Say, buddy, can you spare $183 billion?
Thomas Healey is the king of IOUs. The youthful former Wall Street executive will mastermind the sale of some $ 183 billion in government IOUs during the current budget year. It is these IOUs - known more formally as Treasury bills, notes, and bonds - that let the federal government spend more than it takes in from taxpayers.
While he has introduced or is studying a number of technical innovations in federal debt management, Mr. Healey, assistant secretary of the Treasury for domestic finances, says that perhaps the most striking aspect of his stay at Treasury is ''financing more money than anyone else'' in history.
In fact, the $183 billion he and his staff will borrow this fiscal year roughly equals all the publicly held debt the government had accumulated between 1776 and 1944.
Lately, investors have been worrying that massive government deficits may cause the economy to overheat and reignite inflation. So they have been making Healey's job a bit tougher by pushing up the interest rate they demand for holding government, as well as corporate, debt issues.
''Rates at the moment are higher than what is forecast in the (Reagan administration's) budget,'' he says. For instance, the budget predicts an average 90-day T-bill rate of 8.5 percent this year. As of this writing, the rate on the most recent issue of T-bills is about 9.3 percent.
''The market is very anxious about the size of the deficit and very concerned about whether Congress will have the will'' to reduce it, Healey says.
There is a general expectation in the credit markets that interest rates will continue to rise, although not enough to snuff out the recovery in the short term. As a result, investors pushed down the price of 30-year goverment bonds enough to bring the effective yield up to 12.36 percent by week's end. Since bonds pay a fixed amount of interest, paying less for one drives up its effective yield.
The interest rate on 30-year government bonds is now the highest it has been since September 1982 and is up two percentage points from last May.
Bond experts do not blame Healey or his staff for pushing up the interest rate the government must pay.
Given the size of the federal deficit, ''I would give the Treasury high marks for debt management,'' says David Jones, an economist at Aubrey G. Lanston & Co. , a government-securities dealer. He speaks highly of the Treasury's ''regularity and smoothness'' in bringing out new debt issues and its success in extending the average length of time investors are willing to lend funds
Still, Mr. Jones says that the interest rate on government bonds could climb to 12.75 percent this spring and that other interest rates also will climb. One reason is that he expects that the Federal Reserve Board will tighten credit to slow a rapidly expanding economy.
Other economists also see higher rates ahead. For example, Robert M. Giordano , vice-president of Goldman, Sachs & Co., says he expects Treasury-bond yields to approach 13 percent this year.
Nevertheless, ''we don't see any difficulties'' in raising funds this year, Healey says. However, if current interest-rate trends continue, government borrowing costs will be a little bit higher that those found in the budget, he says. The budget projects interest costs of $108 billion in budget year 1984.
But Healey notes that ''our basic costs of borrowing are so high than that a little bit of incremental borrowing at a higher rate is not going to have a dramatic impact this year.'' For instance, interest costs 1 percentage point higher than budgeted would add $1 billion to the government interest bill. ''That's not gigantic'' given the sums the government has to borrow, he says.
Healey, a former manager of Dean Witter Reynolds Inc.'s corporate finance department, is less optimistic about the outlook for 1985 unless the federal deficit is reduced.
The question is not whether the Treasury will be able to borrow the $193 billion it is expected to borrow from the public in fiscal 1985.
''The Treasury always gets theirs,'' Healey notes.
But demand for credit will rise next year. And unless federal borrowing can be reduced by trimming the deficit, other borrowers will be priced out of the market by rising interest rates, Healey says.
''High borrowing costs could curtail efforts to develop and modernize the nation's productive capacity,'' Commerce Secretary Malcolm Baldrige said Monday. His comment came as the government announced that American business plans to increase its 1984 investment in new factories and equipment by 12 percent after adjustment for inflation. If the spending materializes, it would be the strongest pace since 1966, when investment climbed 13.4 percent.
The amount of borrowing Healey does soon will be the subject of debate since by April the government will be approaching the $1.49 trillion debt ceiling set by Congress. The ceiling is some $98 billion below the amount of debt the government expects to have to issued by the end of the current fiscal year.
The usual congressional delay in approving a new limit upsets securities markets, causing a modest increase in the government's interest costs. A delay in setting a new limit in 1983 cost between $300 million and $400 million, Healey says.
And the outlook for speedy action this year is not terribly bright. ''It's a very political process in a year ending in an even digit,'' he says.