Cliches and the National Debt

Your editorial of May 15 (“Face the Truth: Tame the Debt”) repeats the cliches that are widely believed by economists and journalists. History does not support the cliches:

Federal deficits are not high by historic standards. Relative to gross national product, they are much lower today (2-4 percent) than in the 1940s (20-31 percent).

Government spending and deficits do not cause recessions and depressions, but harsh cutbacks seem to have that effect. Huge spending in the 1940s ended the Great Depression that began just after the government stopped spending in the 1920s (the last great “peace dividend”).

Yes, interest rates are higher than they should be, but not because of government borrowing. The deregulation of interest rates paid to depositors in financial institutions (beginning in the late 1970s) has driven up the rates for borrowers (including government).

In recent months, other countries (Germany, for example) have raised depositor rates to outbid us for those looking for places to put their money. Naturally, our banks must pay more to depositors to stay even with world competition. Depositor rate deregulation is generally ignored but, if it had no effect on rates, why the deregulation?

Today’s economic thinking, academic and journalistic, most clearly resembles that of the “Roaring ‘20s.” But if the United States was able to borrow and spend the huge amounts needed in World War II, the country can now afford the social, educational, infrastructure andenvironmental programs needed to save both the national community and the planet.

As to why you chose to attack the British prime minister of the 1930s (“Stanley Baldwin’s record . . . bordered on disreputable”), that is a mystery, given the similarity of his economic thinking and yours.

If the British (and the United States, and other countries) had spent money on social programs in the 1930s, World War II could have been avoided.

FREDERICK C. THAYER

Los Angeles

The writer is professor emeritus at the University of Pittsburgh Graduate School of Public and International Affairs.