Now or never?

Published 12:00 am Thursday, August 5, 1999

From staff reports

A proposal to buy down part of the national debt is long overdue, and must be supported by Congress.

Thursday, August 05, 1999

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A proposal to buy down part of the national debt is long overdue, and must be supported by Congress.

The Treasury Department on Wednesday issued proposed rules for a debt buyback operation. Next, a 60-day comment period will allow the public to weigh in on the plan. The department then hopes to adopt a final set of rules by January.

The plan makes sense, particularly in its voluntary approach that buys back older, higher interest debt while still offering new Treasury bills, notes and bonds to current investors.

Interest is key. Last year, interest on the public debt cost us $364 billion. Reducing the debt by buying back older securities voluntarily would lower the government’s interest payments. The savings could be used for other purposes, such as shoring up Social Security.

And, reducing the debt will likely have the effect of lowering consumer interest rates for mortgages and other loans, too.

President Clinton wants two-thirds of projected budget surpluses over the next 15 years to go toward eliminating the nation’s $5.5 trillion in public debt. While a worthy goal, it is also highly unlikely.

Despite his veto power over the Republicans’ $792 billion tax cut plan, Clinton will not be able to secure most of the surplus for debt reduction.

Still, a more modest approach to debt reduction requires congressional support. Lower interest rates and a better financial position for when the next recession hits are just two of the many good reasons for this support.

Indeed, if the nation cannot pay back some of its $5.5 trillion debt now, in the midst of a projected $2.9 trillion surplus over the next decade, it never will.

And the next time the national debt balloons, as it did in the 1980s and early ’90s, the interest payments could prove ruinous for future generations.