Cashing in on prosperity

Debt buy-back: U.S. Treasury hopes to save billions through early purchase of high-interest bonds.

January 27, 2000

BORROWING a page from Wall Street corporations, the U.S. Treasury is out to make money by spending money to buy back its own stock.

In this case, the targets are older Treasury bonds with high interest rates. If federal officials succeed, the savings to taxpayers could be in the billions of dollars.

It's a splendid way to spend a portion of the huge federal surplus that keeps building.

The Treasury now intends to use $30 billion of excess cash to buy back securities that have not yet matured, some of which pay 14 percent interest.

By retiring high-yielding debt early, the government erases long-term interest payments. Fewer new bonds are being issued, too, because Washington can meet expenses without much borrowing, thanks to the big federal surplus. And the bonds that are issued these days pay far lower interest -- a bit over 6 percent.

It's a giant savings for taxpayers. Given the immensity of this nation's publicly held debt -- $3.6 trillion -- sharply reducing this burdensome IOU ought to be a priority.

During the past two years, the Clinton administration has cut public debt $140 billion by paying off maturing bonds and not issuing as many replacement bonds.

The Treasury's buy-back plan accelerates debt-reduction efforts.

This is a sound, conservative way to use taxpayer dollars. It will strengthen the U.S. economy, especially if the policy is allowed to flourish under the next president.

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