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PASTOR GENERAL'S REPORT, FEBRUARY 10, 1984
trillion mark in the summer of 1986, according to the U.S. NEWS &
WORLD REPORT Economlc Unit..--:-: --
Those who do worry about today's chronic deficits fear that
Treasury borrowing to finance them will clash with an expected
pickup in private credit needs as the recovery continues. That
"crowding out" effect, according to this reasoning, will push
interest rates up again, thereby endangering the recovery's
durability....
Over all, the USN&WR Economic Unit calculates that total federal
financing, which includes government-guaranteed and other sub
sidized borrowing not done by the Treasury, will account for
about 55 percent of all funds raised in the credit markets in
1984-85. That is a huge increase from the federal credit demand
that averaged 25.4 percent during the 1970s and 16.7 percent in
the decade of the 1960s.
High deficits and high interest rates also have created what many
regard as an excessively strong dollar on foreign money markets
that is having negative effects on the world economy.
Since
1980, the dollar has risen 81 percent against the French franc,
54 percent against the British pound, and 41 percent against the
West German mark. That strength in effect raises the price of
American goods in world markets, making it harder for American
companies to sell abroad and easier for foreign firms to sell
their products here.
Adcordingly, U.S. merchandise exports have fallen more than 14
percent from 1981, to about 200 billion last year. This trend is
expected to swell the U.S. trade deficit, already a record 69.4
billion dollars in 1983, to close to 100 billion dollars this
year.... Nor are foreign governments happy with the dollar's
strength. It hurts their recoveries by luring needed investment
capital from their borders.
The annual deficits estimated for the future may possibly be too conserva
tive: they assume a fairly robust economy generating considerable cash flow
into federal coffers. What if the rosy prospects don't materialize? This
report from the February 8 LOS ANGELES TIMES shows what could actually be in
store:
The Congressional Budget Office, saying U.S. economic health may
hang in the balance, warned Tuesday that the annual federal
deficit could reach $326 billion in 1989--nearly double the
current record level--if Congress leaves today's spending and tax
policies unchanged and the economy performs moderately well for
the rest of the decade.
But weak economic growth--a real danger in the face of such a
flood of red ink--could force the 1989 deficit to $390 billion,
budget office Director Rudolph G. Penner told the House Budget
Committee. And, even if the economy grows more vigorously than
it has since the early 1960s, he said, the deficit would remain
at the current level of about 180 billion....