the President's proposals, the in-
dividual who is a stockholder will be hit
A 4381
double since a 10% surcharge on the present
48% corporate rate will raise that rate to
52.8% or more than it was before the reduc-
tion of the old 52% rate. The individual will
then bear the bite on any dividend distribu-
tions.
Because so much of personal income is in
the lower tax brackets, a relatively small but
constant increase in each of the percentages
in the several graduated brackets, say by 2
percentage points, might well produce more
tax revenue than the higher-sounding 10%
surcharge.
Because Inflation is best checked by a tax
that reduces consumer income and that bears
least heavily upon income likely to be in-
vested, the flat increase in the scale of rates
would seem more appropriate economically
than the 10% surcharge at this time.
There is talk of making tax surcharges
larger for corporations than for individuals.
Just remember that, tax-wise, there is no
such thing as a "corporation". "Corporations"
are only millions of people pooling their in-
vested savings together. The corporate in-
come tax is one of the Treasury's major
sources of income. They are paid only out of
profits at a rate of 48%.
The remaining earnings distributed to in-
dividual stockholders are then taxed at rates
from 14% to 70%. It is obvious that if the
Treasury wants more income, they should go
all out to encourage business expansion and
creation of even greater profits. Whenever
government attacks profits, it is simply at-
tacking itself. As Senator William Proxmire
crisply summarizes, "the crux of my opposi-
tion to the President's 10% surtax proposal
is that it is dead certain to retard this na-
tion's economic growth".
Gentlemen, our entire Federal tax system
must be overhauled. It has become a hodge-
podge mess. Its policies must be established
and controlled by Congress, and not by the
executive branch or its bureaus who are only
presumed to enforce our laws and not to
make them.
In your tax thinking, gentlemen, just re-
member that there are over 24,000,000 Amer-
ican investor-shareowners whose savings
provide the jobs for our workers in industry
and produce under our free-enterprise profit
system, the goods and services that have
given this nation the highest standard of liv-
ing in this world. And remember one other
thing. This system is called "Capitalism".
Karl Marx, in his "Communist Manifesto",
stated that the surest way to destroy Capital-
ism was to impose a heavy progressive in-
come tax and an ever higher inheritance
tax. We have already gone too far down this
road.
Gentlemen, I thank you.
EXTENSION OF REMARKS
OF
'HON. BOB WILSON
OF CALIFORNIA
IN THE HOUSE OF REPRESENTATIVES
Tuesday, August 29, 1967
Mr. BOB WILSON. Mr. Speaker, that
trenchant observer of the American
scene, Will Rogers, once observed that
in the field of disarmament Americans
had a tendency to scrap battleships while
their opponents tore up blueprints.
Something of this American tendency of
an almost extremist good will is in evi-
dence today with reference to the ques-
tion of anti-ballistic-missile defense. We
balk and talk in the hope that we can
persuade the Soviet Union to dismantle
its present anti-ballistic-missile system
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A4382 CONGRESSIONAL RECORD - APPENDIX August 29, 1967
and to refrain from going ahead with
further missile defenses. The Soviets stall
in the negotiations while continuing to
build and deploy their ABM's.
SOVIET CAPABILITIES AND INTENTIONS
The recent study prepared by a spe-
cial subcommittee of the National Strat-
egy Committee of the American Secu-
rity Council entitled "The Changing
Strategic Military Balance: U.S.A. ver-
sus U.S.S.R." has stated that-
The preponderance of evidence points to
the conclusion that the Soviet Union is suc-
ceeding in its massive drive toward strategic
military superiority . . . (and that) the year
1967 falls in a crossover period with the
U.S.S.R. estimates ranging between 16,000
and 37,000 (deliverable) megatons, to equal
or exceed the U.S. estimated range of between
8,000 and 29,000 (deliverable) megatons.
This study, with its graphic documen-
tation of the Soviet thrust for military-
technological superiority, has received,
and continues to receive, widespread at-
tention from leading editors and author-
ities in both the daily and, the periodical
press. The New York Times, for exam-
ple, in a front-page story on July 12,
1967, stated that--
The Defense Department did not directly
contradict the study's findings, but argued
that deliverable megatonna.ge was not an
accurate indicator of "true military capabil-
ity."
It has been argued in some quarters
in the West, however, that Soviet capa-
bilities as illustrated by the Soviet de-
ployment of an ABM system need not
be a cause for alarm, since Soviet inten-
tions are peaceful and the cold war is,
in fact, over.
But are the Soviet leaders mellowing?
Unfortunately, the most recent evidence
would appear to indicate that storm flags
are flying in the Kremlin. Some storm
signals are:
First. The official pronouncement of
the Communist Paxty of the Soviet Union
issued June 25, 1967, in a summary of
50 years of bolshevism. It stated that
"the domination of imperialism on the
world scene has ended" because of the
growth of Soviet military power. The
statement also singled cut the United
States as the "main enemy" of the na-
tional liberation warfare movement and
charged the State of Israel with aggres-
sion.
Second. Appointing-for the first
time since Berta"s execution in 1953-
the Soviet secret police chief a member
of the ruling Politburo. This is Yuri An-
dropov, whose promotion was announced
June 22, 1967. Since the KGB-the So-
viet secret police--have vast responsibil-
ities for waging unconventional warfare
around the world, it would appear that
giving Andropov such power indicates
stepped-up cold war operations.
Third. Writing in the official Soviet
Armed Forces newspaper, Red Star, on
June 3, 1967, Bulgarian :Minister of De-
fense, General of the Army Dobri Dzhu-
rov.said:
The Soviet Union has always been and will
continue to be the main political and ma-
terial base of the world revolutionary process.
(Emphasis added.)
The general also went on to say that-
The Soviet Union constitutes the. main
support of fighting Vietnam.
Fourth. Soviet escalation of the Viet-
nam war is another example of the So-
viet's true intentions. Soviet shipping
going into North Vietnamese ports has
shown a marked increase this year over
1966. As of June 1967 the rate was 18
per month, with an additional two to
five Soviet satellite ships per month.
Indicative of this escalation is the Mos-
cow Radio broadcast of July 28 which
stated that Soviet ships "leave c?dessa
practically every day with cargces for
Vietnam."
Fifth. The recent hard line in toe So-
viet press which continually r.ttacks
Israel, "Zionism," and the United States.
In reporting this trend from Moscow,
the Washington Post of August 8, 1967,
stated that the press campaign was one
which "to some senior diplomats here
recalls the worst days of the cold war."
These indicators of increasingly
"stormy cold war weather" indicate that
Soviet strategists understand quite well
that revolutionary agitationand propa-
ganda, "peace marchers" in London and
New York, guerrillas in Africa and Latin
America, are techniques of conflict on
a par with guided missiles and nuclear
submarines. But does it follow that these
same Soviet strategists are unaware of
the possibilities for nuclear blackmail
of the West in the event that they at-
tain strategic military-technological su-
periority? Indeed, one may well ask
whether the present U.S. limitations on
air strikes against military targets in
North Vietnam result from the steady
accretion of Soviet military-tecl-nolog-
ical power.
CHINESE COMMUNIST NUCLEAR WEAPONS
DEVELOPMENT
Even if it were possible to disregard
the evidence of the Soviet deployment of
an ABM system or systems and the coun-
ter-deterrence which this poses to the
announced U.S. policy of deterrence, it
would be still more difficult to close our
minds to the ominous developments in
China.
The Chinese Communists exploded
their first H-bomb on June 17, 1967. It
was apparently a sophisticated implosion
type in the two-to-seven megaton range.
The complicated electronic triggering
and measuring devices that would appear
to have been required, in this and other
nuclear tests, would be of great assist-
ance to the Chinese in building an inter-
continental missile. Since the Chinese
progress in nuclear weapons develop-
ment has been faster and more effective
than had been anticipated by Western
sources, it raay be that they will also
develop a nuclear ICBM delivery capa-
bility sooner than the mid-1970's, which
is the time phase previously estimated by
Western sources. Moreover, the Chinese
now possess the design capability for a
multimegaton thermonuclear weapon
which can be delivered by aircraft.
The possibilities of the Chinese Com-
munists exercising nuclear blackmail
against Southeast Asia countries, Japan,
or, indeed, against the United States are
underscored in a report released Au-
gust 3, 1967, by the Joint Congressional
Committee on Atomic Energy. The com-
mittee said:
We believe that the Chinese will continue
to place a high priority on thermonuclear
weapons development. With continued test-
ing we believe they will be able to develop
a thermonuclear warhead in the ICBM
weight class with a yield in the megaton
range by about 1970. We believe that the
Chinese can have an ICBM system ready for
deployment in the early 1970's. On the basis
of our present knowledge, we believe that
the Chinese probably will achieve an opera-
tional ICBM capability before 1972. Con-
ceivably, it could be ready as early as 1970-
1971.
The Joint Comm: ttee then went on to
sound a warning about the direct threat
to U.S. national. security posed by Chi-
nese Communist nuclear weapons devel-
opments by pointing out that-
Most significant for the United States is
the fact that a law order of magnitudeattack
could possibly be launched by the Chinese
Communists against the United States by
the early 1970's. At present we do not have
an effective anti-ballistic-missile system
which could repel sr tc:h a suicidal (for the
Chinese) but nevertheless possible strike.
THE STABILIZING VALUE OF A U.S. ABM
SY 3TEM
In the final analysis, the value of a sys-
tem of deterrence is that which the
enemy believes about it. If the Soviets
believe that the U S. deterent offensive
force can be neutralizd by their ABM
systems to a point at which the Soviet
warmaking capability will sustain only
an acceptable level of damage-and, of
course, their acce=ptable level may be
much higher than ours-then they have
achieved a counter-deterrence posture
which may lead them to risk-at a given
crisis in international relations-a nu-
clear war.
Equally. - if at some future point the
Chinese Communists should believe-in
the absence of a U.S. ABM system-that
there is somewhat more of a "suicidal"
element for the United States than for
them in a nuclear war, they might, in a
given confrontation, launch a surprise
nuclear attack on America.
The evidence of the post-World War
II period suggests that it has been the
stabilizing factor of U.S. military-tech-
nological power which has prevented a
general war. Today, under the impact of
both the Soviet and Chinese Communist
military-technologi.cal thrust, that sta-
bility appears to be threatened. Would
the production and. deployment of a U.S.
ABM system-perhaps even on a crash
basis as a clear demonstration of credi-
bility-have a definite stabilizing value
on world politics? That it might well do
so is indicated by the thoughtful and
carefully measured words of the Senate
Appropriations Committee. In reporting
on the Defense Department appropria-
tion bill for :fiscal 1968-August 4, 1967-
the committee said:
It is the view of. the Committee that the
deployment of the Nike-X antiballistic mis-
sile system should be initiated immediately,
and the Committee urges the executive
branch of the Government to take action
accordingly.
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