"To the Financial Editor:

"Many of your readers are not well informed in reference to the financial world. We would like to be better informed.

"If the national debt continues to grow at its present pace, when will the interest equal the principal? What effect will this have on our economy, inflation and standard of living?

"I assume that this huge deficit will be repaid via devalued currency. Can we prevent this future event?

"The issue is old, but we feel that it should not be neglected. Would you care to comment on this matter?"

Joseph Lerner, Baltimore.

To Mr. Lerner:

Joe, you have thrown me a pitch so sweet that even I should get solid wood on it. In appreciation, you will soon be receiving an autographed copy of my best-selling guide, "Markets and Morons: Why the Dow should be at 1,500 but no one will admit it."

I am especially touched by these issues now because I have just sent off my tax return for 1990. Tax reform was supposed to make my taxes lower. Hah! I figure the effective tax rate on my last dollar of income was approaching 50 percent (33 percent federal and 7.5 percent state and local, plus real estate taxes and the portion of my spending that is subject to sales, excise and other taxes).

First off, however, Joe, there were two wee inaccuracies in your letter. The first is that our readers are not well informed in reference to the financial world. On the contrary, it is the people who don't read this newspaper who are not well-informed.

I know this to be a fact because I have never heard from an uninformed reader of this newspaper.

Every reader who calls is extremely well informed. Every reader who takes the time to write, including our many fans with return addresses at penal establishments, is blessed with rare insights.

The second wee inaccuracy in your note was your assumption that our huge federal spending deficit would be repaid.

Ho, ho! I nearly fell for that one myself back in 1971 when the Nixon administration imposed wage and price controls.

Anyway, I don't believe the federal debt will ever be repaid. I do share your concern that payments on the debt will be made with devalued currency, and that our standard of living is the worse for it.

Stated in constant, 1982 dollars (to eliminate the effects of inflation) our real average weekly earnings hit a peak of $315 -- in 1972! Eighteen years later, in 1990, average weekly earnings were nearly 18 percent lower, at $260 a week. Some progress, huh?

I used to think that our currency would become devalued because the pols and policy-makers in Washington would finally conclude that a good bout of inflation was the only way to balance the books. Balancing the books, I should stress, doesn't mean the cumulative deficit would get any smaller but only that it wouldn't get any larger.

Such a policy, if openly and consciously pursued, might actually get lots of politicians un-elected. By doing nothing of real substance to address our budget woes, however, Congress has been cheapening the currency every bit as much as if the Federal Reserve simply juiced the money supply.

Ultimately, the reason the dollar is weak is that the U.S. economy's ability to compete on world markets is correspondingly weak. A major reason for those problems can betracked back to our federal fiscal policies, which have soaked money out of the private sector, kept interest rates at absurdly high levels and caused substantial cuts in private investment that would have helped spur competitiveness.

This is the invisible price we pay for the deficit, and it's a price we will keep paying for years and years. Sad, but true.

Now, for some numbers. With apologies to President Bush, I use the administration's numbers as they have been adjusted (I think of it as a reality fix) by the Congressional Budget Office. In most cases, the adjustments aren't terribly large.

Publicly held federal debt is forecast to rise from $2.7 trillion this year to more than $3.5 trillion in 1996. The net interest bill would increase from just under $200 billion a year to about $240 billion over this period. This growth, while certainly not popular at my house, is not viewed as presenting any more drag on the tTC economy than is now the case.

Even the feds have not figured out a way for interest payments to everequal the outstanding amount of the debt. However, if you look at federal spending, there certainly is a troubling trend in how much of the federal budget goes for interest payments.

Federal spending is estimated at $1.4 trillion this fiscal year, so one of every seven dollars spent is interest on the debt. Spending growth is forecast to slow (let's pause here for more audience laughter), meaning that spending in 1996 would total about $1.54 trillion.

The interest bill is rising faster than overall spending and would total 15.6 percent of total spending in 1996, up from 14.2 percent this year. When a percentage point translates into $15 billion, such a swing is hardly trivial.

Now, the overall federal deficit will be "rediscovered" shortly, as it is every year after Congress runs out of fun stuff to do.

So, once we're through with gulf war euphoria, the debates over banking reform and deposit insurance may provide a link back to serious debate on the deficit.

The total deficit is forecast at $308 billion this year, declining to $56 billion in 1996. Given that past deficit projections all trended down to zero or even showed surpluses, you're wise to discard anything past next year as hype.

On a more positive note, it is true that problems with savings and loans and, more lately, banks have accounted for a large slug of unanticipated federal spending. If you exclude federal outlays related to support of the deposit insurance system, the deficit this year is "only" $205 billion.

However (there's always at least one of these, too), the deficit numbers include large surpluses being rung up by Social Security and someother programs. These surpluses involve moneys that will certainly be spent in the future, and many experts feel it's dishonest to include them when calculating overall deficit totals.

If you exclude these surpluses, the federal deficit will be $368 billion this year, $359 billion in 1992 and still $300 billion in 1993, when the unrealistic assumptions of future budget years make the projections of dubious value.

Further, this deficit would be larger still without federal cutbacks in support to the states. This may have staunched the red ink at the federal level, but it has helped throw state budgets out of whack. So, if you consider these "indirect" deficits and toss in off-budget financing, the real budget deficit -- the gap between what government spends and takes in -- is probably running closer to half a trillion dollars.

That's the way it is, Joe, and that's the way it will remain. Voters don't like cuts in spending or higher taxes, but they don't seem to care about deficits. So, the politicians give us what we deserve, making deficits so inevitable that even I'm bored by them much of the time.