How about that now? So Americans finally convinced Bill Clinton that they are total idiots and he can make any promise he wants, no matter how idiotic?
Analysts doubt U.S. debt to
disapppear by 2015
By Glenn Somerville
WASHINGTON, June 28 (Reuters) - Purging the national
debt by 2015 is bold politics that may preempt Republican
promises for tax cuts but President Bill Clinton's proposal is on
shaky economic ground in a consumption-driven nation,
analysts said on Monday.
''There is such a thing as the paradox of thrift, in that what is good for an individual is not always
good for an economy since you need to have someone who wants to borrow all that money you're
saving,'' said Robert Dederick, economic consultant to Northern Trust Co. in Chicago.
Clinton predicted on Monday the buzzing U.S. economy will generate billions and billions of
dollars more over the next decade and more -- money that he said could be used both to shore up
the Social Security retirement system and pay off the national debt by 2015.
''By 2015, this country can be entirely out of debt,'' Clinton said at a White House presentation, a
striking declaration considering that the country only recorded its first surplus in 29 years during
fiscal 1998. Total public debt totals more than $5.5 trillion.
Private-sector analysts doubted it would be possible to pay off the national debt by 2015, even if
the economy totally avoided recession, though a reduction in it would be useful.
There are large benefits from paying down debt, not least shrinking the $364 billion of interest paid
in fiscal 1998 ended last Sept. 30, to carry the current accumulated debt.
Some of that money was interest paid into other government accounts, notably the Social Security
trust fund that uses its surpluses from Social Security taxes over payments to buy government
securities, as well as to individual investors.
''He's saying lets use these resources not for consumption but for savings by paying down debt,''
Dederick said of Clinton's proposal. ''But there's an implicit assumption that the bondholders to
whom you pay it are going to use it for productive purposes, like buying other securities rather
than the U.S. Treasury securities they now hold.''
If the savings were not used in this way, then there would be less money for investment in
expanded production and for servicing demand for goods and services that is the driving force
behind the current expansion now in its ninth year of steady growth.
Thus demand, which fuels two-thirds of national economic activity, would be effectively
weakened, Dederick said.
''The effort to achieve surpluses can in fact lead to recession if you don't protect demand,''
Dederick said, adding ''I think what he's really saying is that I'm going to take that extra money
from rising surpluses off the table, rather than leave it there for Republicans to offer as tax cuts.''
Similarly, economist Joel Naroff of Naroff Economic Advisors Inc. in Holland, Pa., said he
thought there was a strong political element in Clinton's announcement as early maneuvering for
November 2000 presidential elections begins.
''These surpluses have appeared so suddenly that I really don't think politicians have digested the
implications of surpluses,'' Naroff said, adding he didn't think it was practical to talk about
generating enough surpluses to totally eliminate the national debt by 2015.
''I think he's trying to put the Republicans in a position of having to appear to say that they don't
want to pay off the debt -- but that's for political gain rather than a real economic approach,''
Naroff said.
One other potential risk that both Dederick and Naroff cited was the possibility that buying back
debt, by reducing the supply and maturity range of U.S. Treasury securities, potentially makes
bond markets less ''deep'' and ''liquid,'' or easily traded.
That would not only tarnish their glittering position as trend-setter for world markets but might also
make the dollar less attractive as the currency of choice for global dealing.
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