Specter of default Budget impasse: Government-by-stopgap a sorry prospect pushed by ultra-partisans.

January 12, 1996

WITH IDEOLOGUES in both parties eager to sidestep a budget agreement even if it means government-by-stopgap until the November elections, the specter of a federal default grows greater by the day. Despite Congress' refusal to raise the $4.9 trillion debt limit, Treasury Secretary Robert E. Rubin has made do by borrowing from retirement trust funds to pay government bills. But his options may soon run out.

Last week three former Republican Treasury secretaries -- Nicholas Brady, James A. Baker III and Donald Regan -- warned Mr. Rubin that by early February he might be required to take "broader actions" (undefined) that could "raise serious legal, perhaps even constitutional, issues." This letter followed a threat by House Republicans that they might seek Mr. Rubin's impeachment. Even House Democrats deeply involved in fiscal matters warn that Mr. Rubin may be getting onto thin ice through his maneuvers to avoid the debt-limit ceiling.

With both House speaker Newt Gingrich and House Democratic leader Richard Gephardt openly speculating that a series of continuing resolutions might be preferable to a budget accord, the government could be subjected to a series of prospective default crises unless the debt limit issue is dealt with -- even in the absence of a budget agreement.

President Clinton is right in saying a default would be wrong. The U.S., he noted yesterday, has never refused to pay its debts. While he needled the GOP for contemplating a step with serious economic consequences, he has to make sure his Democratic allies in Congress don't also blunder into a default.

A default could produce a long-term increase in interest rates affecting government securities, variable-rate mortgages, home-equity loans and consumer debt run up on credit cards. It has been calculated that a rise of half a percentage point increases the annual cost of funding the government debt by $25 billion. The burden on the private sector would be much greater.

This whole prospect renders even more inexcusable the tendency among extreme partisans in both parties to seek political advantage in the November elections by abandoning efforts to achieve a budget agreement. Actually, both parties have much to lose. The Republicans would forfeit their efforts to achieve a balanced budget in seven years and Mr. Clinton's claim to executive competence would be undercut.

The country doesn't need government-by-stopgap. It needs elected officials who are prepared to carry out their constitutional duties.

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