Stemming the debt buildup

I want to commend David T. Cook on his recent article, ``US spending spree may soon fizzle,'' Oct. 22. The article was probing and insightful. Over $200 billion of the US debt is owed to foreign interests. This year, for the first time since World War II, the US became a debtor nation. Moreover, Americans are saving a smaller portion of their incomes than at any time since the 1950s.

On Oct. 30, I introduced a resolution in the House of Representatives which designates 1986 as ``Save for the USA Year.'' It directs the President to elevate to national prominence a ``Buy Back America'' savings bond drive to wean the US of a growing dependence on foreign credit. The President is authorized to incorporate new bond offerings to enhance sales by offering new interest rates and maturities. This will contribute to more economical financing of the deficit, since bonds save taxpayers a minimu m of $2 billion annually.

Such legislation should begin to raise the consciousness of individual citizens. US Rep. Marcy Kaptur, Washington (D) of Ohio

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In his article ``Exploding the US `debtor nation' myth'' (Oct. 28), Edward Hudgins makes selective use of the facts to show that the net debtor status of the US is actually a ``massive vote of confidence in the American economy by foreign investors.'' He also claims that the principal cause of America's debtor status is the fact that Americans are investing less overseas and more in their own businesses. Which is it?

In a recent study, this association finds that neither is correct. Forty-five percent of the identifiable capital inflow (net of outflow) in 1984 resulted from foreign purchases of US debt, particularly US Treasury securities. Few would argue that these purchases are job-creating.

Net direct investment, on the other hand, represented only 18 percent of the net identifiable inflow. Much of this direct investment was by Japanese companies in anticipation of protectionist legislation that would close our market to their exports. The remaining 37 percent of net identifiable inflows in 1984 comprised mostly volatile banking flows that are both unpredictable and potentially destabilizing.

This type of analysis makes any lasting remedy proposed by Congress that much harder to achieve. Stephen Thomsen, Washington International Economic Policy Association

Letters are welcome. Only a selection can be published and none individually acknowledged. All are subject to condensation. Please address letters to ``readers write.''

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