washingtonpost.com
O'Neill Warns of Debt Crisis
Ceiling Boost Stalled on Hill as Treasury Counts Down Days
By John M. Berry
Washington Post Staff Writer
Wednesday, June 19, 2002; Page E02
Treasury Secretary Paul H. O'Neill yesterday reiterated warnings that nine days from now the U.S. government will run out of money to pay its bills unless Congress increases the limit on how much the Treasury can borrow.
The national debt cannot exceed $5.95 trillion, and at the close of business Monday government borrowing stood a scant $25 million below that limit. Since mid-May, Treasury has avoided breaching the limit only by engaging "in a series of extraordinary account measures," O'Neill said.
The secretary's statement apparently was issued in response to doubts by House Majority Leader Richard K. Armey (R-Tex.) that June 28 was actually a "drop-dead" date for action to raise the debt limit.
O'Neill said that on that date, "we will be required to credit an interest payment of approximately $67 billion to various federal trust funds, including Social Security. We are also scheduled to make $54 billion in payments in the first few days of July, including approximately $30 billion of payments to Social Security beneficiaries and other trust fund beneficiaries."
"It's time to put politics aside and do the right thing for the country," O'Neill said.
Senate Majority Leader Thomas A. Daschle (D-S.D.) told reporters, "The government checks for Social Security, veterans and civil service retirement will bounce if the debt limit increase is not passed."
The Senate passed a bill last week raising the debt limit by $450 billion, but the House has shown no sign of following suit.
Because of the debt limit, Treasury was forced late Monday to cancel an announcement set for today giving details of its regular monthly auction of two-year notes that was to be be held next Wednesday. Even if the auction is not held next week, the Treasury has enough cash to continue government operations until the end of the month.
Financial analysts said there has been little impact on the huge market in Treasury securities -- other than the disruption caused by the postponement of the announcement. Normally, immediately after the announcement of an auction, investors buy and sell in what is known as the "when-issued" market even though the securities do not yet exist.
"There is a curiosity in the market about what is going to happen, but I think people are sort of jaded," said Robert V. DiClemente of Salomon Smith Barney in New York. "They find the activities bizarre. People are just waiting around for everyone to get through with their grandstanding."
The political concerns blocking House action are complicated, with divisions between Democrats and Republicans -- and more critically, within the narrow GOP majority. Meanwhile, the administration is pushing everyone to raise the limit by $750 billion, a goal that currently appears out of reach, according to members of both parties.
Many House Republicans want to avoid a vote on a stand-alone measure. Instead, House GOP leaders want to attach an increase of the same size, $450 billion, to the pending supplemental appropriations bill that would finance government anti-terrorism activities, in hopes that would make passage easier.
House Democrats would like to use the debate over a stand-alone bill to highlight rising federal budget deficits, which they argue are in large part due to the $1.35 trillion tax cut proposed by President Bush and enacted last year.
But the White House prefers a stand-alone bill because it wants to avoid giving a new lever to members who want to increase the size of the supplemental appropriations bill. Also, Daschle has said he will oppose passage of the supplemental bill if the debt limit provision is attached.
Armey acknowledged to reporters yesterday that he does not have enough Republican votes to pass a stand-alone bill. He also said House leaders would not agree to the Senate's version of the supplemental appropriations bill, which calls for $3 billion more in spending than the pending House bill. |
