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Good News (Sort Of) For Deficit Burdened Taxpayers


Economic Trends

GOOD NEWS (SORT OF) FOR DEFICIT-BURDENED TAXPAYERS

Worries about the record 1992 budget deficit--now estimated to hit $348 billion--have helped keep long-term interest rates up around 8.5%. But the deficit may be much easier to finance than expected, suggests economist Maury Harris of PaineWebber Inc. His reason: More than half of the deficit is the result of interest payments on the national debt, and much of the rest consists of payoffs on bank deposit insurance. And these types of outlays, unlike government purchases of goods and services, are available to be lent back to the government again. For example, most interest payments go to institutions and high-income individuals who reinvest the money rather than spend it. So even the big deficit, says Harris, won't stop long-term interest rates from falling to 7.5% by mid-1992.


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