A Link Between Debt Reductions And Depressions
My thanks for the opinion-page article ''Too Many Goods, Too Few Buyers - A Repeat of 1929?'' Feb. 2, and the author's sensible warning to today's eager budget-cutters.
An equally interesting set of data was recently released by Prof. Frederick Thayer of George Washington University. He linked the American historical sequence that begins with budget-balancing and ends with depressions. Among his findings of past debt reductions:
* From 1817 to 1821, the national debt was reduced by 29 percent to $90 million, and our first major depression began in 1819.
* From 1823 to 1836, the national debt was reduced by 99.7 percent to $38,000, and a major depression began in 1837.
* From 1852 to 1857, the national debt was reduced by 59 percent to $28.7 million and was followed by a major depression in 1857.
* From 1867 to 1873, the national debt was lowered by 27 percent to $2.2 billion, and a major depression began in 1873.
* From 1880 to 1893, the national debt was reduced by 57 percent to $1 billion and was followed by a major depression in 1893.
* From 1920 to 1930,the national debt was reduced by 36 percent to $16.2 billion; our sixth major crisis - the Great Depression - began in 1929.
The consistent historical evidence indicates that deficits never cause depressions, while crusades to reduce the national debt are always followed by depressions. The author poignantly reminds us that the legitimate needs of all members of society justify special programs. It is helpful if we remember that these programs and their costs also are integral to the health of our nation's economic well-being.
John Hymes Jr. Alexandria, Va.
The biggest flaw in the analysis is the assumption that the cutbacks in the waste rampant in entitlement programs will result in a severe economic downturn. The number of people affected today would be far greater than the 10 million of 1929; but as a percentage of all working people it would be far less and easier to absorb.
The cutbacks being proposed by Congress today are designed to migrate the current welfare recipients to productive occupations with a correspondent increase of self-esteem and perhaps the ability to help others. Congress would not cut people off that have legitimate needs.
The author does not address the implications of the economic disaster that we will be confronted with in the next five to 10 years if the entitlement programs are not revised now. Each day of delay is costing millions.
Fred W. Asmussen Ann Arbor, Mich.