Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, April 24, 1990 TAG: 9004240491
SECTION: EDITORIAL PAGE: A=8 EDITION: METRO
SOURCE: Bob Willis/Associate Editor
DATELINE: LENGTH: Medium
"The best I could come up with," he said, "is that if you had a stack of $1,000 bills in your hand only four inches high, you would be a millionaire. A trillion dollars would be a stack of $1,000 bills 67 miles high."
It wasn't yesterday, but it was only 1981 when President Reagan was exhorting us to take steps that he said would end the deficit spending that had sent our national debt climbing to the trillion-dollar level, and interest payments on that debt to $96 billion a year.
The latter figure, he said in a televised speech to the nation, was "more than the total combined profits [in 1980] of the 500 biggest companies in the country; or to put it another way, Washington spends more on interest than on all of its education, nutrition and medical programs combined."
Time passed, and as Reagan's economic policies failed to balance the budget within the three years he had promised, his concern about the national debt dwindled. So did his warnings about the amount of interest we were paying on it.
He is gone, having left the nation - that's all of us - with a national debt nearly triple what we had when he became president. It's now over $3 trillion. From $90 billion in 1981, the amount of interest we pay on that debt has risen to more than $175 billion a year. That's up from 8.9 percent of federal outlays to 14.8 percent.
Interest now is the third largest item in the federal budget, topped only by defense and Social Security. It exceeds outlays on benefit programs for the unemployed, disabled and federal retirees, food stamps, Aid to Families with Dependent Children, and subsidized housing.
Reagan isn't here to give us one of his down-home illustrations. Let's turn to Lee Iacocca, writing in the April 16 Newsweek magazine. The board chairman of Chrysler says that to pay that $175 billion interest on the national debt will take every bit of the federal income taxes collected last year west of the Mississippi.
All those dollars from those 24 states in 1989 "will buy absolutely nothing. They will not buy the Army a single bullet or cover the cost of a single food stamp. They won't even help out with the new pay raise for Congress," Iacocca writes. Nor, it should be added, will they reduce the national debt itself by one penny.
He is bothered by this not only because it's patent fiscal foolishness, but also because it drains capital that could be used to build new plants and improve American-made products.
"[T]he real cost of capital in this country right now is roughly 7 percent. In Japan it's about 3 percent. That 4-point spread means that if both Chrysler and Toyota decide to develop a new engine and spread the cost over five years, it will cost Chrysler about $500 million compared to $408 million for Toyota."
Maybe we can dismiss Iacocca's words as a special pleading for U.S. business. Most Americans don't seem worried by all this. Should they be? Back when the Union was running up bills to fight the Civil War, Abraham Lincoln suggested that the people shouldn't be concerned about a debt they owe themselves.
But to whom, actually, is the current debt owed? Not to many schoolteachers, hairdressers, cab drivers or other ordinary Americans. The Treasury sells its bonds in large denominations, such as $10,000.
"In the United States," Mark Shields wrote recently in The Washington Post, "more than half of all bonds are owned by the richest one-half of 1 percent of Americans. Approximately 95 percent of all bonds are owned by the richest 10 percent of Americans.
"Politicians from both parties rhapsodize about the exceptional but ordinary American who gives a full day's work for a day's pay, who obeys the laws, raises his family and loves her country. What is being transferred here are the hard-earned tax dollars of all those admirable Americans in the form of interest payments to the Deserving Rich."
Those rich folks are not only Americans, Shields points out. Interest payments to foreign bankers are nearly $30 billion a year. Foreign holdings of U.S. securities have risen since 1981, when they totaled $125 billion, to $259 billion last year.
Under the Reagan/Bush policies, we have finished the job of losing control of the federal budget. The deficits have paralyzed Washington decision-making. Paying taxes has been made to seem foolish if not sinful, and fiscal irresponsibility has been elevated to a national principle. Americans, 250 million of us, are encouraged to believe that we can have what we want from the federal government and never have to pay for it. Funny, though, how those bills for interest keep coming in - and growing.
by CNB