Can You Sidestem Carry Then Sidestep Carry Again
Battle OVER THE BUDGET: THE TREASURY
BATTLE OVER THE Upkeep: THE TREASURY;Treasury Secretarial assistant Takes a Risk to Sidestep an Fifty-fifty Bigger 1: U.S. Default
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Nov 16, 1995
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Section B , Page
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When Treasury Secretary Robert E. Rubin started plotting the Administration strategy for sidestepping the national debt limit, i priority was uppermost in his listen: extracting President Clinton from the pincer created by Republicans in Congress, who were trying to strength a choice between adopting the Republican agenda and risking national default.
Today Mr. Rubin institute a way. He reached deep into two Government trust funds -- far deeper and probably for far longer than any of his predecessors ever did -- to create room under the nation'south $4.nine billion debt ceiling for more than borrowing. To do and then, he drew on a police force written by the Reagan Assistants, which in 1986 was trying to make sure that Democrats and so in control of Congress did not do to the White House what Republicans have been trying to do to Mr. Clinton. Mr. Rubin chose that road to avoid a political land mine: the 1986 law guarantees that Congress will restore whatsoever interest lost in the financial manipulations.
Just every bit Mr. Rubin said today in the Greenbacks Room of the Treasury -- its onetime ceremonial safe appropriately bare -- he has only bought Mr. Clinton nigh 45 days. And to attain his goal, Mr. Rubin had to take some steps that clearly open him up to both legal and political challenge. Those challenges volition just grow stronger, Treasury officials fear, if the collision with Congress lasts into the side by side year -- a possibility that seems increasingly likely. On January. 1, big Social Security payments come due that may be much harder for Mr. Rubin to finesse.
"We are on solid basis now, but we are headed into completely new territory soon," one senior Administration official said today. "Bob has a program to stretch this well into next yr, but it's hardly something you could phone call bulletproof."
What Mr. Rubin has done today is considerably curt of actually raiding retirement funds to pay off the Government's debts. The coin held in the funds was in the grade of non-negotiable Government bonds -- obligations that count confronting the $4.9 billion debt limit. Today, in a process called "disinvestment," he converted some of the bonds into cash, a move akin to moving money from an interest-bearing savings account into an ordinary checking business relationship. And he effectively issued an i.o.u. to Federal employees, guaranteeing that when all this political and financial maneuvering is over the Government volition requite them back the lost interest.
Mr. Rubin did non use the money freed up to actually make the $25 billion payment due today, nor volition he use it to meet the bills falling due in the adjacent few weeks. Since converting the funds out of bonds diminished the amount of Government obligations, information technology freed upward room nether the debt limit for new borrowing equally needed -- for a while.
But to raise enough money to get the Government through the remainder of the yr, he had to make a legal finding that the Treasury may not go say-so from Congress to borrow more money for some other 12 months -- far longer than almost people believe the Government volition go without an official increase in the debt limit. "We think this is legally defensible," said 1 of Mr. Rubin'south senior aides, citing comments fabricated by Speaker Newt Gingrich and other Republican leaders who have predicted a prolonged battle. That determination could be challenged by Republicans seeking new ways to tie Mr. Clinton's hands.
Mr. Rubin started from a simple premise, many officials and ex-officials who are close to him said: Default is not just "unthinkable," the phrase he has used again and again, but entirely avoidable for a considerable flow of time.
"Bob has an unshakable belief that default is intolerable," said Roger C. Altman, who served in the No. 2 position in the Treasury until he resigned last year over Whitewater, and who is at present starting a small merchant banking concern in New York. "He faced very unpleasant and unattractive choices, but he views default as Armageddon and everything else every bit simply something bad."
Politically, though, Mr. Rubin's maneuvers cut several means. He has taken the pressure off of Mr. Clinton, simply he has as well taken the force per unit area off the Congressional Republicans, who don't have to worry -- at least until Christmas -- that they are in imminent danger of existence blamed for triggering a default. The markets, meanwhile, take largely ignored the squabble; in fact, interest rates have declined since July, when Mr. Rubin kickoff wrote a letter to Congressional leaders warning of dire consequences if the debt ceiling is not raised.
Assessing the financial cost of Mr. Rubin'southward moves today is hard. The Treasury has been forced to finance the Government by auctioning a series of very short-term bills; they commonly carry an interest rate fractionally college than the longer-term securities the Government would usually consequence if exceeding the debt limit was not a trouble. Given the huge amounts involved, that can mean several one thousand thousand dollars more in interest expenses every calendar week.
Source: https://www.nytimes.com/1995/11/16/us/battle-over-budget-treasury-treasury-secretary-takes-risk-sidestep-even-bigger.html
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