Temporary Gains

As the gross national product got its embarrassing face lift, another vital measure of the U.S. economy -the balance of payments -also put forward its best face in many months. In its transactions with the rest of the world, announced Treasury Secretary Henry H. Fowler, the U.S. in 1965's second quarter took in $132 million more than it sent abroad, the first quarterly surplus in nearly eight years.

Joe Fowler made clear that he considered the improvement temporary, and that the U.S. still has a balance-of-payments problem: "We don't take it as a sign that we have turned the corner from deficits to surpluses." Nonetheless, even the careful qualifications could not conceal the fact that the U.S. has come quite a way from its $756 million loss in 1965's first quarter and the peak $1.6 billion deficit of 1964's last quarter. If the new figures did not show that the payments problem is licked, they at least demonstrated how it can be dealt with. The factors that contributed to the new figures:

>> A decline in loans to foreigners by U.S. banks of $380 million from 1965's first quarter, caused by President Johnson's plea that U.S. banks "voluntarily" cut back on their overseas lending.

>> A higher-than-normal (by $300 million) trade surplus of $1.27 billion resulting from stepped-up exports, a good part of which were released in a sudden flood after lying on the docks during last winter's dock strike.

>> The return home of $200 million in profits and working capital of U.S. subsidiaries overseas, prompted in part by the Administration's urging that money earned abroad not be left abroad.

>> An unusually high number of advance orders from foreign nations for U.S. arms -totaling more than $150 million for the quarter.

Quick to realize the temporary nature of these gains, Fowler refused to predict another surplus for the current quarter. Said he: "Expectations are that we'll lose ground." Just how much ground depends to a large extent on how many dollars are left abroad this summer by U.S. tourists, who have largely ignored the Administration's plea that they help the balance of payments by seeing America first. The Government worries that Americans will spend $2 billion more abroad this year than foreigners spend in the U.S. -a new record. Even more worrisome: the gap between what U.S. business spends abroad and what foreigners spend in the U.S. Despite the Government's urgings that they cut back, U.S. companies reporting to the Commerce Department now plan to spend abroad $1.2 billion more during the rest of this year than they spent in the same period last year.

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