SCANDAL

Miami Herald, The (FL)
December 3, 1989
Author: JOEL ACHENBACH Herald Staff Writer

Washington, Nov. 7, 1989

Here they are, the Sultans of Spend, the Viceroys of Venality, the Daddy-Os of Deficit , assembling late in the evening on the Senate floor for an emergency session to raise the nation's debt above the $3 trillion barrier.

Trillion is what you get when you borrow a million dollars a million times. A scientist would say we owe $3 X 10 (12). There is a saying on Capitol Hill: A billion here, a billion there, and pretty soon you're talking about some serious money.

Everyone in Washington agrees that this situation is terrible, terrible, but it's too late to do anything about it, the pork has been doled from the barrel, the checks are in the mail. The alleged leaders want to make people happy, and that means not only buying more batplanes than anyone could possibly use, but also passing bills like -- to use an example from this very day -- the Mushroom Promotion, Research and Consumer Information Act. They have brought us such essential government triumphs as the Landing Craft Air Cushion Program, the Deepwater Port Liability Fund, the National Board for the Promotion of Rifle Practice, the Air Force General Gift Fund -- a gift fund! -- the William Langer Jewel Bearing Plant Revolving Fund, and the Railroad Retirement Board's ominously named Federal Windfall Subsidy.

Surely the government cannot ask the American people to simply pay for this stuff. That would require . . . the unmentionable.

So instead, the Mullahs of Moolah stifle that guttural cry of Stop me before I borrow again and plunge forward into the abyss.

Shortly after the clock strikes 7, the senators file into the chamber and take their assigned seats, Democrats on the left, Republicans on the right. There are a dozen reporters and about twice that many real human beings watching the show from the galleries above.

The historic vote on this autumn evening will rate a sentence, maybe two, on the 11 o'clock news. v In tomorrow's paper, the story will run deep inside the A section.

It's important, it's grave, it's deeply disturbing to anyone who realizes what's happening, but it's not exactly . . . sexy.

That the senators are in the chamber so late, and in such number, is a testament to the secret evil of the moment. Usually they come in ones and twos for brief cameo oratory, staged for the narrow scope of the C-SPAN cameras, which politely focus only on the speaker and allow him to pretend that he is not gesturing to an empty chamber. But on this night, they have come in tens and twenties.

They have postponed until the last minute one of the painful decisions necessitated by their previous decision to make bad decisions. They know they are running the country badly. It's no mystery. But given the choices -- irresponsible deficit spending with short-term economic and political gains, or some combination of budget cuts and tax increases that might anger voters -- they've chosen irresponsibility. Like true Americans, they know how to put their purchases on plastic.

That the nation is already in the hole to an obscene degree does not matter; that everyone in Washington agrees that the government is willfully selling out the nation's future does not matter; that the world's wealthiest nation is shamelessly sucking up the world's investment capital to fund its day-to-day craving for the good life does not matter. All that matters is the Treasury Department's insistence that, unless the Congress raises the ceiling on the public debt from $2.8 trillion to $3.12 trillion, by midnight, the United States of America will go broke.

The Treasury will literally run out of cash.

Social Security checks will bounce.

United States Savings Bonds that "mature" will be temporarily as worthless as Confederate money.

Both arms of Congress know what they must do. The House has already acted. The only issue for the Senate tonight is whether it can quickly pass a clean, unencumbered debt bill, or get bogged down in amendments. A number of senators would like to stick their pet legislation onto this must-pass bill.

So it happens. The squeeze play comes from Sen. John Heinz of Pennsylvania, quite literally as in the steak sauce (that's his family). Heinz announces that he wants to attach an amendment that would prevent Congress from disguising the true size of the budget deficit . Specifically, he wants Congress to stop counting the surplus money in the Social Security system. That surplus money is supposed to be saved for when the Baby Boomers get old.

Sticking up for Social Security neither requires great political courage nor solves the problem of deficit spending, but Heinz's idea is basically sound. Congress and the president go through contortions every session to make the annual budget deficits -- the yearly spasms of overspending that have ultimately added up to the $3 trillion national debt -- look smaller and more benign than they are. There are innumerable ways to mask the deficit , including:

1. Taking items "off-budget." This means that we don't count them anymore. For example, in April, President Bush and Congress -- the Viscounts of Miscount -- decided that the Postal Service would henceforth be off-budget, which has the convenient result of removing $1.7 billion in Postal Service red ink from the deficit calculations. The excuse is that the Postal Service is a self-supporting agency -- which it isn't for the moment. Not only is this sort of budgeteering completely dishonest, it's not even particularly clever. The motto is, A billion dollars not counted is a billion dollars earned.

To top themselves, the president and Congress then decided to ignore about $20 billion spent to bail out the corrupt, insolvent Savings and Loan industry. The rationale for such deceit is that the money for the Savings and Loan bail out will be borrowed by a newly formed agency that is not technically part of the federal government. The real reason for not counting that money is that it would make the budget deficit embarrassingly large. Administration officials said they were worried that Wall Street would panic if the official budget deficit swelled that much. Why the administration felt that an accounting gimmick would soothe the nerves on Wall Street is a mystery. Wall Street knows how to count. The weak-kneed handling of the deficit by Washington is commonly believed to be a major reason that the stock market dropped 189 points in an hour and a half one day in mid-October.

2. Counting money that you shouldn't. The prime example is the surplus in the Social Security trust funds. If you are a working person, you pay both a "withholding tax" and a "Social Security tax," a bifurcation that is the government's way of trying to dupe you into thinking that your Social Security money is stashed away in Washington, with your name on it, waiting for you to get old. Alas, "Social Security tax" is a joke. By any name, it's more chow for the government maw, and the so-called "trust funds" do not really exist. The government has already spent that money, and issued an IOU to future generations. "Trust" us, says the government.

So here is Sen. Heinz, saying that the real budget deficit for fiscal year 1990 is not $141 billion, as Congress is pretending, but rather $206 billion, once you take the bogus Social Security money out of the equation.

"Our current practices obviously encourage and result in a practice of deficit deception," Heinz says.

His colleagues are annoyed. Heinz is slowing everything down, and if he gets his way, other senators will want to add amendments to the debt bill. People would rather vote and go home. The Senate Majority Leader, Sen. George Mitchell, glares at his colleague from Pennsylvania.

Mitchell says, "We are all public officials . . . "

This is going to be a lecture, a dressing-down.

" . . . If we are unable to act to extend the debt ceiling, we run the risk of forcing a default by the United States government for the first time in our nation's history, with consequences that not one of us can now calculate, all of them adverse, and potentially unleashing a course of events which we could not then contain or reverse."

Foreboding indeed. Heinz, sticking up for himself, says, "Mr. Leader (not his real name), I do not think anybody in this body wants to endanger the nation's economy. It would be remarkable if one person in the Senate could do that . . . "

Ooooohhhhh, bad move. A cavalier attitude does not suit the game of budget brinksmanship. The statesman from Texas, Sen. Lloyd Bentsen, rises for more lecturing:

"Let us talk for a minute about what kind of stakes we are playing for. The Congressional Budget Office sends us a letter telling us that we may well have a decline in the dollar and incomplete recovery if the government were to enter default for just a few days beyond the drop-dead period we're talking about. They are also talking about a general increase in interest rates for the entire country, and that is for just a few days delay in our action. We could have really some disastrous results if default were to continue. When the senator says he does not believe one person can cause that to come about, I respond: you bet one person can cause it!"

After about an hour of sniping, and a brief summit in the outer hallway, and an exchange of promises and back scratching, Heinz buckles.

But then another senator balks. Kent Conrad, from North Dakota.

"I am dismayed by what we are about to do today. We are called upon to increase the debt limit from $2.8 to $3.12 trillion without any long-term plan to reduce the budget deficit and thus reduce our borrowing needs," Conrad says.

He picks up steam:

"The largest threat to our national security is our economic vulnerability. We have engaged in a policy of debt, deficit and decline over the last decade. We've tripled the national debt. We have gone from being the largest creditor nation in the world to being the largest debtor nation . . . "

Blah blah blah. These words are an old refrain by now. Everyone knows this stuff. The senator is being a bore!

The Senate votes by voice. The motion passes easily, with scattered nays. Since there's no roll call, the senators avoid being listed individually in the Congressional Record as having voted to raise the nation's debt to $3,122,700,000,000.

They can always deny it in the morning.

There is a secret federal program that might be called Aid to Rich Foreigners. This is not a small program. Would you believe . . . $27 billion in one year? That's the 1988 figure for how much the United States government paid in interest on all the Treasury bills owned by foreigners.

Aid to Rich Foreigners is twice the size of Aid to Families with Dependent Children. It's twice the size of the food stamps program. It is 40 times what we spend on the Centers for Disease Control, which leads the fight against AIDS.

That's just one year. From 1981 to 1988, we gave foreign investors $165.4 billion.

But who's counting?

What makes the Aid to Rich Foreigners program all the more astonishing is that American taxpayers haven't stormed Capitol Hill with bayonets and bazookas to protest this boondoggle. No one cares. Where's the outrage? What does it take to get people riled? How much money down a rat hole before people wake up?

Check this out: The net interest payments for fiscal 1990 -- the amount we pay to everyone who owns Treasury bills -- will be about $187 billion. That is $187 billion that could otherwise be spent on something tangible, like roads, prisons, child care. At best it is a kind of "transfer payment," a way to redistribute money from a lot of average taxpayers to a lot of affluent investors. Including those who live on other continents.

You could argue that $187 billion is a pittance. The annual Gross National Product, the combined sweat and strain of every American, is about $5 trillion. The wealth of the country, the accumulated capital, is about $15 trillion. So what's a measly $187 billion?

For starters, it's more than any other cost in the budget except national defense and Social Security. Take away the interest payments on all that money we borrowed to fund the Reagan '80s, and the infamous deficit would nearly vanish. That $187 billion is more than we spend on the National Cancer Institute, disadvantaged students, the National Park Service, land reclamation, Solar System exploration, Aid to Families with Dependent Children, the CIA, the FBI, the Secret Service, the Environmental Protection Agency, alcohol and drug abuse, the National Endowment for the Humanities, the Fish and Wildlife Service, crime victims assistance, the Small Business Administration, job training for veterans, salaries for federal judges, financial aid for students . . . more than all that combined.

In fact, it is five times that total.

In 1981, Ronald Reagan delivered on his campaign promise and convinced Congress to cut taxes. But Reagan also wanted a massive military build-up. Under those terms, the only way to balance the budget would be to chop down the country's social programs, and Congress didn't want to do that. In the 1980s, only one program, General Revenue Sharing, was axed completely.

Stephen Bell is one Washingtonian who sees the full dimension of this deficit fiasco. He was the chief of staff for the Senate Budget Committee in the early and mid-1980s, and spearheaded the push for the Reagan tax cut. As one of his colleagues put it, only half-joking, "He created these budget deficits ." Bell is most chagrined at how badly things turned out.

"The country's leaders refuse to make choices anymore among competing demands for government resources -- taxpayers' dollars. They have thrown up their hands in despair and said these choices are too difficult," says Bell, now a senior executive for the investment firm Salomon Brothers.

In 1985, Congress passed the famous Gramm-Rudman-Hollings law, which promised a balanced budget by 1991. Then they switched the goal to 1993. But the will to solve the problem still hasn't materialized, and there is talk of a balanced budget in 1999, squeaking one in just before the millennium.

Gramm-Rudman is designed to cudgel the president and Congress into fiscal prudence. The law requires a budget deficit no larger than $100 billion in 1990. If the deficit is any larger, automatic spending cuts will pare away the extra money. This is called Government By Computer. Congressmen are rather ashamed that it has reached this level, that they have to turn fiscal policy over to a machine. This year has been particularly rough because the deficit was projected by the Congressional Budget Office to be about $141 billion, despite alleged efforts all year to get that number down. How can Congress slash $41 billion in spending?

By cheating.

This is where Gramm-Rudman does more harm than good. It inspires deceit.

The term for this is "legerdemain." It may be the only thing that our leaders have truly mastered.

The first thing they do is ignore the Congressional Budget Office, a bipartisan agency with a good track record for accuracy, and instead adopt all the smaller, less credible deficit estimates of the Office of Management and Budget, which is part of the Bush administration. The OMB said the deficit would be a modest $116 billion.

This is based on a number of fibs. Foremost, the OMB lists as a "receipt," that is, as incoming revenue, $12.8 billion that was borrowed by an off-budget enterprise set up to bail out the Savings and Loan industry. It's borrowed money! It's not less debt, it's more debt.

The OMB also assumes, in its calculations, that the economy (and thus tax revenue) will grow faster and inflation will stay lower than most other economists think is likely. Politicians are reluctant to use the more realistic budget figures, because the taxpayers might confuse honest arithmetic with a sudden increase in the deficit . So anyway, going from $116 billion down to $100 billion isn't too hard if you know plenty of tricks.

Those zany folks at the Pentagon switched a payday from Oct. 1, the first day of fiscal 1990, to Sept. 29, part of fiscal 1989. The Department of Agriculture also shifted some payments to farmers from the autumn to the summer. Any person not currently housed in a long-term mental health care facility would realize that no money had actually been saved by either move. But in the deficit calculations, these actions saved $4 billion. (Under Gramm-Rudman, there's no punishment, no automatic spending cuts, if the deficit for the previous year exceeds the legal limit. The deficit for 1989 was supposed to be no higher than $136 billion, but came in at $161 billion. No one cared.)

How's this: The government sold off a bunch of assets for about $5 billion. This shouldn't be counted, because the country is just trading assets for cash. You can picture the logical extension of this: We balance the budget, but Trump owns Yellowstone.

Here's another novel idea. The Reagan and Bush administrations have totaled up the value of all the food stamps that haven't been used in the past 10 years and have counted them as a "credit" for the next fiscal year. This is another lie. The honest approach would be to go back and re-adjust the historical tables of how much was spent on food stamps. Instead, the Executive Branch is acting as though it found a secret stash of gold.

Next year it may try the food stamps ruse with uncashed government checks and savings bonds. There is about $2.5 billion in lost Treasury notes, presumably stuffed into mattresses and under floorboards. A quick notation in the ledger, and that $2.5 billion can be lopped off the official 1991 budget deficit .

And finally, if the alleged leaders still can't get the deficit below the $100 billion target, there is a final recourse: They can point out that when Gramm-Rudman mandated that the deficit be no greater than $100 billion the law actually said, in fine print, $100 billion give or take $10 billion. So they shoot for $110 billion.

There is a way to detect the extent to which the Official Deficit is a lie. You must remember that the deficit is different from the federal debt. A deficit is just one year's supposed shortfall between revenue and expenditures. The debt is how much money the government owes in total, from all these years of profligate spending. If you add up the annual deficits , you get of about $1.4 trillion for the past eight years. But if you look at the total federal debt, the jump has been more dramatic -- from $994 billion in September 1981 to $2,866 billion in September 1989. Why the difference? Because the government lies about the annual deficit . The government hides hundreds of billion of dollars worth of borrowing.

Worse than the budget gimmickry is that, in the pursuit of Gramm-Rudman targets, Congress makes bad policy. There is a tendency to favor big-ticket weapons like the Stealth bomber, because the costs of the program can be officially assigned to future years, as opposed to, say, paying salaries to the soldiers and intelligence operatives, or buying ammunition for guns. The result is that we have lots of titanic hardware, and a commitment to spend huge sums of money far into the future on weapons we're not even sure we'll need, but in the meantime we're closing our military bases and couldn't rescue an American hostage if you held a tank to our head.

Unless it suddenly has a spasm of courage and inspiration, Congress will obey the first law of political dynamics and remain as inert as dirt on tedious and difficult issues like the deficit . It can be prodded into action from two directions: Above and below.

Above is the president of the United States, George Bush, who, whatever one thinks of him, is not exactly Leadership Incarnate. It is Bush's job, as president, to submit an annual budget to Congress. Congress then tinkers with it, gums it up, twists it around, and sends it back to the president for final approval, or veto, in the form of 13 major appropriations bills. If Bush vetos a bill, as he did twice this fall, Congress usually gets out the eraser and tries again. The original proposed budget for 1990, submitted to Congress last February, was largely hammered together by the Reagan administration, but there is no sign that Bush will break with Reagan's tradition of submitting budgets with huge deficits .

Bush this year tried to use his political heft, such as it is, to push Congress to cut the tax on capital gains -- profits from sales of stocks and so forth. This would have a good news, bad news effect on the deficit . The good news is that, in the short run, tax revenue would actually increase, because people would take advantage of the lower rates and liquidate a lot of their investments, and pay taxes on the profits. The bad news is that, over the long haul, the lower tax rate would probably mean less tax revenue for the government. It's an arcane and speculative area, but in any case, Congress balked, because it seemed too much like a tax break for the rich. The president, angered, suddenly demanded that Congress abandon all the hocus- pocus deficit accounting tricks that Bush himself had blessed only a few months earlier.

Absent leadership from above, Congress looks below. To the people.

And the people say, who cares?

No one has ever marched against the deficit . There have been no sit-ins. No public official has ever been thrown out of office for deficit spending.

The fact is, people like the deficit . They tell pollsters they are worried by it, but on a day to day basis they like what the deficit gives them: A free lunch. They get the same old government largess, they get an economy hopped-up by borrowing, and meanwhile the tax rate has been lowered slightly, or dramatically in the case of the richest Americans.

Swearing off deficit -spending is like swearing off Hagen-Dazs. We are fully conscious of the fact that Hagen-Dazs isn't good for us. It's incredibly fattening. Eating a carton of Hagen-Dazs is like having a reverse liposuction.

But it's so yummy.

And so we eat it, feel a little guilty, and then try to convince ourselves that it probably is nutritious in its own way. We practice the same rationalization with deficits : We say, can they be so bad? After all, the 1980s economy has resurged from a recession at the same time that deficits rocketed upward. Maybe deficits are good!

Deficit apologists often use three false standards to downplay the significance of the red ink:

1. The standard of previous deficits . The apologists say we've had larger deficits in the past, when measured as a percentage of Gross National Product. Like 1986. Or like 1943.

This reasoning is laughable. The nadir of government fiscal policy was 1986, when the official, disguised deficit hit $221 billion. By that standard anything would look good. As for 1943, we were in the middle of a global battle against fascist imperialism. Today we're merely in a war against our own bad judgment.

2. The standard of the balanced budget. There is a constant fuss about getting the deficit to zero, as though this is a magical number. The truth is that sometimes a deficit can be a good idea, and, more importantly, sometimes a surplus is a good idea. Right now should be surplus time. The economy is growing and the country is at peace. Baby boomers are in the prime of their working life. A wise government would look at the demographics of the nation and decide to put some money aside -- maybe $50 billion a year or so -- for when that huge population retires and becomes a financial drain. Shooting for a balanced budget right now is shooting too low.

3. The standard of total economic collapse. In the early 1980s, when the shocking deficits came along, doomsayers said that this would destroy our country, sending it reeling into economic disintegration. That didn't happen, and it almost certainly won't. The economy will churn forward even if the deficits remain. Most economists have come to the conclusion that government debt, though a grave problem, is not entirely catastrophic. But since when is Not Entirely Catastrophic the same thing as Acceptable? Does the government have the license to do anything it wants so long as the result doesn't precipitously drive the country back into the Stone Age?

As Steve Bell puts it, "People have this notion that countries die of heart attacks." They don't -- they just slowly waste away.

Deficits rob from the future. The problem is not merely that we have a big debt that we must pay back; we'll probably never pay back that $3 trillion, because we can keep rolling it over indefinitely so long as the country remains intact. The real problem is that when the government borrows so much money from Americans (who buy most of the Treasury bills), it sucks up money that otherwise would be invested, to greater end, in the private sector.

Look at it this way: The government is a plodding, inefficient, bureaucratic, complacent institution, the worst company that anyone could ever design. It is a giant version of the state Department of Motor Vehicles. This "company" pays a decent dividend to those who invest in it, but because it wastes so much of that invested money, the overall economy isn't helped much. The economy gets more of a boost if, instead of buying Savings Bonds, we invest our money in, say, Spaceley Sprockets, which must operate efficiently in order to survive in the jungle of Free Enterprise.

This is a complex point, but it is Major Deficit Problem Number One. Only through investment does a capitalist country get richer. Investments yield profits, profits fuel more investment, around and around, which is why rich people get so much richer and end up lounging poolside in Bel-Air eating buckets of Hagen-Dazs.

Frighteningly, though, most people in this country seem to have stopped caring about the future, and they blow their money before it can be invested. For several decades, this country had a savings rate -- the amount we set aside every year from our income -- of about 8 percent. In the last decade, savings has dropped to 4 percent, far below any industrialized nation except Australia. Government leaders mimic the public. The deficit is merely a symptom of a grander pathology of Nowism.

"We, as a nation, are overconsuming. Why are we doing this? Because it's fun," says Robert Reischauer, director of the Congressional Budget Office.

Because we don't save and invest, future generations will be poorer than they otherwise would be. That doesn't mean they'll be selling apples on the corner. As deficit apologists are quick to point out, even with this huge public debt, future generations are likely to make slightly more money, in real terms, than we do today. So you might ask, why the fuss? Why should we worry about those soft-bodied, snot-nosed future punks? Why not steal from the rich of the future and give to the poor in the present? Why should they get to drive Cadillacs if we're stuck with Chevys?

For starters, the Robin Hood defense is questionable on moral grounds. No previous generation has countenanced a theft of wealth from its descendants.

But on a more practical level, we can't just freeze the nation's wealth at our own level. Hampering future growth will erode the position of America compared to other countries, countries that don't have gutless leaders and huge budget deficits . Our grandchildren may be driving Cadillacs, true enough, but Cadillacs might be a joke by that time, the equivalent of horse-and-buggy. The Japanese might be zipping around in, who knows, Hovercraft. Anti-gravitation devices. Thought Power.

Sen. Bob Graham tells a little story:

"There was a country that in 1900 was in the top 10 in the world in terms of its prosperity. It was a country that had great material wealth, great land, a temperate climate . . . It had 80 years of stable, mostly democratic government. Today, 80 years later, it is the 60th economy overall in the world. Just in the past 10 years its people have suffered a decline of 20 to 30 percent in per capita standard of living . . . The reason for this turnaround was largely a government that became increasingly self-serving, very now-oriented. The elites in the government saw themselves as protecting the status quo. The name of the country is Argentina."

Graham told that story to this reporter as we flew into Washington National on a Monday morning flight from Miami. As it happened, we got a brief glimmer of the Major Deficit Problem Number Two, which isn't far away in the befogged future.

The Pan Am jet had just passed over the Lincoln Memorial, following the curve of the Potomac, descending toward the airport, when suddenly the pilot aborted the landing. It wasn't exactly terrifying, just vaguely unsettling. He announced that there was an air traffic control problem. The air traffic control system, operated by the federal government, has been a mess for several years. Why can't it be improved? Money. The deficit and the federal debt have bound the government's hands, forced it to tread water furiously just to stay afloat. Money that could go to a good cause is being wasted on massive interest payments on the federal debt. A drug war? Can't afford it. Better schools? They'll have to make do. Potholes in the road? Try swerving. Safer airports? Just cross your fingers.

Actually, there is an Aviation Trust Fund, just like the Social Security trust funds. It takes 8 percent of the money spent on plane tickets. That money is supposed to go into improving airports. It doesn't -- it goes to offset the deficit . Just like the Social Security surplus.

"One of the reasons there is a squeamishness about flying on American commercial airlines is that we've doubled the number of passenger miles and have hardly increased air safety at all," Graham said, moments before a bumpy landing.

Major Deficit Problem Number Three is something only economists think about. When a country goes into a recession, a good technique for getting out of it is for the government to spend a whole bunch of money suddenly, which runs up a deficit . But we can't use that tool because we already have a huge deficit . If there's a recession, tax revenue will drop and welfare needs will increase, and the budget deficit will likely hit $300 billion. To give the economy a needed jolt, we'd have to run the deficit to something like $400 or $500 billion. It's too appalling to even think about.

Major Deficit Problem Number Four is purely moral. We are a rich country. There are none richer. Not even Japan. We live nice lives. We have "leisure time." Some of us drive Recreational Vehicles that get six miles to the gallon. It is great to be American. So why are we borrowing money from foreigners? Why are we using up capital that could be invested in poor countries where children starve to death? Do we have no shame?

Not much. We the People don't care about Them the People.

This brings us to Major Deficit Problem Number Five. Rich foreigners love the economic policies of this country, because those policies jack up interest rates. When the government spends more than it takes in, it must borrow, which has the effect of increasing the competition for the loose investment dollars floating around out there, which increases interest rates. It's quite simple: The government has to outbid the competition. It says, buy our Treasury bills, we'll pay you 7 percent interest. No? OK, then, 8 percent! Do we hear 9 percent? And so on, elevating interest rates far above the inflation rate of 4 or 5 percent, and adding to the expense of buying a car or a house.

Those rates also make American investments more attractive to rich foreigners, the same ones we've made richer with our annual interest payments. Wait, you say: Isn't it good that foreigners are investing in our country? No, because, once again, he who invests, gets the profits. The $27 billion in the Aid to Rich Foreigners program is a small fraction of the profits that foreigners take from this country every year.

In recent months, the Japanese have purchased Rockefeller Center and, in the biggest buy out of an American company by foreign investors, Columbia Pictures. This was big news: Japan had bought Radio City Music Hall and one of the great studios of Hollywood. Buying Treasury bills is one thing, but not our culture! Not our movies. (Is it just a coincidence that there's a new Godzilla movie in the works?)

These purchases finally managed to strike a chord in the American public. That chord is probably a somewhat ugly one. The Japanese are not the biggest investors in America -- the British are -- but they are of a different race from most Americans, and there is an acute sensation of a new Yellow Peril.

Perhaps it is too much to ask of the American people for them to scrutinize the issues a little closer and see that the Japanese are not causing the decline of this country. We are doing it to ourselves.

No Japanese national serves in the United States Congress or in the White House. The Japanese have not ordered us to stop saving money and run up huge deficits .

We control our destiny. We have willfully addicted ourselves to money, enjoying the cheap high at the cost of inevitable degradation. We're junkies. It's time to grit the teeth and go cold turkey.

There is no shortage of potential cures, or at least treatments, if we have the nerve to go through with them. There is a thick book published by the Congressional Budget Office called Reducing the Deficit : Spending and Revenue Options. It's not exactly Elmore Leonard, but it's interesting in its own way, with 149 options for whittling away the deficit .

A sample:

* Cancel the Trident Refit Program. The Navy wants to spend $1.3 billion over the next five years switching missiles in eight Trident submarines. Those subs have the Trident I, and the Navy wants to put in the slightly more accurate Trident II. The switch would give us 1,900 nuclear warheads on submarines, instead of a paltry 1,500. Once we install the new missiles, however, they might have to be ripped out due to arms control treaties.

* Cancel the Rail MX. The military wants to spend $5.7 billion in the next five years putting 50 MX missiles on railroad cars. This is so that if the Soviet Union launches a massive nuclear strike that turns most American cities and military installations into a fine glowing powder, some of our nuclear missiles will be able to choo-choo to safety.

* Modify the Davis-Bacon Act. This law, passed in 1935, says that whenever the government builds anything costing more than $2,000, it must pay "prevailing wages" to all construction workers, which often means a union wage scale. The result is that the government wants to build a few office partitions it can't use a low-skilled helper to hammer nails and pick up trash. Or, if the government does hire that helper, he will be paid as though he's a highly trained professional. Abandoning this rule for federal projects costing less than $250,000 would save the government about $3.5 billion over five years.

* Restrict cost-of-living increases in pensions paid to federal retirees under the age of 62. These people are not disabled and are relatively young. If they don't like the benefit cut, they can go out and get a job. This would save $9.7 billion over five years.

* For one year only, eliminate the cost-of-living increase for Social Security benefits and other entitlements that aren't determined by the person's neediness. This would save $10.6 billion in a single year, with aftereffects for many more years.

* Raise income taxes. Currently, there are two tax brackets of 15 and 28 percent. If these were raised to 16 and 30 percent, the government would pull in about $167 billion in extra revenue over five years.

Just because an idea is a good one doesn't mean it'll become law. Cut Social Security? Raise taxes? These noisome ideas are picked up with the end of a long stick and cast into the dumpster. The people who run the government aren't accountants, they're politicians. The president would lose face if he allowed a tax hike. So there's not even an option. (Maybe he'll announce that what he really said in his campaign last year was, Read my lips, no new taxis.) Social Security benefits, meanwhile, will be cut sometime after the hydrogen is exhausted in the core of the Sun. And the military contractors who subsist off government business will squawk if America gets one single pound-per-square-inch weaker in the face of the Soviet menace (or whomever else we can get to play that role now that the Soviets are retiring).

Wistfully, we might fantasize about balancing the budget the easy way, by simply refusing to pay the $180 billion that we spend on interest on the federal debt. Unfortunately that's called default. That is bad.

There is one final way to pay off the mountain of debt that is our monument to the Hagen-Dazs Decade. We can print money. Just crank up the presses at the mint.

This is how they dealt with a similar problem in Bolivia. The only down side is that the more money you print, the less it's worth. The inflation rate in Bolivia got a little high -- about 30,000 percent.

You could buy a Jag in the morning for what a moped would cost you in the afternoon.

Fortunately we will never have to learn what five-digit inflation is like. This is America, after all. The richest country. The smartest country. The bravest country.

This isn't Bolivia.

Yet.



Edition: FINAL
Section: TROPIC
Page: 8
Copyright (c) 1989 The Miami Herald