November 8, 1999

by Peter J.M. Orvetti

The Government Pays Its Bills
Signing Out
The Waco Wait Wears On

The Government Pays Its Bills

The government paid off $15.9 billion of the national debt in the third quarter and expects to retire another $12 billion in the first quarter of next year, the Treasury Department announced. Paying off a portion of the $5.5 trillion in national debt is occurring because of record budget surpluses, now estimated by the Clinton administration to total $5.9 trillion during the next 15 years, AP reports. The United States posted a record $122.7 billion federal budget surplus in fiscal year 1999, but the surplus came from Social Security.

Lawrence Kudlow and Stephen Moore write in the article "GOP's Myopia on Debt Retirement": "In the Reagan era, Republicans found political pay dirt by defining themselves as the party of tax relief. But now the Republicans, at least in Washington, have converted themselves into the party of debt retirement. Many congressional Republicans have lost interest in tax cutting and instead want to devote two-thirds of the surplus tax payments over the next 10 years to paying down the national debt. Some of the militant debt hawks have announced their goal is to retire the entire $5 trillion national debt over the next 20 or so years. Has this Congress forgotten all of the economic and political lessons of the past 20 years? Using surpluses to cut marginal tax rates, as Mr. Reagan did, is the most economically productive use of tax surpluses. Moreover, financing Social Security privatization, as much of the rest of the world is now doing, would enhance the long-term growth potential of the U.S. economy substantially more than retiring treasury notes. We worry that this Congress is squandering a once-in-a-lifetime opportunity to fix our federal tax and retirement programs that nearly all Americans recognize as economically dysfunctional…

"There are two problems with diverting $1.5 trillion of surplus tax collections to debt reduction. First, it will never, ever happen. Leaving Congress with $1 trillion of extra cash and not expecting members to spend it is like serving whipped cream and chocolate cream puffs at a dieters' convention. Congress will spend the money, because it is in their nature. Just observe what has happened in just the past 18 months. Congress has spent Social Security surpluses on pork barrel highway bills, a $500 billion omnibus budget, and two multibillion-dollar 'emergency' spending bills. The debt hawks say: stash the surplus money away so it's available for a rainy day. The truth is, for Congress, every day is a rainy day. But even if we suspend our disbelief and assume that every surplus penny were used to buy down debt, the economic benefit would be trivial. The primary argument in favor of debt reduction is that it will relieve the burden from our children of having to pay off the debt in the future. But as long as we don't add to the debt over the next decade through a return to deficit spending, the debt burden on the next generation will fall automatically. It already is happening. Even without a penny of actual debt retirement, the debt as a share of GDP will nose-dive from 50 percent of GDP in the early 1990s to about 25 percent of GDP 10 years from now."

Signing Out

The House of Representatives has rejected digital signature legislation that would have made it easier for companies and consumers to conduct business online. Democrats blocked the measure by insisting that the federal government should establish a minimum standard for electronic signatures and electronic records while states worked on overhauling their own laws. Virginia Republican Rep. Tom Bliley's bill would have included less consumer protections than are now required for written contracts, Democrats charged.

Solveig Singleton addresses digital signature technology in the Cato Policy Analysis "Encryption Policy for the 21st Century: A Future without Government-Prescribed Key Recovery" (pdf): "Public key cryptography provides a way for the recipient of a message to identify the sender, a 'digital signature.' The sender encrypts part of the message, the signature, with his or her private key. The recipient decrypts this part with the sender's public key, confirming the sender's identity. Digital signatures will be important to the successful growth of Internet commerce; for example, banks will want to be certain that they are actually communicating with their customers, and the customers will want to be certain that they are communicating with their banks. When both the recipient and the sender are using public key technology, encryption can provide privacy and identity authentication.

"The sender signs a message with his private key and enciphers the message with the recipient's public key. The recipient deciphers the message with her private key and checks the sender's signature with his public key… Public key cryptography amounts to a revolution in security because it enables computer users to secure and authenticate their communications without revealing their own secret keys. The general cryptographic system can be exposed to public scrutiny, allowing weaknesses to be ferreted out, as long as the key remains secret."

Electronic signatures are also discussed in the Cato Policy Report articles "Money in the Electronic Age" and "The Future of Money In the Information Age". In the latter, William Melton of CyberCash notes, "If chains of trust are the primary ingredient of liquidity, then the technology of digital signatures and digital certificates is indeed a breakthrough that allows maintenance of ever more subtle, more complex, and yet still reliable chains and domains of trust. The economic impact is to provide greater liquidity. Yet that additional liquidity is provided under the tight feedback loops of the market and thus is, on the whole, noninflationary."

The Waco Wait Wears On

Government officials have asked Judge Walter S. Smith to allow them more time to turn over all materials relating to the 1993 siege on the Mount Carmel religious community outside Waco, Texas, saying they were unable to meet their court-ordered deadline, AP reported. The Justice Department says it needs until December 1 to complete its task of surrendering documents and materials sought by Smith. The judge, who is presiding over a wrongful-death case filed against the government by survivors of the assault, had already extended the deadline from October 1.

In the commentary "Fanning the Flames of Waco", David B. Kopel and Paul H. Blackman write, "The lies about how the fire started commenced while the building was still in flames. A Justice Department spokesman in Washington claimed that an FBI sniper using a rifle scope had seen a male Branch Davidian, wearing black Ninja-style clothes and a black hood, pour liquid on the floor behind a piano and then ignite it. The day after the fire, Jeffrey Jamar, the FBI's special agent in charge at Waco, asserted that the agent saw a person 'get down with cupped hands and then there was a flash of fire.' At the criminal trial of the Branch Davidians in 1994, that story fell apart. FBI Special Agent Jack Morrison said that he could see, through a hole created by a tank, somebody bent or kneeling by an overturned piano. The man appeared to be washing his hands, although the sniper admitted on cross-examination that he could not see the man's hands. The fire did not erupt while the man was in the sniper's sight, though the sniper did see a fire shortly thereafter. However, pictures of the progress of the fire show that the area near the overturned piano (the front door) was not a starting point for any fire. No fire appears there until several minutes after the sniper's observation. Photographs show no fire in that area while much of the rest of the building was in flames…

"Even now, it is unclear who killed the children of Waco. More than ever, though, the recent unveiling of more FBI lies underscores the fact that the children died because of willful and knowing actions by our federal law enforcement professionals. Although the president shed crocodile tears over the 12 children at Columbine High School and now seeks partisan advantage by pushing for federal laws that could not possibly have prevented Columbine, he and his administration remain coldly indifferent to the 26 children at Waco. The day after the Waco fire, Clinton said, 'I do not think the United States government is responsible for the fact that a bunch of religious fanatics decided to kill themselves.' But the children didn't kill themselves. If the president and his attorney general really care about those 26 children, they will appoint outside investigators -- not the FBI -- to bring out the truth about what really happened on April 19, 1993."

Kopel was among the panelists at a Cato Institute forum on the Waco investigation in September, along with Mount Carmel survivor David Thibodeau and Rep. Bob Barr (R-Ga.). That event may be viewed in RealVideo format.