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An Open Invitation to Economic Disaster The following speech was made on the floor of the U.S. House of Representatives on October 24, 1979, by House majority leader, Congressman Jim Wright of Fort Worth. It is reprinted here, from the Congressional Record, with his permission. New York banks today announced they are raising the prime interest rate to an unprecedented 15 percentthe highest in American history. This is the result of a misbegotten policy of the Federal Reserve Board. In my opinion it is an open invitation to economic disaster. The Federal Reserve seems to think that raising interest rates is an effective way to curb inflation. That, I submit, is like pouring gasoline on the fire. The two elements which have run ahead of and paced the rise in the cost of living are the cost of energy and the cost of money. For the past 6 months we have watched the inflation rate follow the interest rate up and up. High interest rates are clearly price inflationary, not deflationary. They have become, quite clearly, one of the principal causes of the inflation. But they do run the serious risk of stalling out the economy, creating rising unemployment to exacerbate the ills of rising prices. That is exactly what they did in the early 1970’s. High interest is the proven formula for creat ing both inflation and recession in the same economy. High interest rates always have cruelly hurt the poor and moderate-income Americans. People with money always have had an advantage over people without money. The interest rate is the precise measure of the degree of that advantage which a society is willing to tolerate and institutionalize. The skyrocketing interest rate already this year has made it impossible for literally millions of American families to afford a home. Since the first of this year, the increase in interest alone has added some $41,000 to the ultimate cost of paying for a $50,000 home on a 30-year mortgage. It has added $115 a month to the payments a young family would have to make to purchase such a home. That is a $115 monthly hidden hand in the pocket. It robs that young family of that much of its income while giving nothing whatever in return. Since the first of this year, the skyrocketing interest rate has added $4 billion to the annual cost of servicing the national debt. That is $4 billion more the American people will have to pay in taxes, and for which we will get exactly nothing. In the early 1950’s, President Harry Truman ordered the Federal Reserve to disgorge itself of an ill-gotten interest rate increase which it had ordered. The Federal Reserve did so. It is time, and past time, for that kind of leadership again. Bemard Rapoport, Chairman of the Board P.O. Box 208, Waco, Texas 76703 American Income Life Insurance Company 18 DECEMBER 14, 1979