On the Right - reduction of national debt; release of FBI file on Murray Kempton; George W. Bush's speech problems - Column

Reduce the Debt?

NEW YORK, February 8

Mr. Clinton's budget has been greeted as deserved. It is a budget designed to give a political face to Pleasant Thoughts. Such thoughts include free prescription drugs for children and for old people, modest tax reductions for the middle class and the lower class, this and that for this and that, and-a Major Pleasant Thought of the season-a reduction in the national debt.

This last is an especially pernicious Pleasant Thought because it is very appealing to conservatives, and indeed debt reduction has much to commend it. But it does deserve scrutiny.

Is the national debt too large?

A rational amateur would tend to ask some basic questions. The first of these is: Is damage being done on account of the size of the debt? Such damage would be visible, for instance, if it became necessary to devalue the dollar. This would be the result of doubt being cast on the credit of the United States. If a country needs to borrow in order to sustain, or to magnify, the deficit incurred by its fiscal practices, then it has to find someone who will lend it the money. Someone has to buy its bonds.

Now of course the next question to ask is: How much interest is being paid for those bonds? Very unstable governments can usually sell bonds, at least in the short term, if they promise a huge return. Not long ago Mexico was paying out 12 percent and more to anyone who would lend it money. The money poured in, but the malpractices outpaced the subventions, and devaluation came, so steep that bondholders ended up with 1 percent or less, and of course a reduction in the bond's face value.

The U.S. is paying about 6.5 percent on its Treasury bonds, which is a lot more than the traditional 3 percent interest, the conventional orthodox rate of return for a hundred years. But given two generations of inflation, the price is not inordinate.

Compared to what? The interest rate is subject to the discipline of capital mobility. Money flows to the market in which returns for its use are the largest. This means a general equality in interest rates, subject only to the stability of the lender. In the international markets, Russia would have to pay about two and a half times as much as the U.S.Next, one looks to the size of the national debt over against national income. A national debt of $1 trillion would instantly bankrupt a majority of the nations on earth. But $1 trillion is a mere 11 percent of our national income. We have, now, a national debt of $5.7 trillion, which is equal to 63 percent of our national income.

That is a heavy debt; but again, one looks for relative figures. In Canada, the debt is about 87 percent of national income; in Japan it is 105 percent.

The above would seem to be telling us that our national debt is not immobilizing the U.S. economy. There are, of course, many other proofs that we're doing okay economically. Si monumentum requiris, circumspice. Those classic words were uttered when the question was asked: What were the achievements of the architect Christopher Wren? Well, he had endowed much of London with his genius. "If you seek his monument, look around you." The U.S. economy is flourishing. But then there is the question of the burden of annual interest payments on the debt. These amount to approximately $200 billion. Surveying the problem of debt reduction bit by bit: Suppose we were talking about a $100 billion surplus and confronted the alternatives of applying it to debt reduction, or returning the money to the taxpayer. Self-evidently, we are talking about the overtaxed taxpayer, since that is why we have a surplus. Tax rates aren't supposed to be motivated by a desire to generate a surplus. If that $100 billion, at the hands of taxpayers, is going to generate tax revenues larger than the cost of borrowing money, then we are ahead of the game, are we not? Does money returned to taxpayers tend to result in money deployment that generates tax revenue? The answer, quite simply, is yes, unless the whole of it is spent on ice-cream cones and aspirin, which are not taxed. But then too, money returned to taxpayers is spent also on capital growth, which not only adds year after year to the revenue of government, but to the satisfaction of the community. Money spent to develop a housing project satisfies not only local tax collectors, but also people looking for a place to live. It is a dangerous appeal, that of debt reduction. The reason being that it is axiomatic that human beings should not run into debt, and that those who are in debt should use the proceeds of unexpected revenue to reduce that debt. But people aren't governments, whose vices are distinctive, as also their opportunities.

Is the FBI Mad at You?

NEW YORK, FEBRUARY 15

A nonpolitical story told last week of the FBI's no doubt unhappy release of one more file kept by the Bureau's late director, J. Edgar Hoover. The file discloses important things about Mr. Hoover and vital things about the United States. The Freedom of Information Act amendments of 1974 require federal agencies to give up files that pertain to any American citizen who petitions to see them. There are common-sense exceptions: You can't write in to find out what somebody said about you when the FBI was conducting a security check. What transpired last week were bureau memorandums on the activity of Murray Kempton (1917-1997). Kempton had briefly joined the Young Communist League in the 1930s and, after the war, wrote a provocative newspaper column. He was correctly acknowledged, by colleagues in the craft, as supreme; but that isn't what Mr. Hoover cared about. He cared about Kempton's general impiety and his sallies in the 1970s in defense of individual members of the Black Panther movement. There are those who believe the FBI has no business keeping an eye on writers. This seems on the face of it absurd, the equivalent of presuming that writers can't engage in illegal activity. What is interesting in the Kempton file isn't that the FBI was keeping its eyes on him. It is that the material by Kempton, shown to Director Hoover, elicited comments from Hoover that reinforce what we now know about him, thanks mostly to author Natalie Robins and her book, Alien Ink: The FBI's War on Freedom of Expression.