Responsibility #72

<body topmargin=0 leftmargin=0 marginheight=0 marginwidth=0> <table cellpadding=0 cellspacing=0 border=0><tr> <td valign="top" colspan=2 height=110 BGCOLOR="#666699" TEXT="#080000" bgproperties="fixed" background="04900840erlcjm.png"> <div> <FONT SIZE="5" COLOR="#FFFFFF" FACE="Arial" ><B>NATIONAL SECURITY--Structural,Moral,Economic,Domestic,International</B></FONT><B>     |     </B><A HREF="index.htm" TARGET="_top" TITLE="NATIONAL SECURITYStructural,Moral,Econom"><U><B>home</B></U></A></div> <div> <A HREF="id33.htm" TARGET="_top" TITLE="Responsibility Contents"><U>Responsibility Contents</U></A>   |   <A HREF="id34.htm" TARGET="_top" TITLE="Responsibility 1"><U>Responsibility #1</U></A>   |   <A HREF="id35.htm" TARGET="_top" TITLE="Responsibility 2"><U>Responsibility #2</U></A>   |   <A HREF="id36.htm" TARGET="_top" TITLE="Responsibility 3"><U>Responsibility #3</U></A>   |   <A HREF="id37.htm" TARGET="_top" TITLE="Responsibility 4"><U>Responsibility #4</U></A>   |   <A HREF="id38.htm" 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to President, et al,"><U>Health Care Letters to President, et al, 8/24/94</U></A>   |   <A HREF="id123.htm" TARGET="_top" TITLE="Arguments for Delay in Enactment of a He"><U>Arguments for Delay in Enactment of a Health Care Bill</U></A>   |   <A HREF="id124.htm" TARGET="_top" TITLE="Post WORLD WAR IIPost COLD WAR Deja Vu"><U>Post WORLD WAR II--Post COLD WAR Deja Vu</U></A>   |   <A HREF="id125.htm" TARGET="_top" TITLE="Responsibility 89"><U>Responsibility #89</U></A>   |   <A HREF="id126.htm" TARGET="_top" TITLE="Responsibility 90"><U>Responsibility #90</U></A>   |   <A HREF="id127.htm" TARGET="_top" TITLE="Responsibility 91"><U>Responsibility #91</U></A>   |   <A HREF="id128.htm" TARGET="_top" TITLE="Responsibility 92"><U>Responsibility #92</U></A>   |   <A HREF="id129.htm" TARGET="_top" TITLE="Responsibility 93"><U>Responsibility #93</U></A>   |   <A HREF="id130.htm" TARGET="_top" TITLE="Responsibility 94"><U>Responsibility #94</U></A>   |   <A HREF="id131.htm" TARGET="_top" TITLE="Responsibility 95"><U>Responsibility #95</U></A>   |   <A HREF="id132.htm" TARGET="_top" TITLE="Responsibility 96"><U>Responsibility #96</U></A>   |   <A HREF="id133.htm" TARGET="_top" TITLE="Responsibility 97"><U>Responsibility #97</U></A>   |   <A HREF="id134.htm" TARGET="_top" TITLE="Responsibility 98"><U>Responsibility #98</U></A>   |   <A HREF="id135.htm" TARGET="_top" TITLE="The Structure of Our Nation is Unsound"><U>The Structure of Our Nation is Unsound</U></A>   |   <A HREF="id136.htm" TARGET="_top" TITLE="Ltr. to Editor, 3/19/96, Property Taxes "><U>Ltr. to Editor, 3/19/96, Property Taxes and Education Funding</U></A></div> <div> </div> </td> </tr><tr> <td valign="top" width=190 BGCOLOR="#CCCCFF" TEXT="#080000" background="04311c00egdysm.png"> <bR> </td> <td valign="top" height=370 BGCOLOR="#FFFFFF" TEXT="#080000"> <div> Responsibility #72</div> <div> To the People of the United States of America:</div> <bR> <div>      <U>6th postscript, April 1994</U>.  The 42nd President has nearly completed 1/3 of his term of office.  The 103rd Congress is almost 2/3s done.  What progress has been made in resolving problems addressed in these RESPONSIBILITY papers?</div> <div>    </div> <div>      <U>Deficit/National Debt Reduction</U>.  Notwithstanding the agreement of a deficit reduction package of nearly $500 billion dollars over a five year period (reduction from what the revenue shortcomings would have grown to, not from what they have been), the President and the Congress have barely made a dent in the national debt problems.  </div> <div>      A newspaper editorial of March 20, 1994 proclaimed: "Deeper in debt.  For many Americans, the rising tab from deficit spending is a symbol of a government out of control."  The article went on to state that the current national debt of $4,535,687,347,219 is expected to top $6 trillion by the end of the decade.  This year's interest burden is about $202 billion.</div> <bR> <div>      The nation's health and survival are under greater siege on more sides, due to the burgeoning national debt, than they were:</div> <div> by the lowering of the iron curtain,</div> <div> by the invasion of an asian ally,</div> <div> by the flight of a sputnik,</div> <div> by the presence of an enemy's missiles on our doorstep, </div> <div> by the threat of a domino effect in southeast asia,</div> <div> or by the fear of an oil monopoly by a mideast madman. </div> <div>      The nation in those cases stood up and made the sacrifices which seemed necessary to overcome the threats.</div> <div>      Like the world response to the rise of Adolph Hitler in the 1930s, the United States is doing little or nothing, to reduce the ever increasing perils of the national debt.  In the election campaigns of 1980 the candidate, who was to become the 40th President, sounded the alarm and promised to balance the budget. Instead his administration, and the four Congresses during his two terms of office, "stoked" the deficits and added to the pressures of the superheated national debt.  </div> <div>      The world fed the Nazis the Saar, the Sudetenland, Austria, and Czechoslovakia.  Prime Minister Chamberlain could proclaim "Peace in Our Time".  President Reagan could exclaim "prosperity during my terms".</div> <div>      The 41st and 42nd Presidents, and the 101st through 103rd Congresses, have continued the examples set in the 1930s and 1980s.  If the nation does not face a "September 1, 1939", prior to that time, annual budget shortfalls are expected to top $140 billion each and every year until the turn of the century.</div> <bR> <div>      <U>The Economy/Interest Rates</U>.  Implied by the fears and procrastinations of our recent Presidents and Congresses, to lead the nation to make sacrifices to balance the budget and begin payoff of the national debt, during each of their terms of office, is the assumption that someday our nation will experience high rates of growth, sustainable for years on end.  That hypothetical someday is now at some unpredicted time in the next century. Don't bother to search newspapers and books for explanations, by politicians or economists, for a basis for that assumption!</div> <bR> <div>      The, for-the-most-part lack-luster, economic-growth years of the 1980s (growth sustained by deficit spending; normally employed reluctantly as a short-term, anti-recession measure) belatedly came to an end in the term of the 41st President. The recession was long, entailed sustained high unemployment, and was accompanied by record deficits.  Here again was proof that the business cycle is alive and lurking.  It will periodically frustrate budgets that are planned, even with no deficit spending, and continuous amortization of the national debt.</div> <div>      The good news, of the low-growth economy years, was that they were accompanied by the lowering of interest rates, to levels not experienced in decades.  The 42nd President was blessed upon entry into office with clear, though marginal, evidence that the nation was coming out of the recession.  In the fourth quarter of his first year there was a blip of high growth in the economy. Quickly (February, March, and April 1994), there were events that vividly demonstrated how tight a siege the superheated, burgeoning national debt has on the nation.  The Federal Reserve Banks thrice bumped interest rates up, purportedly to arrest a proneness for (but not evident) high inflation, which could result from high economic growth rates.</div> <div>      The Federal Reserve System has fearful responsibilities. The health of the entire banking system within the United States falls within its purview.  It controls the tightness or looseness of money.  Tightness of money, at the wrong time, is given principal credit for triggering the depression of the 1930s.  The health and survivability of banks (including the relatively few still existent savings and loans) is predicated primarily on the balancing of long term mortgages and loans, with sufficient deposit accounts of lesser earning interest rates.  </div> <div>      In the late 1970s and early 1980s, banks were unable to maintain this balance due to financial markets competition (e.g., money market mutual funds).  Early in the first term of the 40th President, wholesale failures in the banking system were threatened.  Belatedly the Administration and the Congress relaxed banking rules to permit the institutions to compete. They also failed to provide adequate checks on the system.  Many banks and S&Ls abused the latitudes then permitted; others could not compete even with the relaxed rules.  Wholesale failures of S&Ls did occur, and the failure of banks were numerous.  Bailing out the banking system has been estimated to cost taxpayers as much as $500 billion.  </div> <div>      The Presidents and the Congresses have not reduced federal government guarantees of up to $100,000 per deposit account.  The condition of the banking system, though much improved, is tenuous.  The nation still has not found the solution, as to how to keep banks both safe and competitive, while meeting their intended missions.</div> <div>      Perhaps the greatest challenge, for the Federal Reserve System, is to do its part to keep domestic economic conditions such that bi-weekly funding of the current deficits, and refunding of the maturing portions of the burgeoning national debt, are salable nationally and internationally.  It must also worry about the risk and marketability of ever growing other federally guaranteed debt (FHA, VA, and low-income housing loans; farm loans; small business loans; student loans; and other Government Sponsored Enterprises' loans).  At least peripherally the Feds must be concerned with the effects on the banking system, the securities markets, and the general economy, of federal government (certain or implied) guarantees of pension plans and insurance companies.</div> <div>      The reason given to the public for the three recent boosts in interest rates (and the one or more anticipated in coming weeks) is the threat of inflation.  But one wonders what other factors (more complicated than the public could understand, without panicking) played a role in the Fed decisions.  Me thinks a more surreptitious concern may be a deteriorating condition again of the banking system.  </div> <div>      During the relatively long period that the Feds have held down short term interest rates (to the distinct advantage for funding federal deficits and refundings of the national debt), bank Certificates of Deposits have been unable to compete with mutual funds and the stock market.  [Shades of the late 1970s and early 1980s.]  In any case the predictable result occurred.  A large drop in the stock and bond markets ensued, and the more cautious investors have begun to move money back into the safety of bank deposits guaranteed by the federal government. Unfortunately the Fed actions entail higher interest costs of short and long term federal government securities (which translates into greater deficits and acceleration of the growth of the national debt).  It also means the maintenance and/or increase in the level of federal guarantees.</div> <div>      It is quite evident from the above how narrow and slippery a plank, above the roiling waters of the economy, off the side of the ship of state, the Federal Reserve must walk while taking soundings and deciding what must be done to keep the vessel afloat.  Can it cope indefinitely with the storms ahead as the ship wallows deeper in the troublesome waters?</div> <bR> <div>      Mr. President, Senators, and Representatives: Take out the tablespoon!  Make us take the castor oil, now! Please!</div> <bR> <div>      The sixth postscript will be continued in the next essays.</div> <div>                          Publius IV</div> <div> <A HREF="id106.htm" TARGET="_top" TITLE="Responsibility 73"><U>Responsibility #73</U></A></div> <div> Back to: <A HREF="id33.htm" TARGET="_top" TITLE="Responsibility Contents"><U>Responsibility Contents</U></A></div> </td> </tr></table></body>