Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, March 1, 1993 TAG: 9303010237
SECTION: EDITORIAL PAGE: A-6 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
CLINTON
SINCE HIS Feb. 17 economic address to Congress, President Clinton has generally been winning plaudits for his outline of the deleterious effects of federal debt and deficits, and for launching the first serious presidential attack on them in many a moon.But if the structural deficit is to be dismantled, Clinton's prescriptions may fall short. At the least, Clinton may not yet have made Americans fully aware of the explosive power of the problem.
The government of the United States has been running chronic structural deficits since the early '80s, when the Reaganauts' borrow-and-spend philosophy laid a debt time-bomb that's been ticking ever since.
Looking at federal-budget numbers as a percentage of the total economy, or gross domestic product, is one way to automatically allow for inflation, national economic growth and (indirectly, as an element of GDP growth) population increase. It helps ensure that you're measuring apples and apples, rather than, say, apples and kiwi fruit.
Since the early '80s, federal revenues have consistently run between 18 and 19 percent of GDP, while federal outlays have consistently run more than 21 percent and in some years more than 23 percent. Deficits wax and wane from year to year, depending on the nation's economic performance as well as federal fiscal policy. But in even the best economic times of recent years, the deficit - the built-in, or structural, deficit you get even when the economy is running at or near full employment - has been about 2 percent of GDP. In the recessionary year that ended Sept. 30, the deficit climbed to nearly 5 percent of GDP.
Combine chronically big deficits and the (in this case, black) magic of compound interest, and you get a federal debt growing faster than the economy as a whole.
In the mostly prosperous years between 1960 and 1975, the national debt was cut from 55 to 34 percent of GDP. Even during the stagflationary hard times of the late '70s, the debt did not grow: It was 34 percent of GDP in 1975, and the same in 1980.
But from 1980 to 1985, it rose from 34 to 45 percent of GDP. Every year - good or bad - thereafter, it has climbed, and today is about 65 percent of GDP. One result, as Clinton noted in his speech, is that capital becomes harder and more expensive for the private sector to borrow, because so much is soaked up by the government.
Ultimately, the public sector is crippled, too. For several years, debt service was the fastest-growing item of federal spending, though that honor is now being taken over by health-related costs. Today, debt servicing now takes more than 20 cents of every federal tax dollar.
Thus, overall federal spending has been climbing as a percentage of GDP - even though all other federal outlays in recent years have totaled no greater a percentage of GDP than during the 1970s. What's shot up is the cost of servicing the escalating debt.
The sight of a "liberal" Democratic administration forced to concentrate on the task of reversing a debt spiral set off a decade ago by the policies of "conservative" Republican administration may offer amusing irony. But Clinton has no choice: Unless the debt-spiral time-bomb is defused, the best of present or future presidential intentions will be of little avail.