Economists Support Budget Surplus; Trimming Debt, Interest Payments Would Lower Long-Term Rates
More than $1 out of every $7 the federal government spent in the last year went to pay interest on the $3.8 trillion national debt, which has doubled in less than a dozen years.</br></br>Now that President Clinton and Congress have agreed to balance the federal budget, some economic analysts say they should consider running budget surpluses to pay down the debt -- the accumulated total of past annual deficits -- and to reduce the government's interest bill, which reached $245 billion in fiscal 1997, which ended Tuesday.</br></br>The mounting interest payments compounded the difficulty Clinton and Congress had in reaching an agreement to balance the budget, forcing them to squeeze other popular programs harder than they would have had to otherwise.</br></br>Meanwhile, for a variety of reasons, federal spending, other than for interest, has dropped to 17.2 percent of the gross domestic product -- the total value of the nation's output of goods and services. That is the lowest level since 1966.</br></br>One compelling reason for paying down part of the federal debt is that it would lead to lower interest rates for consumers, businesses and the government, some economists argue. Running a surplus in coming years equal to about 1 percent of GDP could trim long-term interest rates by anywhere from a third to three-quarters of a percentage point, according to estimates by different experts. That, in turn, would lower the government's interest payments on the debt by billions of dollars each year.