ABSTRACT
This chapter examines the nature of the federal credit programs, illuminating their hidden costs and their off-budget nature. The arsenal of government power over the economy is extensive, including the authority to tax, the ability to spend the proceeds of that taxation, and the capability of issuing rules and regulations determining or influencing private behavior. Direct loans are an important form of federal credit. However, in recent years, they have been exceeded in size by the various guarantee programs and lending activities of government-sponsored but privately owned credit agencies. The impacts of federal credit programs on the total flow of saving and investment in the US economy are clear. These programs do little if anything to increase the total flow of saving or investment. In a comprehensive study of federal credit programs for the Commission on Money and Credit, Warren Law concluded that they have created inflationary pressures in every year since World War II.
