THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, September 25, 1995 TAG: 9509230184
SECTION: BUSINESS WEEKLY PAGE: 04 EDITION: FINAL
TYPE: Opinion
SOURCE: Ted Evanoff
LENGTH: Medium: 83 lines
All this talk about the possible shutdown of the United States government next Sunday is nothing more than a high-stakes game of political brinkmanship.
The talk about what could happen Sunday, though, may pale in comparison to what's brewing on the distant horizon.
There's another game being played in Washington and this one concerns the national debt.
It could involve not only Tidewater's sizeable federal workforce, 178,000 people including military personnel, but everyone who receives Social Security, Veteran's benefits and other federal assistance.
Of course, the focus so far has been not on this distant storm, but the deadline Sunday.
Throughout September lawmakers and the White House have wrangled over the federal budget. The argument sidelined the 13 separate funding bills Washington runs on.
If those measures aren't put into law by Sunday Oct. 1, the start of the '96 federal fiscal year, paychecks for more than 2 million federal employees and military personnel worldwide would be disrupted.
Understandably, legislators in districts with concentrations of federal employees are alert. Resolutions are taking shape to ensure the paychecks continue.
``It looks like we're going to avert the crisis,'' said Dan Scandling, press secretary for U.S. Rep. Herbert Bateman, R-Newport News.
We may dodge this one, though it's not Oct. 1 that could rattle Hampton Roads. It's Nov. 15.
On that day, payment comes due on $25 billion in interest the U.S. Treasury owes investors who bought Treasury bonds, which are a kind of loan the government promises to pay back.
To pay the investors, which include banks, corporations, foreign governments, insurers, pensions and mutual funds throughout the world, the Treasury first must borrow the cash by going into the market and selling investors another round of bonds.
Trouble is, the government's own rules might block the sale of this second round. The rules say the volume of federal debt can't exceed $4.9 trillion. Washington could hit the debt limit in November, leaving it without enough cash on hand to make the interest payments.
In past years, Congress was happy to change the rules.
By some counts it's lifted the debt ceiling 77 times since 1940, including seven moves alone amid the 1990 budget battle. A resolution passed in June calls for lifting the cap to $6.7 trillion through 2002.
However, a coalition in Congress wants to hold firm. Led by U.S. Rep. Nick Smith, R-Mich., a farmer and former official in the U.S. Department of Agriculture, 160 House Republicans have insisted they'll vote against the new $6.7 trillion debt ceiling unless Clinton agrees to balance the federal budget in seven years instead of 10.
``We're really trying to say we think the budget deficit is a serious enough problem that we don't want to raise the deficit,'' said economist Gary Wolfram, Smith's chief of staff.
Treasury officials are concerned. They need maneuver room if the budget feud spills into November with the current debt limit in place. The rules say the first bill in hand must be the first bill paid by the Treasury.
That means the Treasury, which sends out millions of checks every day, can't defer payments on what it deems the less important bills and scrape together $25 billion for the interest payment on the national debt.
If the Treasury misses the payment, it could set off a financial chain reaction that shakes Wall Street and slows the economy by pushing up interest rates on 30-year mortgage loans.
One solution is to change the rules. Last week, Smith asked colleagues to sign onto a measure that would give the White House authority to manage the cash flow.
That would give the Treasury authority to postpone payment on what are considered the less important bills. Social Security checks or Veteran's benefits or the federal payroll or U.S. grants could be held up for a month.
And the cash that would have flowed out to the recipients instead could go to the insurance companies and the banks and the mutual funds owed interest on the national debt.
That in a nutshell is the high-stakes game being played in Washington. Too bad it's turned thousands of people on the federal payroll into pawns. by CNB