Alternatives for Putting Capital into the American Economy

LAWRENCE JOHN FEDEWA

October 25, 1992|By LAWRENCE JOHN FEDEWA

In the midst of all the confusion he is causing, Ross Perot is asking some serious questions about the American economy. Here are some serious answers.

In the first place, the United States of America is in danger of repeating a terrible mistake which we have already made twice in this century. In 1919 and again in 1946, we won a war and demobilized so fast that we threw our economy into recession. We are in the process of doing the same thing in 1992.

Throughout the past fifty years we have given our best and our brightest -- in human talent, technological advances and financial resources -- to the cause of winning the Cold War. Our most prosperous allies have given very little, while we have run up a multi-trillion dollar deficit defending both ourselves and them from the war that never quite happened.

We should be proud of this record, by the way. Far better to have a monstrous debt than a nuclear war. We should also admit that this course of action was undertaken by a consensus of the American people. Both the victory and the cost of the Cold War are products of that consensus -- it is neither productive nor fair to assert that either belongs to only one political party, whether Republicans or Democrats. We won together; now let's go on together to the next challenge.

That next challenge is a new "war," an economic competition. And we are behind. We are not behind in technology. We are behind in capital.

Every technology which could make a commercial difference is capital-intensive. And we are low on capital. Our debt from the Cold War hangs over us and threatens to absorb all the capital we can muster for the next generation. If we let this happen, we, like the former Soviet Union, will be sitting on a useless capability of destroying the world many times over, while our people are worried about making it through the winter.

Some of our people do not seem to understand the problem. They think that the government can simply go on forever spending money that it doesn't have.

Those on the right believe we should spend that money on war machines, just in case the Soviet threat -- or some other threat -- returns. Those on the left think we should take the mythical money and spend it on helping the poor, and the sick and the old.

Even those who do understand the problem, like Mr. Perot, present options which seem tired and self-defeating. They say that we must reduce spending and raise taxes -- the same discipline we impose on less-developed debtor nations through the International Monetary Fund. Under this theory, we will eventually reduce the amount of capital required to pay the federal government's bills, and free up some money to invest in our economy.

By then, however, it will be too late. Investment in government services, whether military or civilian, has minimal impact on economic growth. Using all our capital to pay past bills will gradually wind down our economy until tax receipts decline, and interest rates -- and the deficit as well -- will increase. The result will be a spiral of decline from which America may never recover.

America's best course to regaining our economic vigor has two parts: 1) make our national debt self- liquidating; and 2) use our national credit to raise investment capital for American business.

* A Self-Liquidating National Debt

When your debt is strangling your business, the first thing to look at is the possibility of using the mortgaged assets to produce some offsetting revenue. This means that we must look at the assets of the federal government in a new way.

First, we should divide federal finances into what accountants call a "balance sheet" and an "income statement." All the bridges, highways, buildings, forests, seashore, military bases, mineral rights and the millions of other assets owned by the American people must be identified and analyzed for income potential.

A whole part of the government should be dedicated to raising the revenue to retire the debts on the "balance sheet." This approach is like dedicating the tolls from a highway to paying off the bond that was sold to build it. Maybe we don't like the idea of paying tolls, leasing back public buildings or monuments, paying rents or use fees or royalties on our waterways, our grazing lands, our forests and our ports, or selling our military airfields and facilities as we downsize our war machine. But we have to pay the price for winning the war somehow.

Morally, this approach is more acceptable than becoming a huge mercenary war machine which "rents" out its army, navy and arms to the latest crisis, and continues to sell weapons in the world markets because weapons are all we know how to make.

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