Clinton speech presages our economic ruinIn his recent...

the Forum

February 26, 1993

Clinton speech presages our economic ruin

In his recent speech to Congress, President Clinton threw the pebble that hits the stone that knocks the boulder that dismantles the entire economy.

As the real tax rate on the wealthiest is jerked up from 31 percent to 39.5 percent, long-term bonds have to yield more so that investors can realize the same after-tax return as they do now.

The 30-year bond recently yielded 7.147 percent. Adding 22 percent, the difference between 31 percent and 39.5 percent, to the present 7.147 percent bond yield gives an 8.61 percent bond yield on the 30-year.

We can expect the free markets to hurl this rate upon us in the near future to penalize our unscientific thinking, or rather the executive branch's illogic.

This quick rise in rates will stretch more or less through the entire bond longevity spectrum, regardless of Alan Greenspan's manipulations at the Fed.

Since the stock market, now premised on the 7.147 percent 30-year rate, is in the stratosphere by most ordinary calculations, we can expect it to tumble in concord with the 30-year bond, which it has done historically, especially from overvalued levels.

A 22 percent stock market correction will be the starter. That would take perhaps $1 trillion out of the stock market, a vast multiple of the $31 billion Clinton has planned to pump-prime the economy.

From that point on, it's all downhill. Only the precise timing is in question.

Demand drops as interest rates ascend, while the Clinton administration plans further taxes to put the increasing numbers of unemployed on the government payroll.

Home prices drop with higher rates and increased job uncertainty. Public skepticism of falling values in all asset

classes promotes further big stock market drops as government borrowing pushes up interest rates and devalues bonds.

Trillions are lost and private business contracts its work force. Economic conditions will deteriorate much faster than they improved in the 1980s.

As short-term interest rates rise to protect the dollar from oblivion, we can turn back to Clinton and the pebble that started it all.

In short, the rich can't be inequitably taxed because they will seek better returns elsewhere with their mobile funds. Why not keep them here, financing our future, with start-up companies, new ideas and patriotism?

The decision that has been made is anti-savings, isolationism and promulgation of class warfare.

And remember, this is just a start in a direction to be followed for four years. The last bull market is over.

Richard L. Frank

Cockeysville

More like Hayden

I wish President Clinton were more like Roger Hayden.

When County Executive Hayden was swept into power with a four-year term after promising change, he spent two years letting attrition whittle away at the size of government until the government that he was heading had shrunk by 12 percent.

He then had the courage to make the difficult decision to make government leaner yet with another 6 percent reduction in personnel.

President Clinton has pulled the old "bait and switch." He promised us a tax cut like Presidents Kennedy and Reagan and is now sticking us with the kind of tax hikes that one would expect from Governor Schaefer.

The time for timidity is over; the time for real cuts in federal spending is now.

No tax and spend plan will undo 30 years of "Great Society" public debt. We have beaten the Red Army; now President Clinton needs to tackle the red ink without foolish tax hikes but with a sharp pencil.

A5 Please, Mr. President, be more like Roger Hayden.

Mendelsohn

Baltimore

School borders

On Feb. 15, Dorothy Dowling wrote an article in Other Voices complaining about city kids who attend Baltimore county schools, without living in the county.

She states that it takes a monumental effort by her and a team of teachers to track down those kids and send them packing back to the city. I hope she puts as much energy into teaching her history class.

I wonder if Miss Dowling ever considered why those parents went through so much trouble just to make sure their kids get a chance at a proper education.

Did she consider that maybe these parents can't afford the cost of private schools or that their child's school may be in the middle of a drug infested, crime ridden neighborhood?

What about the people who work in the city, but live in Baltimore County, whose children attend city schools because its closer to their jobs in the city? Are we to send them packing back to the county?

As a teacher, she should be more concerned with children getting an education regardless of where they come from.

vTC Katina D. Warren

Baltimore

Turned off

If the Republican spokesman thought he had a captive audience from President Clinton's speech, he was wrong. After listening to him stating what a neat package the Republicans had handed the president, we just turned him off.

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