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1981 PUBLIC DEBT LIMIT II

HEARING
BEFORE THE

COMMITTEE ON FINANCE
UNITED STATES SENATE
NINETY-SEVENTH CONGRESS
FIRST SESSION

SEPTEMBER 11, 1981

Printed for the use of tlie Committee on Finance

U.S. GOVERNMENT P R I N T I N G OFFICE
84-191 o




WASHINGTON : 1981

HG 97-47

COMMITTEE ON FINANCE
ROBERT J. DC LE, Kansas, Chairman
BOB PACKWOOD, Oregon
RUSSELL B. LONG, Louisiana
WILLIAM V. ROTH, JR., Delaware
HARRY F. BYRD, JR., Virginia
JOHN C. DANFORTH, Missouri
LLOYD BENTSEN, Texas
JOHN H. CHAFEE, Rhode Island
SPARK M. MATSUNAGA, Hawaii
JOHN HEINZ, Pennsylvania
DANIEL PATRICK MOYNIHAN, New York
MALCOLM WALLOP, Wyoming
MAX BAUCUS, Montana
DAVID DURENBERGER, Minnesota
DAVID L. BOREN, Oklahoma
WILLIAM L. ARMSTRONG, Colorado
BILL BRADLEY, New Jersey
STEVEN D. SYMMS, Idaho
GEORGE J. MITCHELL, Maine
CHARLES E. GRASSLEY, Iowa
R O B E R T E . L I G ITHIZER, Chief Counsel
M I C H A E L S T E R N , Minority Staff
Director




(II)

CONTENTS
ADMINISTRATION WITNESS

Page

Mehle, Hon. Roger, Assistant Secretary for Domestic Finance, Department of
the Treasury

3

ADDITIONAL INFORMATION

Committee press release
Prepared statement of Senator Robert J. Dole
Tables furnished by Senator Harry F. Byrd, Jr
Prepared statement of Hon. Roger Mehle, Assistant Secretary for Domestic
Finance, Department of the Treasury
Charts from OMB
Tables furnished by the Treasury

1
11
21
18
15
21

COMMUNICATION

Letter from Carson Crawford
Letter from Hilton Davis, vice president, Chamber of Commerce, U.S.A
Government Loan and Loan Guarantee Programs, Baylor University

26
35
29

APPENDIX I

(Tables prepared for Senator Harry F. Byrd, Jr.)

Tables:
1. Estimated ownership of public debt securities, June 30, 1981
2. Maturity distribution of official foreign holdings of Treasury public
debt securities, June 30, 1981
3. Total foreign official custody account holdings at FRBNY
4. Net increase in Federal and federally assisted borrowing from the
public
5. Federal deficits and debt, 1971-82
6. Means of financing other than borrowing from the public
7. Debt subject to limit
8. Receipts, outlays and surpluses or deficits in trust funds
9. Budget receipts, outlays and surplus or deficit (—) by fund group,
1971-82




(hi)

21
21
22
22
23
24
24
25
27

EXTENSION OF THE TEMPORARY LIMIT ON
THE PUBLIC DEBT
SEPTEMBER 11, 1981
U . S . SENATE,
SUBCOMMITTEE ON TAXATION AND DEBT MANAGEMENT,

Washington, D.C.
The subcommittee met, pursuant to notice, at 9:30 a.m. in room
2221, Dirksen Senate Office Building, Hon. Bob Packwood (chairman of the subcommittee) presiding.
Present: Senators Dole, Packwood, and Harry F. Byrd, Jr.
[The subcommittee press release announcing this hearing follows:]
[Press Release No. 81-158, Committee on Finance, Aug. 19, 1981]
F I N A N C E SUBCOMMITTEE ON TAXATION AND DEBT M A N A G E M E N T SETS HEARING ON
PUBLIC DEBT

Senator Bob Packwood (R.-Oreg.), Chairman of the Subcommittee on Taxation and
Debt Management, announced today that a hearing on extension of the temporary
limit on the public debt has been scheduled. The Honorable Roger Mehle, Assistant
Secretary of the Treasury for Domestic Finance, will testify on the public debt at
9:30 a.m. Friday, September 11, 1981, in Room 2221 of the Dirksen Senate Office
Building.
Written testimony.—The Subcommittee would be pleased to receive written testimony from those persons or organizations who wish to submit statements for the
record. Statements submitted for inclusion in the record should be typewritten, not
more than 25 double-spaced pages in length and mailed with five (5) copies by
September 11, 1981, to Robert E. Lighthizer, Chief Counsel, Committee on Finance,
Room 2227, Dirksen Senate Office Building, Washington, D.C. 20510. The first page
of the written statement should indicate the date and subject of the hearing.

Senator PACKWOOD. The committee will come to order.
We are here for our semiannual ritual of raising the debt ceiling.
And the Secretary has a sentence in his statement that as clearly
describes what we are doing as any statement could, and that
sentence says:
The increase in debt each year is simply the result of earlier decisions by Congress on the amount of Federal spending and taxation.

This debt ceiling in and of itself is not spending. This debt ceiling
is nothing but an acknowledgment of past decisions that this Congress has approved. Everybody in the Congress may not have voted
for each of the decisions, but, collectively, we have voted to spend a
certain amount of money. And now we are telling the Treasury
Department to raise the money, and the Treasury Department is
simply coming to us and saying:
Ladies and gentlemen, you told us to spend x billions of dollars. The taxes that
you directed us to levy will not raise x billions of dollars, so we have to borrow the
rest to make up the difference.




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2

And the Treasury Department is here to indicate how much
more they must borrow and how far the debt ceiling needs to be
raised to accommodate—and I emphasize again to accommodate—
the past decisions that Congress has already made and directed the
President to carry out.
Senator Byrd?
Senator BYRD. Thank you, Mr. Chairman.
The administration today will ask that the debt limitation be
increased to $1,079,000,000. Now this new debt ceiling exceeding a
trillion dollars is an unfortunate milestone in our Nation's economic history.
It is visible evidence of the years of fiscal mismanagement in
Washington. And as Senator Packwood just said, it is not the
mismanagement of the present administration but the mismanagement of previous Congresses and previous administrations.
Runaway Federal spending, accompanied by huge Federal deficits, has ballooned the debt to its current lofty level.
In the short time span from 1975 to 1980, Federal spending has
almost doubled. In the 7 months since he has been if office, President Reagan has implemented policies which seek to reverse the
rapid growth of Federal Government. He has charted a bold new
course of spending and tax reductions. Next year, more than $35
billion will be trimmed from the Federal budget. In 1983, over $44
billion will be cut. Over the next several years the tax bite for
Americans will also be trimmed: $38 billion in 1982 and $93 billion
in 1983.
Despite the progress which has been made in the last 7 months,
the enormity of the changes which need to be made should be
frankly considered. Although the spending reductions are unprecedented, they are only the beginning, not the end, of a prolonged
fight to bring Federal spending under control and leave more capital for the productive private sector of our economy.
From 1958 to the present we have had a surplus in our Federal
budget in only 2 years, 1960 and 1969. That dramatizes the total
irresponsibility of the Congress and of the administrations involved
in those years. These spending habits cannot be changed overnight.
The key to the future success of our economy is confidence—
confidence in the ability of the Government to exercise fiscal restraint and reduce the Federal deficit and confidence that fiscal
and monetary policy will not create another round of inflation.
Plummeting stock prices and soaring interest rates are clear
evidence that the financial markets are not yet convinced. The
looming $1 trillion debt is a clear signal that it will not be easy to
bring about fiscal sanity. High interest rates and the prospects of
even higher rates in the near future are the most pressing problems which our economy now faces. These high-interest rates are,
however, evidence that economic policy has left the job of fighting
inflation to the Federal Reserve. This is a job that it cannot handle
single-handedly. In fact, high-interest rates can potentially only
exacerbate the problem.
With approximately 15 percent of Federal spending going exclusively to pay for interest on future debt, high-interest rates add to
the level of Federal spending. Fiscal policy, therefore, continues to
be the key to providing a foundation for our Nation's future eco-




3

nomic well-being. In the months ahead, no Federal program should
be immune from close scrutiny.
While I support a prudent buildup of our Nation's defenses, the
growth of defense spending must be closely watched. Other programs, such as foreign aid, need to be sharply curtailed.
A $1 trillion debt shows how misguided our Nation's fiscal policies have been. I urge the administration in the months ahead to
continue to press for fiscal discipline and a balanced budget. A
credible policy to achieve this result is essential if confidence is to
be restored and interests are to be declined.
I end by commending President Reagan for his leadership and
for his determination to reverse the trend of more and more and
higher and higher deficits, and more and more and higher and
higher Federal spending.
I think one figure which dramatizes what has happened in the
last 7 months is this, that during the last year of President Carter's
Presidency, the cost of Government increased 17 percent. During
the first year of President Reagan's Presidency, the cost will increase 6 percent. So that is a decided and very substantial and
significant improvement.
Thank you, Mr. Chairman.
Senator PACKWOOD. Mr. Secretary, go right ahead.
STATEMENT OF HON. ROGER W. MEHLE, ASSISTANT
SECRETARY OF THE TREASURY, DOMESTIC FINANCE

Secretary MEHLE. Thank you, Mr. Chairman, Senator Byrd, and
members of the committee.
I am here to advise you of the need for Senate action this month
to increase the debt limit. The increase in debt each year is simply
the result of earlier decisions by Congress on the amounts of Federal spending and taxation, as Senator Packwood has observed.
Once these decisions are made, as they were in connection with
the enactment of the President's economic program earlier this
summer, the U.S. Government, through the Treasury Department,
then must provide the financing that these commitments entail.
Based on Mid-Session Review estimates of outlays, receipts, and
other transactions affecting debt subject to limit, the amount of
debt subject to limit outstanding on September 30, 1982, will total
$1,074.9 billion. This estimate, of course, is subject to change based
on new legislation and unfolding economic developments.
However, given this projection of debt issuance, adoption of a
debt limit of $1,079.8 billion, as is provided in the House Joint
Resolution 265, for fiscal year 1982 should give the Treasury sufficient borrowing capacity with some added leeway for borrowing
should contingencies arise.
Prompt action on the debt ceiling is required to avoid a repetition of past dislocations which have hampered Treasury operations.
In recent years delays in action on the debt limit have generated
uncertainty about Treasury financing schedules, and on several
occasions drastic measures have been undertaken. These measures
have included suspension of savings bond sales, postponement of
auctions and disinvestment of trust funds.
Treasury reaches a point when it must consider which obligations it should pay—social security checks, payroll checks, unem-




4

ployment checks, defense contracts—and whether, for the first
time in its history, it will have to default on its securities. Such
confusion and congestion in financial markets which results from
changed financing plans adds directly to the costs of Government
debt.
If the current temporary debt ceiling is not increased for fiscal
year 1982, the debt limit will revert to its $400 billion permanent
ceiling on October 1, and no issuance of debt will be permitted
thereafter. In that case, the Treasury's cash balance will be quickly
depleted as maturing debt is retired and other obligations are paid.
In fact, the Treasury would run out of cash altogether in the first
week of October.
I believe we can avoid these problems this year, and recommend
that in future years the Senate consider combining the budget and
debt limit actions. This would assure an earlier focus on controlling
the public debt.
While passage of House Joint Resolution 265 will enable Treasury to finance the Government's operations after September 30, a
technical matter necessitates additional debt ceiling authority for
September 30. On that day the Treasury is scheduled to issue
approximately $13 billion of securities to the civil service retirement trust fund. Unless additional leeway is provided for that
particular day, the last day of the fiscal year, the Treasury will not
be able to fulfill its responsibility to invest civil service retirement
funds. For every $1 billion of retirement funds not invested, the
trust fund would lose about $350,000 per day in interest.
Passage of House Joint Resolution 266 would provide a debt limit
through September 30, of $999.8 billion and would allow the investment of these funds.
That concludes my remarks, Mr. Chairman.
Senator PACKWOOD. Mr. Secretary, I agree with everything you
have said, except combining the budget and debt limit actions,
because that would deny to this committee and to the Senate the
enjoyment of attaching different riders to these debt ceiling bills.
Short of that, we will have a markup on Tuesday, and I intend to
vote for this increase. The case that you have made is very persuasive. Each time Treasury comes up it is a persuasive case.
I share Senator Byrd's sentiments about President Reagan. I am
delighted at last we have a President who not only cares but can
lead.
Nine months ago if you had told me that he would have been
able to get Congress to cut the things that we have cut, I would
have said that is an incredible act of leadership. Indeed, that is
what it was. That is what we have done. We have got more to go.
But in the meantime, until we go that far, we have to raise the
debt ceiling.
Harry?
Senator BYRD. Mr. Secretary, do I understand the figures accurately? You are anticipating an increase in the debt from September of 1981 to September of 1982 of somewhere between $90 and
$100 billion?
Secretary MEHLE. That is correct, Senator, in debt subject to
limitation.
Senator BYRD. NOW, does that include the off-budget items?




5

Secretary MEHLE. It includes the off-budget items, of course the
on-budget items, and it also includes the required investment of the
receipts for the several social security and certain other Government trust funds. So those three items together are the items that
the increased issuance of debt would be in respect of.
Senator BYRD. SO what you are saying is that during the 12month period September to September, 1981 to 1982, the Government will spend between $ 9 0 - 1 0 0 billion.
Secretary MEHLE. That is essentially correct.
Senator BYRD. NOW, you estimate that the debt subject to limitation at the end of September 1982 will be $1,074 billion. In developing that figure, what interest rate did you assume that the Government will need to pay on the debt?
Secretary MEHLE. Before I answer that, and I will, let me modify
that statement about the expenditure amount of the Federal Government for fiscal year 1982.
A large part of the required increase in debt subject to limit is
the result of the investment of the receipts that the social security
and other trust funds get in the course of the year.
So, in fact, those moneys may be regarded as invested rather
than spent; but they do give rise to an increase in the debt subject
to limit.
The amounts I think that can be regarded as expended for goods
and services received during the period would be the amount of the
on-budget deficit combined with the amount of the off-budget deficit, which together will total about $60 billion.
Senator BYRD. If you are asking for an increase in the debt
ceiling of $90-100 billion, that is bound to mean that you are going
to spend $100 billion more than you take in.
Secretary MEHLE. If you look at the receipts of the social security
and other trust funds as requiring investment, then you come to
grips with the fact that they are not necessarily spent, they are
invested; but, because they have to be invested in Federal debt,
they give rise to an increase in the debt subject to limit.
Unlike tax receipts, which of course are collected through the
taxing power and are not required to be invested, the social security trust fund receipts are invested. I think the distinction I am
making may be a slim one, but
Senator BYRD. I think the distinction is less than slim.
Secretary MEHLE. Well, let me go on and talk about the interest
rates that are assumed in the 1982 budget.
For the 1-year Treasury bill rate the assumed rate for fiscal year
1982 is 10.4 percent. I will give you some benchmarks. For securities over 6 years, that is to say longer-term securities, the assumed
rate is 12.3 percent. For the shortest maturity Treasury obligations,
which is to say the 3-month bill, the assumed rate is 11.3 percent
for 1982.
Senator BYRD. NOW, what are you paying today?
Secretary MEHLE. Today the rates are considerably higher than
that.
Senator BYRD. Sixteen percent?
Secretary MEHLE. The rates for the short-term securities are
about 15 to 16 percent.

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2




6

Senator BYRD. Fifteen to 16 percent. And you say that they are
going down to 11 percent?
Secretary MEHLE. Well, we certainly hope so.
Senator BYRD. All of us hope so. I do not suppose there is anyone
in the country who does not hope so; but I do not know if we can
operate the Government entirely on hope, although hope is a very
desirable thing to have.
But, anyway, you are assuming then that the Government, instead of paying 15 to 16 percent for money, next year will be
paying 11 percent for money?
Secretary MEHLE. I would say between 11 and 1 2 percent, or 11
and 12 V2 percent.
Senator BYRD. NOW let me go back. I thought we had this clear
until you interjected a moment ago. Is it not correct that the Office
of Management and Budget projects a Federal funds deficit for
1982 of $66.5 billion plus an off-budget deficit of $18.2 billion,
adding up to $85 billion?
Secretary MEHLE. I think there are a couple of concepts which
are potentially very confusing. One is the unified budget deficit.
Senator BYRD. I want to deal, if we may, with the operating cost
of the Government, namely the Federal funds budget. Now the
other is a trust fund.
Secretary MEHLE. Right.
Senator BYRD. And I have opposed, ever since Lyndon Johnson
brought it about, mixing the two together, because that does not
give the American people a clear picture.
The reason we need to increase the debt, to the extent that we
are, is the tremendous deficit in the operating fund, namely the
Federal funds. Is that not correct?
Secretary MEHLE. Yes, that is $66 V2 billion.
Senator BYRD. Yes, $66 V2 billion. And then you have your offbudget deficits that you have to add to that.
Secretary MEHLE. That is right.
Senator BYRD. SO you are getting a deficit of a minimum of $ 8 5
billion in the Federal funds budget as differentiated from the unified budget for fiscal 1982. Those are the figures that are projected.
Secretary MEHLE. That is correct including the off-budget deficit.
Senator BYRD. SO that gets back to somewhere between $ 9 0 - 1 0 0
billion of additional expenditures over and above the revenues that
will be received, which is exactly where we were a few moments
ago.
Secretary MEHLE. Yes.
Senator BYRD. All right. Now let me say at this point that I am
not quarreling at all with you or with the Treasury Department;
all I want to do is to try to establish the figures and understand
the figures.
Now let me ask you this in regard to interest rates. Statements
have been made over the weekend by prominent Members of the
Congress that if interest rates do not come down within a short
period of time, the administration and the Congress must take
action to bring them down.
Now what action can the Congress take to bring interest rates
down?




7

Secretary MEHLE. The question probably comes down to additional restraints in spending. That looms largest on the horizon for
action to be taken.
Senator BYRD. I think that is exactly my feeling. Let me put it in
the form of a question.
As I visualize it, there is no way that Congress can legislate a
reduction in interest rates directly. Do you agree with that?
Secretary MEHLE. Absolutely.
Senator BYRD. And the only way that Congress can help bring
about a reduction in interest rates is to reduce the excess spending
of the Federal Government, which in time will then bring down
interest rates. Is that your approach?
Secretary MEHLE. That is certainly an appropriate approach. We
believe that the more Government is present in the marketplace,
the more difficult it generally is for others to satisfy their credit
needs. And, of course, the more we spend, the more we will necessarily have to be in the marketplace, given our fiscal policy.
Senator BYRD. Well, then, if we agree that there is nothing that
Congress can directly do to bring down interest rates, is there
anything the administration can do?
Secretary MEHLE. I think the administration will need to take a
leadership position, as I think you properly recognize that President Reagan has done, to continue to work together with the
Congress on methods for reducing the amount of Federal presence in
the marketplace, which arises principally because of the expenditures that the Federal Government makes.
I think the administration working together with Congress can
effect these changes in Government expenditure.
Senator BYRD. By bringing down the excessive spending of the
Government over and above the revenue that the Government
receives, is that what you are saying?
Secretary MEHLE. I should mention, of course, in this context,
that is to say in the context of causing a reduction of interest rates,
that we continue to believe that one of the four parts of the
President's economic program upon which we have placed emphasis remains very important, and that is the proper control of monetary policy.
But we certainly recognize that the presence of the Government
in the marketplace does cause an increase in the total demand for
funds and will have a tendency to make interest rates higher.
Senator BYRD. Your mention of monetary policy suggests, does it
not, that the administration feels that if inflation is to be controlled and interest rates are to be brought down that it requires
both fiscal policy and monetary policy?
Secretary MEHLE. Certainly both matters have to be addressed,
and I think are being addressed and will continue to be.
Senator BYRD. I think that is true.
So I assume from what you say that the Treasury Department—
and you speak for the Treasury today—does not recommend that
the Federal Reserve ease its current monetary policy.
Secretary MEHLE. The viejy of the Treasury Department and the
administration is that a slow, Steady, predictable growth of the
money supply, which keeps pace with the development of the real
economy, is an appropriate monetary policy. It is that particu-




8

lar policy which we have looked for and which we have worked
together with the Federal Reserve to have them achieve. And we
are certainly pleased with the efforts that are being made along
those lines by the Federal Reserve.
Senator BYRD. SO the administration has no quarrel with the
Federal Reserve in the way it has been handling the money supply
in recent months?
Secretary MEHLE. I do not think we have ever had a quarrel. We
have had a lot of healthy discussion on the subject, but by and
large, to this point we are pleased to see that efforts are being
made by the Federal Reserve to keep the pace of money supply
growth one which roughly approximates, as I say, the growth in
the underlying capacity of the economy. We hope they will continue to do that.
Senator BYRD. By hoping that they will continue that course, you
are saying that you hope that they will not adopt a policy of a
great expansion of the money supply?
Secretary MEHLE. Yes. We think that any rapid expansion of the
money supply would be very damaging to the economy because of
the effect that it would have on inflationary expectations.
Senator BYRD. During the upcoming fiscal year, what will be the
total of the new and rollover debt? The new debt, I assume, is
roughly $90 billion. What would be the rollover?
Secretary MEHLE. I am advised that $252 billion of marketable
debt matures in the next year, and added to the maturing amount
would be the amount of new money issues.
Senator BYRD. Maybe I did not understand you. Do you say the
amount maturing of the present debt would be $250 billion?
Secretary MEHLE. Right. Out of the amount of debt subject to
limit outstanding now, some approximately $985 billion, about $252
billion would mature in the next year.
Senator BYRD. $ 2 5 2 billion?
Secretary MEHLE. Yes.
Senator BYRD. So that would be about a little more than 2 5
percent?
Secretary MEHLE. Of debt subject to limit, right.
Senator BYRD. SO you need to go into the money markets for that
$252 billion?
Secretary MEHLE. That is right.
Senator BYRD. NOW, on top of that, you need to go into the
money markets for whatever the new deficit is?
Secretary MEHLE. Well, for a portion of it, because some of it, as
we have noted, is issued to the social security trust fund. The
amount of new financing is probably about $60 billion that we
would have to go into the marketplace for, and not even all of that
necessarily will come from the marketplace. Some of it may come
from savings bond flows.
Senator BYRD. NOW, we have established that you are going to
have a Federal funds deficit of $66 V billion plus off-budget deficits
2
totaling $85 billion.
Secretary MEHLE. Yes.
Senator BYRD. SO you will have to go into the money markets for
the bulk of that.




9

Secretary MEHLE. Well, the reason you do not have to raise the
entire $85 billion in the market is because of debt that you issue to
the social security and other trust funds, which is not the public
marketplace. So that is a relief, so to speak, from the amount that
you have to get in the marketplace.
The amount in the marketplace is about $60 billion which, when
coupled with the amount received from the social security and
other trust funds, totals that number you spoke of about $85 billion
or so.
Senator BYRD. Speaking of the social security trust fund, from
the last figures I saw, it is down to a 2-month's level, that is,
adequate funds to pay only 2 months of benefits. Is that about
right?
Secretary MEHLE. I cannot comment on that, I am sorry to say. I
will find the answer out for you on that.
Senator BYRD. Well, let me ask you this in regard to social
security: What interest does the Government pay on the buying of
those social security trust funds?
Secretary MEHLE. The interest rate on the funds that flow into
the social security trust funds periodically is a rate which is the
average of the current yields on all Treasury obligations that have
a maturity longer than 4 years. So for each incremental investment of the funds the rate is approximately the long-term borrowing rate of Treasury obligations.
Senator BYRD. SO the trust fund is receiving an appropriate
interest?
Secretary MEHLE. Right now the new investments are being
made at a level of approximately 14 percent.
Senator BYRD. Fourteen?
Secretary MEHLE. Yes; in accordance with that formula I gave
you.
Senator BYRD. Of course, the Treasury is now paying right at 16,
or slightly less than 16, for money that it borrows on the open
market.
Secretary MEHLE. Well, for the securities over 4 years it actually
is paying 14 percent. But others are at a higher yield right now, as
we said earlier, more between the 15- and 16-percent range for the
very shortest term security.
Senator BYRD. That rollover debt of $252 billion, how does that
compare with the rollover in the current fiscal year?
Secretary MEHLE. In fiscal year 1 9 8 1 ?
Senator BYRD. Yes.
Secretary MEHLE. Well, I expect it is going to be very much the
same, but if you will give me a moment here I will ask the
members of the staff to come up with that.
Well, I correct my statement. We won't have it for you in a
moment. We will supply it for you later. But I can tell you it is
very much like the amount that in fiscal year 1982 we will see in
rollover, because about the same amount runs off every year.
Senator BYRD. I wonder if you could get your staff to give my
office a call and just give me that figure when you are able to.
Now, just one or two additional questions, then I will be through.
You base the figures for the upcoming year on the Treasury
paying 11 percent, roughly 11 percent, for money. If the interest




10

rates stay high—and I was talking with a presumed expert yesterday who feels that the interest rates will go up to 24 percent—if
the interest rates stay in the current range how would that affect
your financial picture? How would that increase the Federal funds?
To what extent would that increase the Federal funds deficit?
Secretary MEHLE. There is a rule of thumb which is used, and
can be found actually in the copy of the budget, on sensitivity of
the budget to economic assumptions.
I am going to give you the thumb rule which is used by OMB: it
is that a 1 percentage point increase in interest rates increase
would increase interest costs by $4.2 billion.
Senator BYRD. Each 1 percent?
Secretary MEHLE. Each 1 percent. And that is from January 1,
1981. So for fiscal year 1982, if the rates were to be increased by
January 1, 1981, the additional outlays would be $4.2 billion.
Senator BYRD. If the rates stayed roughly what they are now, it
would be somewhere in the neighborhood of $20 billion additional?
Secretary MEHLE. With current rates, if the market stayed where
it is, the additional amounts of outlays could be $10 to $12 billion,
if they stay exactly where they are for the entire fiscal year 1982.
Senator BYRD. NOW, is that a mixture of the long-term rates and
the short-term rates? It is not based on the current short-term
rates?
Secretary MEHLE. NO, it is based on the existing structure across
the board and dealing with the maturing securities as if they
would be rolled over into indebtedness of the same maturity.
Senator BYRD. Will most of your new financing be for a short
term, or will it be more than 4 years?
Secretary MEHLE. Most of the financing is much shorter than for
the 4-year period of time. We have the bulk of our financing done
in the short-term market, the bill market, where the maturities are
less than 1 year.
Senator BYRD. And that is why we are paying 1 5 to 16 percent?
Secretary MEHLE. That is the market where the highest yield is
right now. The lower yields are being paid for longer term securities. We have what is referred to as an inverted yield curve. The
relationship is not ordinarily that way. Ordinarily, in the past,
shorter term maturities have carried lower yields than longer term
maturities, but presently we are not in that circumstance.
Senator BYRD. One final question: How do you see interest rates
3 months from now?
Secretary MEHLE. Well, I have been in the securities business for
about 12 years before I came here, and I do not think I ever made
a prediction on interest rates. I would like to keep my record
unblemished.
Senator BYRD. Mr. Chairman, I may have some inserts for the
record.
Senator PACKWOOD. By all means.
Senator PACKWOOD. Senator Dole?
Senator DOLE. Thank you, Mr. Chairman.
I have a statement which I would like to have made part of the
record which I will not read, except to indicate that we are here
again to increase the debt.
[The prepared statement of Senator Robert J. Dole follows:]




11
STATEMENT OF SENATOR DOLE

Mr. Chairman, this is the second time this year that the Finance Committee has
been obliged to address the question of the limit on the public debt. Raising the debt
limit is a perennial problem for Members of Congress—but we ought to remember
that the consequences of failing to raise the limit are even more painful.
The present debt limit, which we approved in February, is valid only through
September 30. So we have known for some time that we would have to address this
question around the close of fiscal year 1981. In fact the house already has passed
two resolutions that increase the debt ceiling, H.J. Res. 265 and H.J. Res. 266. Those
resolutions were approved by the House in connection with the first concurrent
budget resolution for fiscal year 1982, and were referred to the Finance Committee.
H.J. Res. 266 was used by this committee as a vehicle for our tax cut proposal, and
pertains only to the remainder of fiscal 1981. H.J. Res. 265 is pending in the
Finance Committee and would provide a limit of $1,079.8 billion through September
30, 1982.
Mr. Chairman, the thought of raising the public debt limit above a trillion dollars
is a matter of concern to many. But is a matter that must be faced and dealt with
promptly, because it shows how we have gone astray in the past and how we must
act differently in the future.
I look forward to hearing the testimony of Assistant Secretary Roger Mehle,
although I regret that his appearance today must involve a request for another
extension of the debt limit. The fact is that our present debt limit procedure, which
derives from the Second Liberty Bond Act of 1917, was intended to minimize the
number of occasions on which Congress must act to authorize the issuance of
Federal debt. Because of the explosive growth of Federal deficits in recent decades,
the debt ceiling has been increased an inordinate number of times. The ceiling was
raised on 13 separate occasions in the 1960's, and 18 times during the 1970's. Worse
yet, on three occasions in recent years the temporary limit has expired without
timely legislative action to extend it. As a result, the Treasury Department had to
suspend sales of savings bonds and other securities. Such suspensions only undermine investor confidence, and make it likely that bidders for Government securities
will demand a higher interest premium in the future to safeguard them against
future disruptions. That means higher costs to the Treasury, at a time when we are
trying our best to reduce those costs.
Mr. Chairman, through the cooperation of this administration and this Congress
we have made substantial strides this year toward getting the Federal budget under
control. I hope that, with further cooperation, we may gain sufficient command over
the fiscal situation to avoid frequent increases in the debt ceiling. But clearly we
cannot fail to act now, in view of the obligations the U.S. Government is bound to
honor over the coming months. I know that the President is preparing further
proposals that will affect the budget for fiscal year 1982 and the years to follow. We
do have an obligation to minimize the burden of the public debt, and we ought to
continue to work for a consensus on a rational fiscal policy that will demonstrate
our good faith with the American people. At the same time we must remember that
our problems were not generated overnight, but over a period of decades, and that
there are no quick solutions or easy answers. A firm and steady course over a period
of years is the only sensible policy, and I know that the administration will agree.

Senator DOLE. I hope the trips to the financial markets will be
less frequent. The ceiling was raised on 13 separate occasions in
the 1960's and 18 times during the 1970's. Worse yet, on three
occasions in recent years the temporary limit has expired without
timely legislative action to extend it, and you had to suspend sales
of bonds and other securities and hold up the payments of checks.
I think you made that clear in your statement. It is not going to
be easy to ask our colleagues to vote to exceed a trillion dollars.
There is something about that figure that is a barrier to many, but
I would hope that the alternatives will be articulated, as it has
been in your statement.
But just so that we can have it again for the record, what
happens if we do not do anything before the 30th of September?
Secretary MEHLE. A S I mentioned before, Senator, we would have
to take a number of actions which are very disruptive to the
Treasury's operations and which increase the cost of Government




12

financing. Those could include suspension of auctions of Treasury
securities, the necessity to suspend issuing savings bonds, notifying
the savings bonds issuing agencies that they could not sell them.
They could include such measures as disinvestment of the various trust funds, which would result in loss of interest to fund
beneficiaries.
I might cite what I think is a very good and comprehensive
report on the consequences of failure to increase the debt limit in a
timely way. It is a report of the General Accounting Office of
September 1979, and it chronicles the history of failure after failure to increase the debt limit in the past and sets forth in full the
details of these kinds of things that I just mentioned.
Senator DOLE. YOU have indicated that you have got a little
problem there on the 30th of September; you need additional debt
authority on that date. Right?
Secretary MEHLE. That is right.
Senator DOLE. And if that does not happen, it costs the Treasury
what? $4% million?
Secretary MEHLE. What will happen in that event is that the
investment of the civil service retirement trust fund cannot be
made on the date that it is prescribed to be made, which is the last
day of the fiscal year. That means that, assuming the debt subject
to limit were increased for fiscal 1982 to the amount requested, the
fund would not be fully invested until the next day, October 1.
Accordingly, it would have lost interest on the prescribed investment amount of $13 billion, which would be equal to about $5
million.
So it would not be the Treasury who would have the loss, it
would be the civil service trust fund.
Senator DOLE. But as I understand that, we used House Joint
Resolution 266 as a vehicle for our tax cut, and so that resolution is
now on the calendar.
Secretary MEHLE. Right.
Senator DOLE. It would take unanimous consent, I understand, to
do that.
The other thing we could do would be to amend House Joint
Resolution 265 and move it back a day.
Are you suggesting any other amendments to the debt ceiling?
Secretary MEHLE. Than those?
Senator DOLE. Right.
Secretary MEHLE. NO.
Senator DOLE. There have been some comments about impoundment authority and other things being added to the debt ceiling.
Secretary MEHLE. Well, it is certainly nothing that I bring here
in my testimony. I have read, of course, as all of us have, about
these kinds of things in the papers but it is not part of what I
bring.
Senator DOLE. HOW would you view that, if in fact the debt
ceiling was used as a vehicle for a number of amendments? I guess
your concern is in getting it passed.
Secretary MEHLE. That is right. My concern is a timely passage
of the debt ceiling to limit increase so that we can invest the trust
fund and conduct the business of Government in the coming fiscal
year.




13

Senator DOLE. But if it contained, say, a package of amendments
which would modify the minimum benefit and address the social
security concerns, and maybe have some deferral or—I guess impoundment is not a good word these days—some other authority,
your primary concern would be that we do all that in a timely
fashion.
Secretary MEHLE. That is right. It would be important, I would
think, to have our debt limit increased appropriately by September,
I would say, which addresses the two issues: one, on September 30
we could make the investment of the civil service trust fund. And
then, in the coming fiscal year, if there is no increase in the debt
limit, it would revert to the $400 billion permanent ceiling, and in
a matter of days, literally, we would run out of cash because of
obligations which would come due which we could not fund.
Senator DOLE. We will have a full committee meeting next Tuesday, at which time we will hopefully be able to pass whatever we
decide to do and get it on the Senate floor.
I assume there would be somebody thinking of some possible
amendments to the debt ceiling. It has happened in the past, and I
would assume that there are a lot of fertile minds at work at the
staff level, trying to dream up all sorts of goodies before we take it
up.
I might also suggest, since you are here, that we hope to address
a second tax bill in this committee this year. We made the promise
to a number of our colleagues, that if they would refrain from
adding their amendments to the first proposal—not many did refrain, but we made that promise—that there would be a second tax
bill.
We have also indicated that it must be revenue neutral, that we
have to find some gainers if we are going to have losers.
This may not be in your area but, since you are probably going
back to the building, it is my understanding that Treasury has
been working on a number of areas that might be used to pick up
some revenue. In fact, we anticipated a second proposal, and we
had hoped to address that later this month or early next month.
The question is of concern to a number of our colleagues and
others on the outside who believe that there could be a second tax
bill.
I cannot speak for the House, but on this side we did make, I
think, a rather public commitment that we would do our best. If
we cannot come up with a revenue neutral bill, maybe that would
be the end of it.
We will probably be needing some assistance to pass a trillion
dollar plus increase in the public debt, but I agree with Senator
Byrd in that I think the only way we are ever going to restore
confidence and bring down interest rates is to continue with the
spending reduction.
This committee, I might add, has done quite well. I think about
27 percent of the original cuts were accomplished by this committee in a bipartisan way. We are willing to do more, but we think
there are other areas that ought to be looked at.
Secretary MEHLE. I might make one comment. It seems to me
Senator Byrd and I had a conversation on this subject several
months ago when I first arrived.
84-191

0-81

3




14

One of the Federal presences in the marketplace which does not
score on the budget, either on budget or off-budget, which does
have an effect on the allocation of funds is the Government-guaranteed loan programs. We do not see those numbers set forth for
us on the budget, although they can be reviewed in the special
analyses of the budget, but they are not put into the budget totals
or in the off-budget totals either. That is an area that I know is
being addressed, the so-called credit budget, those items that, while
they allocate resources in the economy as if the Federal Government were intermediating the funds, nevertheless do not score on
the budget.
That is being looked at also, I know. And it really does have the
same kind of economic effect as the direct expenditures that do
score on the budget of the Federal .Government, so far as allocating
resources in the economy.
Senator DOLE. Well, I think when we were out of town there
were a lot of people who made the whole economic package retroactive. We hear a lot of media talk now that the program has not had
any impact. I thought it took effect in October, but maybe I missed
something during the debate. But in August, when I was not here
much, I kept reading and listening and watching on television
about the failure of the program. Maybe it was made retroactive by
the media while we were in recess, but we have not repealed it,
have we? I mean the package is still intact, as far as you know?
Secretary MEHLE. A S far as I know, it is. And I quite agree. The
time that has elapsed since the package has been in effect is really
awfully brief. And, while the markets are going through a bit of a
sorting out process right now, we trust that when it is apparent
that the program has taken hold, as well as when we take some
additional measures that seem to be indicated, as we have discussed, particularly expenditure measures, the markets will
become a bit more stable.
Senator DOLE. Yes. I am not certain we should have recesses
anymore. If there is nothing going on around, there is not much to
write about or talk about, and so there is a lot of focus by the
media on something that did not happen.
I do not fault that. I mean, we do that ourselves sometimes. But
maybe we should not have any more 30-day recesses, following
what I thought was an historic effort by the Congress and the
administration for the first time to really look at spending and cut
it $36 billion in fiscal 1982, and to enact the tax cut. Then I read
this morning that some of the Wall Street people now are sorry
they supported a tax cut. They did not appear that way when they
came before our committee. Just because they did not get one little
provision, it is reported that they are not happy. I do not even
recall any testimony on that provision when they appeared here.
But, be that as it may, I think there are a number of us who are
going to continue to look at the effective date, not the perception of
what could have happened.
Secretary MEHLE. We think that is entirely appropriate.
Senator DOLE. NOW, you cannot predict what the rate will be, but
you are optimistic about interest rates, are you not?
Secretary MEHLE. I am optimistic. I am optimistic because I
believe in the fundamentals of the program.




15

There is no question that markets do change from day to day,
and they adjust up and down on the news, the events of the day, on
perceptions; but they also operate over the long run. And, with the
fundamentals having been addressed as they have been, and with
what we expect and hope will be a confined adherence to those
fundamentals, the market can do nothing but improve.
Senator DOLE. There will be some of that before the end of the
year?
Secretary MEHLE. I would certainly hope so, because I think
there are some new initiatives that will be taken that, I believe,
will be dealt with and discussed between the administration and
the Congress in the coming weeks. They are entirely appropriate,
and I think they will have a salutary effect on the markets.
Senator DOLE. Thank you, Mr. Chairman.
Senator PACKWOOD. Any other questions?
Senator BYRD. I would like to mention one thing that is in the
form of a question. It has not been brought out this morning, but
am I not correct that dollar-wise the interest cost on the debt for
the upcoming year will exceed $100 billion?
Secretary MEHLE. Right. It is projected, Senator, to be $ 1 0 8 . 6
billion.
Senator BYRD. It is projected at $108 billion on an assumption of
an 11-percent interest rate that the Government would have to
pay?
Secretary MEHLE. Well, it is really higher than that. It is between 11 and 12 Vz percent. But it is certainly in the range that you
mentioned. That is right.
Senator BYRD. The interest rate assumption is between 11 and
12%?
Secretary MEHLE. Right.
Senator BYRD. That, of course, could be an optimistic assumption;
but, even based on that assumption, the interest cost to the Government would be $108 billion for the upcoming year?
Secretary MEHLE. That is correct.
Senator BYRD. I would like to put this chart in the record.
[Tables furnished by Senator Harry F. Byrd, Jr. follow:]
UNIFIED BUDGET RECEIPTS, OUTLAYS AND SURPLUS OR DEFICIT FOR FISCAL YEARS 1958-81,
INCLUSIVE 1
[In billions of dollars]
Receipts

Fiscal year:
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970




79.6
79.2
92.5
94.4
99.7
106.6
112.7
116.8
130.8
149.5
153.7
187.8
193.8

Outlays

82.6
92.1
92.2
97.8
106.8
111.3
118.6
118.4
134.6
158.2
178.8
184.6
196.6

+

-3.0
-12.9
+ .3
-3.4
-7.1
-4.7
-5.9
-1.6
-3.8
-8.7
-25.1
+ 3.2
-2.8

16
UNIFIED BUDGET RECEIPTS, OUTLAYS AND SURPLUS OR DEFICIT FOR FISCAL YEARS 1958-81,
INCLUSIVE 1 —Continued
[In billions of dollars]
Receipts

1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
19812
19822

188.4
208.6
232.2
264.9
281.0
300.0
357.8
402.0
465.9
520.0
605.6
662.4

Outlays

211.4
231.9
247.1
269.6
326.2
366.4
402.7
450.8
493.7
579.6
661.2
704.8

Surplus ( + ) or
deficit ( - )
-23.0
-23.3
-14.8
-4.7
-45.2
-66.4
-45.0
-48.8
-27.7
-59.6
-55.6
-42.5

1

Prepared for Senator Harry F. Byrd, Jr., Virginia.
Estimates—fiscal year 1982 budget revisions.
Source: Office of Management and Budget; fiscal year 1981 Second Concurrent Budget Resolution, July 1981.
2

DEFICITS IN FEDERAL FUNDS AND INTEREST OF THE NATIONAL DEBT FOR FISCAL YEARS 1959-80,
INCLUSIVE 1
[In billions of dollars]
Year

1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
19813
1982 3
1

Prepared for Senator Harry F. Byrd, Jr., of Virginia.
Interest on gross Federal debt.
Estimated figures.
Source: Office of Management and Budget, July 1981.
2

3




Receipts

65.8
75.6
75.2
79.7
83.5
87.2
90.9
101.4
111.8
114.7
143.3
143.2
133.8
148.8
161.4
181.2
187.5
201.1
241.3
270.5
316.4
350.8
412.6
439.5

Outlays

77.1
74.9
79.3
86.6
90.2
95.8
94.8
106.5
126.8
143.1
148.8
156.3
163.7
178.1
187.0
199.9
240.1
269.9
295.8
332.0
362.4
419.2
476.4
505.9

Surplus ( + ) or
deficit ( - )
-11.3
+ .8
-4.2
-6.9
-6.6
-8.6
-3.9
-5.1
-15.0
-28.4
-5.5
-13.1
-29.9
-29.3
-25.6
-18.7
-52.6
-68.8
-54.5
-61.5
-46.1
-68.4
-63.8
-66.5

Interest

2

7.8
9.5
9.3
9.5
10.3
11.0
11.8
12.6
14.2
15.6
17.6
20.0
21.6
22.5
24.8
30.0
33.5
37.7
42.6
49.3
. 59.8
74.8
96.5
108.6

17
THE NATIONAL DEBT IN THE 20TH CENTURY 1
[Totals at the end of fiscal years In billions of dollars]
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920

1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
3
12
25
24

1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941

24
23
22
21
21
20
19
18
17
16
17
19
23
27
29
34
36
37
48
51
58

79
143
204
260
271
257
252
253
257
255
259
266
271
274
273
272
280
288
291
293
303

1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962

1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975....
1976
1977
1978
1979
1980
19812
19822

311
317
323
329
341
370
367
383
410
437
468
486
544
632
709
780
834
914
995
1,079

1

Cress Federal debt.
' 3 d in fiscal year 1982 budget revisions.
C „
.ice of Management and Budget July 1981.
2C

FEDERAL DEFICIT: FEDERAL FUNDS AND OFF-BUDGET ENTITIES 1
Federal funds
Fiscal year:
1973...
1974...
1975...
1976...
1977...
1978...
1979...
1980...
19812
19822

-25.6
-18.7
-52.6
-68.8
-54.5
-61.5
-46.1
-68.4
-63.8
-66.5

Off-budget

-0.1
-1.4
-8.1
-7.3
-8.7
-10.4
-12.5
-14.2
-24.0
-18.2

Total deficit

-25.7
-20.1
-60.7
-76.1
-63.2
-71.9
-58.6
-82.8
-87.8
-84.7

1

Prepared for Senator Harry F. Byrd, Jr.
As estimated in the fiscal year 1982 midsession review, July 1981.
Source: Office of Management and Budget, July 1981.
2

Senator B Y R D . I think it is interesting to note that the national
debt has doubled since 1974. At the end of fiscal 1974 the debt was
$486 billion. At the end of this fiscal year it will be almost exactly
double that figure, which is another way of saying that in almost
200 years of our Nation's existence half of our debt was created,
and in 7 years the other half was created.
So I do not blame the financial markets for being deeply concerned. I am deeply concerned, too. The mitigating factor is, however, that we have a President who is determined to change that and
has shown that he is determined to change it, and he has done
what no other President has done: he has been able to get the




18

Congress, which is not a totally responsible body at all times, to
reduce spending by very, very significant amounts.
So I want to commend the administration, but at the same time I
do not want to gloss over what I think is a continued, very serious
position in which the Federal Government finds itself on the financial side, namely having doubled the debt in a very short period of
7 years.
Secretary MEHLE. Well, we certainly share your concern in that
regard, and I think the administration, the President, will continue
to work vigorously to check the pace of growth of the Federal
presence in the marketplace.
Senator PACKWOOD. I might say, Harry—you mentioned impoundment a little earlier—you will recall that in 1972 we had a
debate about impoundment and President Nixon at that time.
The issue was should we let the President cut the budget where
he wanted it above $250 billion. And 10 years later we are talking
about a budget of someplace between $750 and $800 billion.
Senator BYRD. Yes. I really think drastic action is needed over
and above what has already been done. And if it takes impoundment or something similar to that, I think that ought to be tried.
I also feel that it is wrong to exempt the Defense Department
from any close scrutiny such as has been given the other departments.
I am a strong defense advocate and have been ever since I have
been in the Senate, but I am willing to support any reasonable
proposals that the President may make to steal back some of the
tremendous increases in defense that have been proposed. I just
think we are in a very desperate situation financially, and that is
having its effect on our entire economy.
Senator PACKWOOD. The hearing is adjourned.
Thank you, Mr. Secretary.
STATEMENT OF H O N . ROGER W . MEHLE, ASSISTANT SECRETARY OF THE TREASURY,
DOMESTIC F I N A N C E

Mr. Chairman and members of the committee, I am here to advise you of the need
for Senate action this month to increase the debt limit. The increase in debt each
year is simply the result of earlier decisions by Congress on the amounts of Federal
spending and taxation. Once these decisions are made, as they were in connection
with enactment of the President's Economic Program earlier this summer, the U.S.
Government, through the Treasury Department, then must provide the financing
that these commitments entaiL Based on Mid-Session Review estimates of outlays,
receipts and other transactions affecting debt subject to limit, the amount of debt
subject to limit outstanding on September 30, 1982 will total $1,074.9 billion. This
estimate, of course, is subject to change based on new legislation and unfolding
economic developments. However, given this projection of debt issuance, adoption of
a debt limit of $1,079.8 billion for fiscal year 1982 should give the Treasury sufficient borrowing capacity with some added leeway for borrowing should contingencies arise.
Prompt action on the debt ceiling is required to avoid a repetition of past dislocations which have hampered Treasury operations. In recent years, delays in action
on the debt limit have generated uncertainty about Treasury financing schedules
and on several occasions drastic measures have been undertaken. These measures
have included suspension of savings bond sales, postponement of auctions and
disinvestment of trust funds. Treasury reaches a point when it must consider which
obligations it should pay—social security checks, payroll checks, unemployment
checks, defense contracts—and whether, for the first time in history, it will default
on its securities. Such confusion and the congestion in financial markets which
results from changed financing plans adds directly to the costs of Government debt.
If the current temporary debt ceiling is not increased for fiscal year 1982, the debt
will revert to its $400 billion permanent ceiling on October 1, and no issuance of




19
debt will be permitted. In that case, the Treasury's cash balance will be quickly
depleted as maturing debt is retired and other obligations are paid. In fact, the
Treasury would run out of cash altogether in the first week of October. I believe we
can avoid these problems this year, and recommend that in future years the Senate
consider combining the budget and debt limit actions. This would assure an earlier
focus on controlling the public debt.
While passage of H.J. Res. 265 will enable Treasury to finance the Government's
operations after September 30, a technical matter necessitates additional debt ceiling authority for September 30. On that day the Treasury is scheduled to issue
approximately $13 billion of securities to the Civil Service retirement trust fund.
Unless additional leeway is provided, the Treasury will not be able to fulfill its
responsibility to invest Civil Service retirement funds. For every $1 billion that is
not invested, the trust fund will lose about $350,000 per day in interest. Passage of
H.J. Res. 266 would provide a debt limit through September 30 of $999.8 billion, and
allow the investment of these funds.

Secretary MEHLE. Thank you, sir.
[Whereupon, at 10:26 a.m., the hearing was concluded.]
[The following material was submitted for the record:]







APPENDIX

I

TABLES PREPARED FOR H A R R Y F . BYRD, J R .

TABLE 1.—ESTIMATED OWNERSHIP OF PUBLIC DEBT SECURITIES, JUNE 30, 1981
[Dollars in billions]
Amount

Held by:
Federal Reserve System
Government accounts

Percent

$120.0
199.9
320.0

Total
Held by private investors:
Individuals:
Savings bonds
Other securities

12.4
2^6
3^9

69.2
7CL4

7.1
1_2

139.6
103.7
15.9
6.0
20.6
78.6
141.2
145.6

14.4
10.7
1.6
.6
2.1
8.1
14.5
liO

Total privately held

651.2

67J.

Total public debt securities outstanding

971.2

100.0

Total individuals
Commercial banks
Insurance companies
Mutual savings banks
Corporations
State and local governments
Foreign and international
Other investors

Note.—Figures may not add to totals due to rounding.
Source: Office of the Secretary of the Treasury, Office of Government Financing, September 3, 1981.

TABLE 2—MATURITY DISTRIBUTION OF OFFICIAL FOREIGN HOLDINGS OF TREASURY PUBLIC DEBT
SECURITIES, JUNE 3 0 , 1 9 8 1 1
[In millions of dollars]
Years to maturity

Marketable

1 year and under
1 to 5 years
Over 5 years

61,751
24,781
4,275

Total

90,807

1

Nonmarketable

6,628
8,110
3,579
18,317

Total

68,379
32,891
7,854
109,124

This table shows the maturity distribution of official foreign holdings of Treasury securities in custody at the FRBNY and in the Treasury Deposit
Funds. Carter bonds/which total $6,437 million, are not included here since they are not foreign official holdings.
Note—Detail may not sum to totals due to rounding.
Source: Office of the Secretary of the Treasury, Office of Government Financing, September 3, 1 9 8 1




(21)

22
TABLE 3.—TOTAL FOREIGN OFFICIAL CUSTODY ACCOUNT HOLDINGS AT FRBNY
[In billions of dollars]
1980

Sept. 24
Marketable
Nonmarketable
Total

1981

Dec. 31

81.2
19.1
100.3

Mar. 25

88.5
17.6
106.1

Aug. 19

July 1

94.8
16.6
111.4

96.8
17.9
114.7

89.9
15.7
105.6

Source: Office of the Secretary of the Treasury, Office of Government Financing, September 3, 1981.

TABLE 4.—NET INCREASE IN FEDERAL AND FEDERALLY ASSISTED BORROWING FROM THE PUBLIC
[Fiscal years; billions of dollars]
Federal borrowing from the public
Year

1970
1971
1972
1973
1974
1975
1976
TQ
1977
1978
1979
1980
1981e
1982e
Net
change
197082

Budget
deficit

2.8
23.0
23.4
14.8
4.7
45.2
66.4
13.0
44.9
48.8
27.7
59.6
55.6
42.5

472.4

Outstanding
September 30,
1982
1

Off-budget
deficit 1

Other
means of
financing 2

Federally assisted borrowing from the public
Total36

Guaranteed
obligations

Sponsored
agency
obligations 4

Deduct to
avoid
double
counting 5

Total Federal and
federally assisted
borrowing from
the public

.1
1.4
8.1
7.3
1.8
8.7
10.4
12.5
14.2
24.0
18.2

2.6
-3.6
-3.9
4.4
-3.1
-2.4
9.2
3.3
-.1
-.1
-6.6
-3.3
-8.6
-1.7

5.4
19.4
19.4
19.3
3.0
50.9
82.9
18.0
53.5
59.1
33.6
70.5
71.0
59.0

8.6
16.3
19.8
16.3
10.3
16.5
16.3
2.8
21.1
24.7
39.3
47.9
73.3
75.0

10.7
1.5
5.0
8.8
14.9
11.9
5.3
1.7
7.0
24.1
25.7
27.5
20.7
30.6

6.8
3.8
4.3
-3.2
3.8
14.4
6.3
3.2
2.1
13.5
17.0
21.6
24.5
23.8

12.5
14.0
20.5
28.3
21.4
14.0
15.3
1.3
26.0
35.3
48.0
53.8
69.5
81.8

17.9
33.5
40.0
47.5
24.4
64.9
98.2
19.3
79.6
94.4
81.7
124.4
140.5
140.8

106.7

-13.9

565.0

388.2

195.4

141.9

441.7

1,006.7

845.1

510.5

220.9

155.5

575.9

1,421.0

Consists largely of Federal Financing Bank borrowings to finance the purchase of guaranteed obligations.
2
Consists largely of changes in Treasury cash balances.
3
Consists of borrowing by Treasury and minor amounts by other Federal agencies.
4
Consists largely of Federal National Mortgage Association and the Federal home loan bank and farm credit systems.
5
Largely Federal Financing Bank and sponsored agency purchases of guaranteed obligations.
6
1976 figure excludes retroactive reclassification of $ 4 7 1 million of Export-Import Bank asset sales to debt.
Source: July 15, 1981 Mid-Session Review of the 1982 Budget.




Total

TABLE 5.—FEDERAL DEFICITS AND DEBT, 1971-82
[In billions of dollars]
1971

1972

1973

1974

1975

1976

TQ

1977

1978

1979

1980

1981e

Federal funds deficit
Less trust fund surplus or deficit

-29.9

-29.3
5.9

-25.6
10.7

-18.7
14.0

-52.5
7.4

-68.9
2.4

-11.0
-2.0

-54.5
9.5

-61.5
12.7

-46.1
18.3

-68.4

6.8

8.8

— 63.8
8.2

— 66.5
24.0

Equals total unified budget deficit
Plus deficit of off-budget Federal entities 1

-23.0

-23.4

-14.8
-.1

-4.7
-1.4

-45.2
-8.1

-66.4
-7.3

-13.0
-1.8

-45.0
-8.7

-48.8
-10.3

-27.7
-12.4

-59.6
-14.2

-55.6
-24.0

-42.5
-18.2

Equals total deficit
Less nonborrowing means of financing 2

-23.0
3.6

-23.4
3.9

-14.9
-4.4

-6.1
3.1

-53.1
2.4

-73.7
-9.2

-14.7
-3.3

-53.7
.1

-59.2
.1

-40.2
6.5

-73.8
3.3

-79.6
8.6

-60.7
1.7

Equals total borrowing from the public
Plus change in debt held by Government agencies 3

19.4
7.4

19.4
8.4

19.3
11.8

3.0
14.8

50.9
7.0

82.9
4.3

18.0
-3.5

53.5
9.2

59.1
12.2

33.6
19.7

70.5
10.1

71.0
9.8

59.0
25.1

Equals change in gross Federal debt
Less change in Federal agency debt

26.9
-.3

27.9
-1.3

31.1
.2

17.8
.9

57.9
-1.1 .

87.3

14.5
.2

62.7
-1.4

71.3
-1.4

53.3
-1.6

80.6
-.6

80.8
-.5

84.1
-1.0

Equals change in gross public debt
Plus change in other debt subject to limit 4

27.2
-1.2 .

29.1

30.9
-.4 .

16.9

59.0
.1

87.2
.1 .

14.3

64.1

72.7

54.9

81.2
- 1

81.3

85.1

26.0

29.1

30.5

16.9

59.0

87.3

14.3

64.1

72.7

54.9

81.1

81.2

85.0

409.5
12.2

437.3
10.9

468.4
11.1

486.2
12.0

544.1
10.9

631.9
11.4

646.4
11.7

709.1
10.3

780.4
8.9

833.8
7.2

914.3
6.6

995.1
6.2

1,079.2
5.2

Equals gross public debt
Plus other debt subject to limit 4

397.3
1.3

426.4
1.3

457.3
.9

474.2
.9

533.2
1.0

620.4
1.1

634.7
1.1

698.8
1.1

771.5
1.1

826.5
1.1

907.7
1.0

989.0
1.0

1,074.0
.9

Equals debt subject to limit

398.6

427.8

458.3

475.2

534.2

621.6

635.8

700.0

772.7

827.6

908.7

989.9

1,074.9

Equals change in debt subject to limit
Debt Outstanding end of Fiscal Year:
Gross Federal debt 5
Less Federal agency debt 5

1
2
3
4
5

Consists largely of Federal Financing Bank borrowings to finance off-budget programs.
See attached table.
Consists largely of trust fund surplus or deficit.
Net of certain public debt not subject to limit.
Fiscal year 1976 figure includes reclassification of $ 4 7 1 million of Export-Import Bank certificates of beneficial interest from asset sales to debt.

Source: Special Analysis E, U.S. Budget, fiscal year 1982 (July 15, 1 9 8 1 ) .




1982e

24
TABLE 6.—MEANS OF FINANCING OTHER THAN BORROWING FROM THE PUBLIC
[in million of dollars]
Estimate
1980 actual
1981

Means of financing other than borrowing from the public: Decrease or increase in
cash and other monetary assets
Increase or decrease in liabilities to:
Checks outstanding, etc
Deposit fund balances
Seigniorage on coins
Total means of financing other than borrowing from the public

1982

643

5,990

-490
2,478
663

1,145
1,000
444

846
161
649

3,293

8,579

1,656

Source: Office of the Secretary of the Treasury, Office of Government Financing July 16, 1981.

TABLE 7.—DEBT SUBJECT TO LIMIT
[Fiscal years; in billions of dollars]
Estimate
Actual 1980
1981

1982

Unified budget deficit
Portion of budget deficit attributable to trust surplus or deficit

59.6
8.8

55.6
8.2

42.5
24.0

Federal funds deficit
Deficit of off-budget Federal entities

68.4
14.2

63.8
24L0

66.5
18.2

82.6
—1.5

87.8
-6.6

84.7
.3

Total to be financed
Means of financing other than borrowing, and other adjustments
Change in debt subject to limit
Debt subject to limit, beginning of year
Anticipated debt subject to limit, end of year
Source: Mid-Session Review of the 1982 Budget (July 15, 1981).




81.1

8L2

8i0

827.6
908.7

908.7
989.9

989.9
1,074.9

TABLE 8—RECEIPTS, OUTLAYS AND SURPLUSES OR DEFICITS IN TRUST FUNDS (Part 1)
[Fiscal years; in billions of dollars]

Receipts

Social security
Health insurance
Revenue sharing
Unemployment
Federal employees retirement
Highways
Other
Total




Outlays

^ j ™

Receipts

Outlays

Receipts

Outlays

^ g i t

Recei ts

P

0utla s

V

or S i d t

66.7
16.9
6.2
8.2
11.5
6.8
2.4

64.7
14.8
6.1
13.2
7.1
4.8
.4

+2.0
+2.1
+.1
-5.0
+4.4
+1.9
+2.0

70.7
18.5
6.4
16.2
13.2
6.0
2.7

73.9
17.8
6.2
17.9
8.4
6.5
.6

-3.2
+.7
+.1
-1.7
+4.8
-.5
+2.2

81.2
22.8
6.7
15.0
16.7
7.3
U

85.1
21.5
6.8
14.1
9.7
6.1
(*)

-3.9
+1.2
-.1
+.9
+7.0
+1.2
+3.2

89.6
27.6
6.9
15.1
17.8
7.6
3.4

93.9
25.2
6.8
11.2
11.0
6.1
1.2

-4.3
+2.4
(x)
+4.0
+6.8
+1.5
+2.3

118.6

111.2

+7.4

133.7

131.3

+2.4

152.8

143.3

+9.5

168.0

155.3

+12.7

to
Oi

TABLE 8.—RECEIPTS, OUTLAYS, AND SURPLUSES OR DEFICITS IN TRUST FUNDS (Part 2)
[Fiscal years; in billions of dollars]
1979

1980

1981

Receipts
Social security
Health insurance
Revenue sharing
Unemployment
Federal employees retirement
Highways...,
Other
Total
1

Outlays

Surplus
or deficit

102.1
31.7
6.9
15.9
20.5
8.0
4.5

104.1
29.1
6.8
11.2
12.5
7.2
.4

-2.0
2.6
.1
4.7
8.0
.9
4.1

117.4
35.7
6.9
16.2
24.5
7.6
5.5

118.6
35.0
6.8
16.4
14.9
9.2
4.1

-1.1
.7

189.6

171.3

18.3

213.9

205.1

$50 million or less.
Note.—Figures may not add because of rounding. 1981 and 1982 as estimated in the Mid-Season Review of the 1982 Budget.
Source: Office of Managment and Budget, September 1981.
Prepared by U.S. Senator Harry F. Byrd, Jr., of Virginia.




Receipts

Outlays

Surplus
or deficit

Receipts

Outlays

1982
Surplus
or deficit

Receipts

Outlays

Surplus
or deficit

-.2
9.6
-1.6
1.4

136.3
45.2
4.6
18.8
28.6
7.8
2.3

139.6
41.6
5.2
19.1
17.9
8.4
3.6

-3.3
+ 3.6
-.6
-.3
+ 10.7
-.6
-1.3

155.6
56.6
4.6
21.6
30.6
8.3
4.0

152.6
47.3
4.6
20.7
20.0
8.5
3.7

+ .9
+ 10.6-.2
+ 0.3

8.8

243.6

235.4

+ 8.2

281.2

257.2

+ 24.0

i1)

+ 3.0
+ 9.4

(x)

TABLE 9.—BUDGET RECEIPTS, OUTLAYS, AND SURPLUS OR D E F I C I T ( - ) BY FUND GROUP, 1971-82
[Fiscal years; in billions of dollars]

1971

1972

1973

1974

1975

1976

TQ

1977

1978

1979

1980
1981

Federal funds receipts:
Individual income taxes
Corporation income taxes

1982

96.2
26.8

94.7
32.2

103.2
26.2

119.0
38.6

122.4
40.6

131.6
41.4

38.8
8.5

157.6
54.9

181.0
60.0

217.8
65.7

244.1
64.6

285.6
63.3

302.9
66.8

113.0
10.5
3.7
2.6
3.9

126.9
9.5
5.4
3.3
3.6

139.4
9.8
4.9
3.2
3.9

157.6
9.7
5.0
3.3
5.4

163.0
9.4
4.6
3.7
6.7

173.0
10.6
5.2
4.1
8.0

47.3
2.5
1.5
1.2
1.6

212.5
9.6
7.3
5.2
6.5

240.9
10.1
5.3
6.6
7.4

283.5
9.8
5.4
7.4
9.2

308.7
15.6
6.4
7.2
13.1

348.8
34.6
6.9
7.6
14.7

369.7
38.6
7.6
7.9
15.7

Total Federal funds, receipts
Trust fund receipts
Interfund transactions

133.8
66.2
-11.6

148.8
73.0
-13.2

161.4
92.2
-21.3

181.2
104.8
-21.1

187.5
118.6
-25.1

201.1
133.7
-34.8

54.1
32.1
-4.4

241.3
152.8
-36.3

270.5
168.0
-36.5

316.4
189.6
-40.1

350.8
213.9
-44.7

412.6
243.6
-50.6

439.5
281.2
-58.3

Total budget receipts

188.4

208.6

232.2

264.9

281.0

300.0

81.8

357.8

402.0

465.9

520.0

605.6

662.4

163.7
59.4
-11.6

178.1
67.1
-13.2

187.0
81.4
-21.3

199.9
90.8
-21.1

240.1
111.2
-25.1

269.9
131.3
-34.8

65.1
34.0
-4.4

295.8
143.3
-36.3

332.0
155.3
-36.5

362.4
171.3
-40.1

419.2
205.1
-44.7

476.4
235.4
-50.6

505.9
257.2
-58.3

211.4

232.0

247.1

269.6

326.2

366.4

94.7

402.7

450.8

493.6

579.6

661.2

704.8

-29.9
6.8
-23.0

-29.3
5.9
-23.4

-25.6
10.7
-14.8

-18.7
14.0
-4.7

-52.6
7.4
-45.2

-68.8
2.4
-66.4

-11.0
-2.0
-13.0

-54.4
9.5
-44.9

-61.5
12.7
-48.8

-46.0
18.3
-27.7

-68.4
8.8
-59.6

-63.8
8.2
-55.6

-66.5
24.0
-42.5

Subtotal
Excise taxes
Estate and gift taxes
Customs duties
Miscellaneous receipts

Federal funds outlays
Trust funds outlays
Interfund transactions
Total budget outlays
Federal funds surplus or deficit ( - )
Trust funds surplus or deficit ( - )
Budget surplus or deficit ( - )
N o t e . — 1 9 8 1 and 1982 as estimated in the Mid-Session Review of the 1982 Budget.
Source: Office of Management and Budget, September 1981.




28
SEPTEMBER 8, 1 9 8 1 .

Mr. Chairman and members of the Senate Finance Committee, I am Carson
Crawford of Florence, Kansas. I urge you to reflect the proposed increase in the
National Debt ceiling by $14.8 billion for Fiscal 1981 as provided in House Joint
Resolution 266.
Increasing the National Debt can only increase inflation and provide the excuse
for an increase in interest rates which is devastating to the productive tax-paying
sector of society as well as the consumer.
I am told that the reason the National Debt needed to be increased was so that
the interest on Government Bonds could be paid.
There are at least two ways to avoid raising the Debt limit and increasing the
National Debt in this instance. The government could default—simply be honest
about it. You can't raise the money by taxation—in fact, government taxing, spending and usurous interest rates caused by government spending money it doesn't
have and can't borrow from savers, are destroying the productive tax-paying sector.
Government has already spent all it can collect in taxes and all the savings it can
borrow and is already continuing on its road of deficit financing by inflating the
money supply. As John Maynard Keynes wrote in his "Economic Consequences of
the Peace," about inflating the money supply or inflation, "By a continuous process
of inflation, governments can confiscate, secretly and unobserved, an important part
of the wealth of their citizens." The effect upon society of confiscation of wealth by
government is the same as though the citizens were the victims of mass theft—
which government is supposed to protect them from. Whether by government confiscation of wealth or by theft, a person no longer has the wealth he once had. Keynes
goes on to point out that " . . . while the process impoverishes many, it actually
enriches some." Keynes quotes Lenin in this manner, "Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the
currency. The process engages all the hidden forces of economic law on the side of
destruction, and does it in a manner which not one man in a million is able to
diagnose." (Emphasis mine)
If the members of this committee could realize that increasing the National Debt
limit in this instance will continue to increase or inflate the supply of printing press
dollars, thereby causing further confiscation of the wealth of the people of our
country—and further that it is using economic law on the side of destruction of our
country and the Constitution you have sworn to uphold—I am certain you would
reject the Debt increase.
To the concern about what would happen if the government defaulted on interest
payments on bonds—defaulting on interest payments could not be nearly as bad as
destroying our country and our form of government. People and nations can recover
from debts—but from a breakdown of mortality which inflation represents, they
find it most difficult to recover. Further it would bring to an end that fraudulent
idea that there is a free money tree in Washington. We could become a free
responsible people once again.
There is an alternative to defaulting on interest payments. I have attached a
reproduction of a brochure I received recently from Baylor University Professional
Development Center on seminars and workshops to be held across the country to
inform people on government financial benefits available. The brochure is entitled
"Government Loan and Loan Guarantee Programs: How They Can Work For You."
In a box on the front page is the statement, "Reagan has left over $100 billion per
year for new direct and guaranteed loans." On page 3 is this statement, "A common
misconception is that all of these programs are available only for underprivileged,
low income, or minority groups. The informed businessperson knows that is not
true." Actual cases are cited of individuals who became wealthy by using government financial benefits. The benefits of government 2 percent loans, 7V2 percent
loans, rent subsidies, etc. are listed.
Simply cut off this unconstitutional spending and the Debt limit would not need
to be increased. Further, substantial reduction could be made in the deficit, thereby
reducing the interest rates which are strangling the productive sector.
Remember, only government, through the Federal Reserve System, causes inflation—not the productive sector—not the consumer. If either of the latter two groups
try to inflate the money supply, they go to prison for it. High interest rates do not
reduce inflation—rather it compounds the devastating effect of inflation. Mr.
Volcker was reported as stating at his confirmation hearing that the standard of
living of the American people would have to be reduced—with the cooperation of
our elected officials, Mr. Volcker has brought this about through inflation and high
interest rates.
I urge the committee to reject any interest in the National Debt limit.




29
ENDORSED BY THE
BAYLOR UNIVERSITY'S
PROFESSIONAL DEVELOPMENT
CENTER

NIE

National
Institute of
Economics

AND THE

H H

AMERICAN
ALLIANCE OF

s e n

PRESENTS
THE

3RD ANNUAL NATIONWIDE SEMINAR AND WORKSHOP SERIES ON

GOVERNMENT LOAN
AND
LOANGUARANTEE
PROGRAMS
HOW THEY CAN WORK FOR YOU
New and Changing Opportunities with the Reagan Administration
• Which Programs will be cut • Where the new opportunities will be •

* «,r

v ' r*

w i
• Housing Loans including
Single Family, Multifamily,
Condominiums and
Mobile Homes




• Commercial-Industrial Loans
• Foreign Investment Loans
• Small Business Administration Loans

Community Development L
Energy Development and
Conservation Loans

• Fanners Home Administration Loans
• Many Other Available Programs

30

Learn how government loan programs can work for you...
Hundreds of programs designed to assist the American people in furthering their economic progress are
provided by the Federal Government through direct and guaranteed loans. Understanding these government loan programs and the changes being made by the Reagan Administration has become an essential
requirement for any business or individual. Baylor University's Professional Development Center, an
integral part of the Hankamer School of Business, is proud to present these one-day seminars
and optional one-day workshops to give business professionals a comprehensive overview
of government loan and loan guarantee programs.
v
Government programs to be covered will include: Housing Loans (Single Family,
Multifamily, Condominiums and Mobile Homes), Commercial-Industrial Loans, Small
Business Administration Loans, Community Development Loans, Energy Develop- ^
ment and Conservation Loans, Farmers Home Administration Loans, Overseas Private Investment Corporation Loans, Agricultural Loans, Disaster
Loans, Relocation Loans, Historic Preservation Loans, and many other
available programs.
Discussions will include: Objectives and goals of loan programs,
federal agencies administering the program, types of financial assistance, eligibility requirements, the application and award process,
and examples of funded projects. Experts who have headed government agencies or who have worked closely and successfully
with these agencies, will share their expertise. The effects of the
new Reagan Administration on the programs will be
explored.
Time will be allotted for participant questions
during the seminar. You will also have the opportunity to talk with faculty members about your
individual needs on a more personal basis
during the various optional workshops.
Actual case studies will be presented
showing how other business persons like
yourself have used these programs to prosper. Actual names, dates, locations,
amounts, and copies of the actual documents involved in the^ansactions will be
provided and discussed on a point by
point basis.

This is your opportunity
to meet and talk
with the experts.




-}.','
. ->J

^ ,,
\

31

. in a one-day seminar and optional one-day workshops
The National Institute of Economics in cooperation with the
American Alliance of Small Businesses has designed this comprehensive program for Baylor University's Professional
Development Center. This one-day seminar will assist you in
understanding government ban programs and the new economic opportunities for the'80s. In addition, we have provided
optional second day workshops where speakers will present the
step-by-step process used in applying for the programs.
During
the workshops you will also have the opportunity to present
your specific needs and get specific answers for those needs.

The seminar will show you how to:
• Identify, analyze and use government loan programs.
• Determine the Federal agency administering the programs and the
objectives and goals of the programs.
• Determine the type of financial assistance offered under a program.
• Evaluate and select programs which meet your objectives.

The workshop will show you how to:
• Develop, package, promote and present opportunities made
available through government loan programs.
• Broaden the scope of your investment, business or
development plans.
• Get immediate answers for your specific needs from experts who
work with these programs on a daily basis.
• Learn how to avoid some of the pitfalls and red tape involved in
applying for government loans.

Real estate brokers/home builders
A special portion of the seminar will be devoted to detailing
loan programs you can use to stimulate production and sales
of housing. New changes currently being considered will be
discussed. Also learn creative ways to use programs to structure single family transactions.
Learn how they will assist you and how to be first in line to
use them.

Current Government programs allow you to:
• Obtain community development loans to rehabilitate certain
older properties.
• Establish, construct, expand or convert businesses and business
facilities.
• Enlarge, improve or buy family farms or refinance debt to place the
farming operation on a sound basis.
• Construct or remodel single family housing (New directions and
policy changes being proposed to further stimulate single family
home production will be analyzed).
• Construct or remodel rental housing (single or multi-family) with a
7'/z% loan and obtain a 20 year government subsidy c
• Obtain loans for energy expansion, production, c
r conversions.
• Buy and develop land.
• Finance luxury apartments for high income tenants with 40 year,
7/2% mortgages with minimal and possibly no cash investment.
• Finance certain office buildings with tax free low interest bonds or
mortgage notes.
• Obtain Federally guaranteed performance bonds for obligations of
your business.
• Obtain financing from government programs with interest rates as
low as 2% for many, many purposes.




This course includes...
A 4 volume set of
reference books
These four books contain 1500 pages which detail Federal
government assistant programs including objectives, eligibility requirements, application and award processes,
current budget estimates, actual case studies and other pertinent information — for each of the programs available.

A certificate of
participation and
CEU credits.
CEU units are nationally recognized units of achievement
which may be used as evidence of increased performance
capabilities and for job advancement.

Case studies will show how other
successful business people have benefited
from government loans.
Take the case of Dean Goodin,who is putting the finishing touches
on a business he bought for $150,000. Mr. Goodin had used his
savings to buy the business and found he didn't have sufficient
capital to operate and expand it. In 1980 he received a $2.3 million
dollar loan at 2% interest to upgrade and expand facilities.
Or Andrew Beal, who in 1976 purchased a foreclosed apartment
project from the Federal Government for $217,500 with a $17,500
down payment and a $200,000 mortgage. Mr. Beal successfully used
a combination of government rent subsidy guarantees and a government mortgage insurance program to sell the property in 1980 for
over $1 million dollars.
A common misconception
is that all of these programs are available
only for
underprivileged,
low income,
or minority
groups.
The
informed
businessperson
knows that is not true.
Or Dick Henke, a restauranteur in St. Paul, Minn, who has just put
together a combination of government loan and loan guarantees
plus private financing for a total of $811,900, to finance a new
restaurant. For every private $1 invested, various government
agencies provided $4.54 in loans or guarantees with interest rates
as low as 2% and 3%.
Other studies will show how a woman who purchased an older
home received an outright grant to make necessary repairs... how a
businessman purchased a chain of sandwich shops with a Small
Business Administration Loan... how another businessman bought
an older downtown building and received a $100,000, 3% community development loan to rehabilitate i t . . . how a construction
contractor received a Small Business Administration Loan to expand his business... and so many more. These loans are available
... learn hipw to take advantage of them and make them work
for you.

32

-Workshop Faculty(partial list)

Milt Rambaud
Los Angeles, C A - Housing
Development Consultant Former Acting Chief of Real
Estate for eleven western states
for the U . S . Department of
Housing and Urban Development - Former deputy Chief of
R e d e v e l o p m e n t and Land
Marketing for the U . S . Dep a r t m e n t of H o u s i n g a n d
Urban Development in Washington, D . C .

Susan Huskisson
San Francisco, C A - Energy
and m a r k e t i n g c o n s u l t a n t Former p u b l i c i n f o r m a t i o n
officer with the U . S . Departm e n t of E n e r g y - F o r m e r
Advisor to the Assistant Secretary for Energy Technology
- Former l i a i s o n for t h e W h i t e
House Staff.

Dan Koehler
Washington, D.C. - Investor
and Business Analyst - Former
Director of Program Development for the Small Business
Administration, Washington former Deputy Regional Director for the New York Regional
Office of the Small Business
Administration - Former Chief
for Community Development
and Policy Analysis for the
Small Business Administration, Washington, D.C.

Roland Camfield
Los Angeles, C A - Practicing
a t t o r n e y r e p r e s e n t i n g governmental agencies and private developers dealing with
Housing and Urban Development programs. - Former Deputy Regional Administrator
for H U D - Former Director of
Los Angeles Area H U D office.

Mike Clark
Andrew Beal
Detroit, MI - E n t r e p r e n e u r
with extensive practical experience who has made over
one million dollars using government loan programs. He
successfully combined numerous government loan programs
to obtain millions of dollars in
direct and guaranteed loans.

Little Rock, AR - Business Development Advisor - Former
Business specialist, planner,
and venture analyst for a planning and development agency
in t h e S t a t e of A r k a n s a s
funded by the Economic Development Administration to
assist investors and businesses
with the use of Farmers Home
Administration programs.

William Painter
Houston, TX - President,
Housing Consultants, Inc. Former Director of the Houston office of t h e U . S . Dep a r t m e n t of H o u s i n g a n d
Urban Development - Former
Supervisor of Federal Housing A d m i n i s t r a t i o n F i e l d
O p e r a t i o n s - F o r m e r Vice
President of t h e A m e r i c a n
Mortgage Company.

Alan Weaver
Waco, TX - Director of Business D e p a r t m e n t P r o g r a m
funded by the U.S. Department of Commerce to assist
small business persons with
Government Loan and Assistance Programs.

"Neither [he above speakers nor the sponsoring organizations are representing the government in an official capacity. The speakers opinions are based on their experiences u>ith government
loan programs. Representatives from local government offices administering these programs will speak at the seminars when possible and if time allows. Due to time constraints and
schedule conflicts, not all of the speakers can appear at all workshops. However, speakers have been selected for each workshop to assure complete and consistent presentation of seminar
materials.




33

0

0

AMERICAN
ALLIANCE OF
SMALL
BUSINESSES

American Alliance of Small Businesses:
The American Alliance of Small Businesses is a non-profit organization
engaged in preserving the system of free, competitive, and private American enterprise. The AASB provides a cohesive organization allowing
small businesses to join together collectively to deal with issues affecting
them. The AASB is endorsing these seminars to further their ideal of
educating small businesses about current issues and to help the small
business person prosper. The AASB recommends these seminars and
workshops as enlightening, educational, and practical. Membership in
the AASB entitles small businesses to special rates for seminars, a
newsletter highlighting legislation, tax tips, stories of particular interest
to small businesses, and an active voice in shaping legislation in
Washington through the AASB lobbying efforts.
Continuing Educations Units:
One and a half CEU units will be offered to participants of the seminar
and workshop. CEU units are nationally recognized units of achievement
which may be used as evidence of increased performance capabilities and
for job advancement.
Certificates of Participation:
Baylor University's Professional Development Center awards Certificates of Participation to those who attend.
Cancellations and Refunds:
Confirmed registrations cancelled less than 3 working days prior to
seminar are subject to a $50.00 registration fee (or as otherwise required
by applicable state laws). Seminar subject to change or cancellation.

BAYLOR UNIVERSITY'S
PROFESSIONAL
DEVELOPMENT
CENTER
Baylor U n i v e r s i t y ' s Professional D e v e l o p m e n t Center is presenting this third nationwide series of seminars and workshops in hopes
of furthering the education of the public in understanding the programs
that the Federal government has developed to assist them. The series is
conducted by experts who have had years of experience administering or
working with these various programs. Their technical knowledge of
government loan programs, as well as the techniques used to apply for the
Federal programs, make these seminars and workshops valuable tools to
many people. We invite your participation in the series.

Tax Deductions:
A taxpayer engaged in business or in a private professional practice can
deduct as a business expense the membership dues he pays to organizations where such membership is used in advancing his business interest.
In addition, an income tax deduction is allowed for expenses of education, including travel, meals and lodging undertaken to maintain and
improve professional skills and to meet express requirements of an employer, or a law imposed as a condition of retention of employment, job
status or rate of compensation (See Treas. Reg. 1.162-5).

(Eastern Statc»)
BAYLOR UNIVERSITY
PROFESSIONAL DEVELOPMENT CENTER
% NATIONAL INSTITUTE OF ECONOMICS
1000 WISCONSIN N.W.
P.O. BOX 3662
WASHINGTON, D.C. 20007

DETACH
REGISTRATION
FORM,
ENCLOSE IN
ENVELOPE
AND MAIL TO:

Participants may register for the Seminar only or for both the Seminar
and Workshop. Each are day-long events—the Seminar will be presented
on the first day and the Workshop the following day.

BAYLOR UNIVERSITY
PROFESSIONAL DEVELOPMENT CENTER
P.<?. BOX 3107
DAlLAS, TEXAS 75221

Registration Form
'w

Fee includes 4-volume set of hooks

. DATE.

SEMINAR LOCATION (See back page).
NAME(s)
ORGANIZATION

. TITLE _

TYPE OF BUSINESS.
ADDRESS
COMPANY PHONE.
•
•
•

MASTER CARD
(Bank N o

)

VISA
A M E R I C A N EXPRESS
(Card Number _
(Exp. Date

Authorizing Signature _

. CITY _

•

C H E C K , payable to
Baylor Professional
Development Programs.

.STATE.
.HOME PHONE _

ZIP.

Please check the appropriate box:
•
•

$ 1 8 5 - Tuition for O n e - D a y Seminar only
(per person pre-registered)
$ 2 8 5 - Complete T w o - D a y Seminar and
Workshop Tuition
(per person pre-registered)
(See tax deductions above)
Add $ 2 0 per person if registration is made less than
10 days prior to s e m i n a r

^

"""""
FOR FAST R E G " " T I O N C " L L " (214™ 28-2500 * TIRSTTDAY"S7M7N-"A" 5P!M.
Lunch Break 12:00-1:00
OPTIONAL SECOND DAY WORKSHOPS
8A.M. - 4P.M. Lunch Break 11:30-12:30




34
BAYLOR UNIVERSITY'PROFESSIONAL DEVELOPMENT CENTER
1981 SEMINAR CALENDAR FOR GOVERNMENT LOAN PROGRAMS
SEVENTEEN STATE AREA
W r i t e f o r l o c a t i o m in o t h e r »tatc*
COLORADO (and »
>
. - Regency Hotel - May 20. 21
I - University Center - Univ. of Colorado
ly 26, 27
ue. NM - Hilton Inn - March 30, 31
IDAHO (and surrounding location*)
Boise - Holiday Inn Boise - May 13. 14
Spokane, Washington - River Park Center - May
11. 12
Salt Lake City, Utah - Salt Palace Center - May
15, 16
ILLINOIS (and surrounding locations)
Chicago, 1L - Presented three times Bismarck Hotel - July 11, 12
Sheraton O'Hare-Rosemont - July 13, 14
Sheraton O'Hare-Rosemont - July IS. 16
Peoria - Continental Regency Hotel - July 9, 10
Springfield - Prairie Capital Convention Center

twice - July 29, 30 and on July 31 & August I
Flint - University Center, Univ. of Michigan •
July 27. 28
Grand Rapids - Grand Rapids Marriott - July 22,
Kalamasoo - Sheraton Inn - July 20, 21
Lansing - Lansing Hilton - July 24. 25
Toledo, OH - Sheraton Westgate Inn - August 3,
South Bend, IN • Century Center Convention
Center-July 17, 18
Ft. Wayne, IN - Marriott Inn - August 5, 6
Chicago, IL - Presented three times Bismarck Hotel - July 11, 12
Sheraton O'Hare-Rosemont - July 13, 14
Sheraton O'Hare-Rosemont - July 15, 16
MINNESOTA (and surrounding locations)
,n June 3, 4
- June I
Fargo, ND - Moorhead, MN - Ramada Inn
Moorhead - June 5, 6Madison, WI - Sheraton Inn & Conference

Evans ville, IN - Ramada Inn - August 10. 11
Indianapolis, IN - Hilton at the Circle - August
St. Louis, MO - Stouffer's Riverfront Towers presented twice - June 29, 30, and on July 1, 2
Cedar Rapids, 1A - Stouffer's Five Seasons Hotel
- June 17. 18
Madison, WI • Sheraton Inn & Conference
Center - June 15, 16
Milwaukee, Wl - Hyatt Regency - June 12. 13
INDIANA (and surrounding locations)
Evansville - Ramada Inn - August 10, 11
Ft. Wayne - Marriott Inn - August 5, 6
Indianapolis - Hilton at the Circle • August 7, 8
South Bend • Century Center Convention Center - July 17. 18
Louisville, KY - Commonwealth Convention
Center - August 12. 13
Dayton, OH - Sheraton Dayton - August 19, 20
Chicago, IL - Presented three times Bismarck Hotel - July 11, 12
Sheraton O'Hare-Rosemont - July 13, 14
Sheraton O'Hare-Rosemont - July 15. 16
Kalamazoo, MI - Sheraton Inn - July 20. 21
IOWA (and surrounding locations)
Cedar Rapids - Stouffer's Five Seasons Hotel June 17. 18
Des Moines - Des Moines Hilton - June 19. 20
Omaha, NE - Peter Kiewit Conference Center June 22, 23
KANSAS (and surrounding locations)
Wichita - Wichita Airport Hilton Inn - Sept.
14. 15
Kansas City; MO - Granada Royale Hometel June 24, 25
Tulsa, OK - Williams Plaza - Sept. 16, 17

20
Cedar Rapids, IA - Stouffer's Five Seasons Hotel
-June 17, 18
MISSOURI (and surrounding location*)
Jefferson City - Governor Hotel - June 26. 27
Kansas City - Granada Royale Hometel - June
24. 25
St. Loui* - Stouffer's Riverfront Towers - Presented twice - June 29, 30, ana on July 1, 2
Springfield, IL - Prairie Capital Convention
Center -July 7, 8
Memphis, TN - Rivermont Holiday Inn
August 26, 27
Little Rock, AR - Little Rock Hilton Inn August 28, 29
Tulsa, OK - Williams Plaza - Sept. 16, 17
Omaha, NE - Peter Kiewit Conference Center June 22, 23
Des Moines, IA - Des Moines Hilton - June 19.
20
18, 19
Spokane," 'v/A - Sp^Aane Riv.
May II, 12
Boise, ID - Holiday Inn Boise - May 13. 14
NEBRASKA (and surrounding locations)
Omaha - Peter Kiewit Conference Center - June
22. 23
Kansi "
Jun

BAYLOR U N I V E R S I T Y
PROFESSIONAL DEVELOPMENT CENTER
do N A T I O N A L I N S T I T U T E O F E C O N O M I C S
1 0 0 0 W I S C O N S I N N . W.
P.O. B O X 3 6 6 2
W A S H I N G T O N , D.C. 20007




Rapid City, SD - )
NORTH DAKOTA (and surrounding
Fargo-Moorhcad, MN - Ramada Inn Moorhead
- June 5, 6
Billings. MT - Billings Sheraton - May 18. 19
Rapid City, SD - Howard Johnson's - May 28, 29
Portland - Portland Hilton - May 6, 7
Seattle, WA - Hyatt Seattle • May 8, 9
Spokane, WA - Spokane River Park Center May 11. 12
Boise, Idaho - Holiday Inn Boise - May 13, 14
Lake Tahoe, NV - Sahara Tahoe - April 29, 30
SOUTH DAKOTA (and *urrounding
Rapid City - Howard Johnson's - May 28. 29
Minneapolis, MN - Radisson South - Presented
ice • June I, 2, and on June 3. 4
>.
Moorhead.
Fargo, ND - Moorhead, IMN Moorhead - June 5. 6
Omaha, NE - Peter Kiewit Conference Center •
June 22. 23
UTAH (and surrounding location*)
Salt Lake City - Salt Palace Center - May 15, 16
La* Vega*. NV . Riviera Hotel - April 15. 16
WASHINGTON (and surrounding location*)
Seattle - Hyatt Seattle • May 8, 9
Spokane - Spokane River Park Center - May 11,
12
Portland. OR • Portland Hilton - May 6. 7
WISCONSIN (and surrounding location*)
Green Bay - Downtowner - June 10, II
Madison - Sheraton Inn & Conference Center June 15. 16
Milwaukee • Hyatt Regency - June 12. 13
Duluth, MN - Radisson Duluth - June 8. 9
Minneapolis, MN - Radisson South - Presented
twice - June 1. 2. and on June 3. 4
Cedar Rapid*, IA - Stouffer's Five Seas.ms Hotel
-June 17. 18
Chicago, IL - Presented three times •
Bismarck Hotel - July 11. 12
Sheraton O'Hare-Rosemont - July 13. 14
Sheraton O'Hare-Rosemont - July 15. 16
Billings, MT -Billings Sheraton
Denver, CO - Regency Hotel • May 2(
Rapid City, SD - Howard Johnson's - May 28. 29
* 1 ~
* - Salt Pi'
~

Non-profit Organization
U.S. POSTAGE
PAID
Baylor University

35
CHAMBER OF

COMMERCE

OF THE

UNITED STATES OF AMERICA

HILTON DAVIS
VICE PRESIDENT
L E G I S L A T I V E AND POLITICAL A F F A I R S

1 6 1 5 H STREET, N . W .

WASHINGTON,D.C. 20062
2 0 2 / 6 5 9 - 6 1 4 0

The Honorable Robert Dole
Chairman
Committee on Finance
United States Senate
Washington, D. C. 20510
Dear Mr. Chairman:
On behalf of the more than 178,000 members of the
U. S. Chamber of Commerce, consisting of businesses, state and
local chambers of commerce and trade and professional
associations, I appreciate the opportunity to express support for
S. 1249, the Debt Collection Act of 1981.
It is essential for the United States government to be in a
position to collect monies owed to it—whether by businesses,
individual citizens and other borrowers—on a timely basis. It is
my understanding that over $25 billion in debts owed the government
is either delinquent or in default. Unless the law is changed, it
is likely that little, if any, of this amount will ever be collected.
S. 1249 removes a number of roadblocks that prevent or inhibit
the government from collecting debts.
For example, the Privacy Act of 1974, which applies to Federal
employees, has prevented Federal departments and agencies from
requiring an individual to include his/her social security number on
a credit application. This makes it difficult to locate delinquent
debtors. S. 1249 would require individuals applying for credit or
any other type of Federal financial assistance to furnish their
social security numbers.
Another illustration is the current inability of Federal
agencies to screen credit applicants against Internal Revenue
Service records to determine whether they owe unpaid taxes to the
government. Permitting such a crosscheck, as provided by S. 1249,
would serve to help the government avoid unknowingly extending
credit to tax delinquents.




36
Still another impediment to the Federal debt collection
process is the limiting effect that the Privacy Act has on Federal
reporting of credit information on delinquent debtors to private
credit bureaus.
I understand that the Justice Department has ruled
that credit bureaus receiving data from Federal agencies must abide
by requirements of the Act in handling credit data. This has meant
that delinquencies and defaults by debtors on their Federal financial
commitments are not reflected in their credit records—which then
appear clean in applications to obtain more credit. Removing the
data reporting impediment, as provided by S. 1249, should cause more
timely repayment of Federal debts.
S. 1249 will facilitate Federal collection of debts owed the
government and the overall process by which the government manages
its financial transactions insofar as its lending programs are
concerned. The legislation represents a significant element of the
Administration's economic recovery program, and is a necessary adjunct
to the President's administrative efforts in improving the Federal
debt collection process.
I will appreciate your consideration of our views and I request
that this letter be included in the hearings record.




Cordially

Hilton Davis

O


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102