The Last Tiling the Economy Needs
The Concord Coalition recently released its ÛÏZero Deficit Plan,Û which proposes to eliminate the federal budget deficit by the year 2000. The planÛªs sponsors, former Democratic senator Paul Tsongas of Massachusetts and Republican Warren Rudman of New Hampshire, also unveiled a "Debt Clock," mounted on a trailer, to be hauled around the country for photo-ops to underscore the peril of the rising national debt.</br></br>The coalition was intended to be a grass-roots group, sounding a national alarm in the spirit of Paul Revere ("The deficit is here!Û)ÛÓhence the name Concord Coalition. It is an epic case of well-meaning people pursuing a perverse goal.</br></br>For one thing, the deficit is already on a downward course. With the 1993 budget accord in place, the nonpartisan Congressional Budget Office now forecasts that the deficit will gradually decline from its present level of 4.3 percent of gross domestic product to 2.5 percent of GDP by 1998.</br></br>At that level, the national debt begins shrinking relative to the growth of the real economy. In other words, the great deficit crisis is basically over.</br></br>If you think investors are deterred by the fear of rising deficits, ÛÏcrowding-outÛ of private investments by government borrowing or renewed inflation, please explain why they are lending money to the Treasury for 30 years at a fixed interest rate of 6 percent. The fact that interest rates have been declining for three straight years suggests that deficits are a much-exaggerated peril.