Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: MONDAY, March 5, 1990                   TAG: 9003052296
SECTION: EDITORIAL                    PAGE: A-10   EDITION: METRO 
SOURCE: 
DATELINE:                                 LENGTH: Short

MYTH, SUPERSTITION, NOT ECONOMICS

YOUR FEB. 11 editorial "Pay interest to paying interest," like most of your commentary on U.S. fiscal policy, seems based more on myth and superstition than economic science. Your example, likening the treasury's management of the national debt to an individual's management of an installment loan, is a fallacy of composition, assuming what is true for individuals is true for nations. Sovereign nations can loan themselves resources by creating money. Individuals cannot do that.

The assertion that interest paid on the national debt "drains the nation's savings pool" is equally questionable. If an employee retirement fund uses interest received on government bonds it owns to buy certificates of deposit or shares of corporate stock, the savings pool has been expanded, not drained. A portion of the taxes you pay is used to pay interest on your government bonds or bonds that are owned for your account in the Social Security trust fund.

Present plans to increase the share of the national debt owned by the Social Security trust fund and reduce the portion owned by foreigners should have a positive effect on the U.S. economy's long-term growth. Why do you oppose that? GORDON E. SAUL ROANOKE