Deficits, debts, defaults and deadlines Republicans vs. Clinton: The GOP brandishes its ultimate budget weapon.

November 08, 1995

HOW MAJESTIC it sounds: "The full faith and credit of the United States." It means that Uncle Sam pays his debts, funds his obligations on time and makes darn sure that U.S. securities are good as gold -- that interest rates will not rocket because investors fear a default.

As deficits have piled up, year after year, there have been some narrow escapes between the rise in the national debt and congressional approval of new debt ceilings. The faster the rise the more tempting it is for lawmakers to put the screws to the executive branch in pursuit of leadership objectives. The urge is not partisan; it is institutional.

Never before have Washington politicians crossed the threshold to default. The betting still is that they won't this time but the odds are getting shorter. President Clinton vows he will risk a default rather than be coerced into signing onto the GOP "Contract with America." House Republicans, especially freshmen, are ready to take the dare and add a few crunchers.

Most Wall Street gnomes warn that once the government misses payments on its binding debts the effects will ripple through the economy, pushing up interest rates permanently as investors fear repetitions. Contrarians demur, contending that interest rates might even go lower if a temporary default reflects real determination to get deficits under control.

Since the government is edging into uncharted territory on this account, the citizenry can count on a bewildering array of deadlines and dissemblings during the next few weeks.

With Nov. 15 listed as drop-dead day, the moment when bonds would come due and not be paid, the Republican-controlled Congress is in the process of extending the marker till mid-December. This is not charity for President Clinton. It is, rather, an attempt to combine the ominous prospect of debt default with a massive tax and spending "reconciliation" bill that will be presented to the White House on a take-it-or-leave it basis. Some senior Republicans fear the bludgeon could turn into a boomerang if chaos engulfs the financial markets.

As deficit hawks, we hope the Republicans succeed in putting the nation on the path to a balanced budget in seven years. But we confess to chicken-like misgivings as the financial markets get more and more fidgety.

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