American plastic ready to get busy for Asia

The Economy

January 19, 1998|By Jay Hancock

NOW THAT the United States must save Earth's economy, at least we possess talent equal to the job: the ability to hock ourselves to the scalp and consume like T. Rex at the brontosaur carryout.

Keeping Asia out of a bad recession will require concentration, diligence and higher credit limits from the American people. We're up to it.

We owe half a trillion dollars on our personal Visas and MasterCards, $5.5 trillion on our federal government's behalf and $3.7 trillion in home mortgages. We have to borrow $3 billion every week to fund our distending trade deficit.

Did somebody say Bloomingdale's?

The Asian half of the orb is chockablock with surplus factories, hotel rooms and warehouses, and somebody's got to put them to work.

The United States has the mightiest currency and the healthiest economy. It's a match made at Seagirt Marine Terminal.

Can we afford it?

U.S. household debts have quadrupled since 1980. Personal bankruptcies are at an all-time high. The national debt -- what the government owes after two decades of budget deficits -- has quintupled.

For the first time in many years, the United States can now pay down at least small portions of these liabilities. The federal budget is on the verge of surplus. Personal incomes are up sharply. Debt and deficit hawks see a rare chance to cull some creditors.

The Concord Coalition, for example, seeks "to end deficit spending in order to preserve our economy and the American dream for our children and grandchildren."

Who could be against that?

The problem is that, geopolitically, fixing our finances couldn't come at a worse time.

With Asia sick, South America teetering and Europe idling, the United States is the customer of last resort for Pacific Rim nations.

Indonesia came close to a coup d'etat this month. South Korea quails under its neighbor to the north. China is home to hordes of unemployed people, tens of thousands strong, roaming from province to province.

Financial rectitude now from America might push a suffering Asia to the mat.

Mercantile Bankshares economist Pat Bradley points out that, compared with the three decades before 1990, recent U.S. fiscal policy has been "contractionary" and has hurt growth. He thinks that will change.

Fiscal stimulus to help economies 12 time zones away may not have been what John Maynard Keynes had in mind, but it's what may happen.

Many specialists on both sides of the political spectrum don't believe debt is all bad, anyway. The $5.5 trillion national debt is a liability on the country's balance sheet, but it's also an asset for millions of American households, paying Treasury-bond interest to finance college tuitions, new cars, retiree incomes.

"If we collect more money from the taxpayers to pay off the deficit, then we're going to turn around and pay off bondholders," said Aldona Robbins, an economist with the Institute for Policy Innovation, outside Dallas. "Well, they're the same people. All you're doing is taking a dollar out of a guy's right pocket and putting it into their left pocket."

Besides, interest rates are falling, making debt cheaper. Not only are personal incomes up, but the U.S. economy is growing faster than the government's debt.

That debt is 70 percent of our national income. Mortgages, credit cards and other consumer debt are about 80 percent of U.S. personal income.

Both ratios would be fine with the people down at your mortgage origination office.

In the end, though, hard questions about geopolitics and household and fiscal solvency probably won't decide where the country's swelling wealth pools up.

American consumers haven't changed their spots. And, Bradley notes, "It's an election year; we are going to have some kind of tax cut."

Shoppers, prepare your plastic.

Pub Date: 1/19/98

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