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THE BALANCED BUDGET DOWNPAYMENT ACT, I (Senate - January 26, 1996)

From the Chicago Tribune, Jan. 24, 1996

[FROM THE CHICAGO TRIBUNE, JAN. 24, 1996]

The Madness of Courting Default

For months, Treasury Secretary Robert Rubin has used every loophole and opening he could find to extend the government's borrowing powers and keep Republican lawmakers from using the debt ceiling to muscle budget concessions out of President Clinton.

But now, Rubin says, he has run out of options that are legal and acceptable to Clinton. Unless Congress raises the debt ceiling, he warns, the nation will for the first time in its history default on its debts--probably by March 1.

Don't worry, some cynics say. Rubin has more tricks up his sleeve and will do anything to avoid default.

Start worrying, say others. The Treasury is at the end of its line, and House Speaker, Newt Gingrich won't raise the debt ceiling unless Clinton agrees to some GOP-proposed reforms on entitlements or welfare. The president insists he won't be blackmailed.

Wherever the truth lies, it's time to stop this reckless gamesmanship. It's one thing to reach an impasse over how to balance the budget and agree to take the issue to the voters, which both Democrats and Republicans seem content to do. But it's totally irresponsible to jeopardize the credit of the United States.

Congress' primary concern in the weeks ahead must be to protect the reputation of the nation as a rock of financial stability and as a debtor that always has honored its obligations. Despite their frustration at being stymied on budget reforms, Gingrich and the Republican hard-liners must pass an extension of the debt ceiling, without extraneous conditions.

So far, the financial markets haven't been roiled by the budget gridlock in Washington. And no one can be sure what default, or even the imminent threat of it, could mean to the economy and markets. But it couldn't mean anything good.

Felix Rohatyn, the respected investment banker who is being considered by the Clinton administration for vice chairman of the Federal Reserve Board, wrote recently that it `could create a catastrophe.' Politically, the rest of the world would think America's institutions had collapsed and the country was no longer governable. Financially, because more than $500 billion of the nearly $5 trillion in U.S. debt is held overseas, a default could `trigger a global financial crisis of completely unpredictable proportions.'

Mr. WARNER. As I understand, both Senators are giving the assurance to the Senate that we will, in an orderly manner, work this thing out in a manner that will not have an adverse impact upon the financial markets of our Nation. I believe the Senator is giving that assurance.

Mr. ROTH. I say to the distinguished Senator from Virginia, that is exactly what we are doing. We are acting in a responsible way today; we are taking action that will ensure that the Government can continue to function, which I know is of primary interest to our distinguished Senator from Virginia. That is the reason we do not want it to be amended further. That would only delay the process and bring about the shutdown that I think no one wants.

As a second step, we are working already, together with the House, with the administration. I was in contact yesterday with the Secretary of the Treasury. We are proceeding to do something about the debt ceiling because I, like Senator Warner, want full faith from the President. So we are working to provide the type of legislation that meets everybody's requirements and can be enacted by the Congress.

Mr. WARNER. I thank the distinguished Senator from Delaware. Yesterday we had a discussion about this in our caucus, and he responded in a way similar to that of today.

Mr. MOYNIHAN. Before yielding to the distinguished Senator from Rhode Island, may I welcome the statements by the chairman of the Committee on Finance and the chairman of the Committee on the Budget. I take them wholly with integrity and give them the full faith and credit of the U.S. Senate.

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