Treasury Dept. Warns Checks May Be Bounced

The Treasury Department, pressuring Congress to extend the Reagan Administration’s borrowing power by raising the national debt ceiling, said Monday that it would ask banks to start bouncing all outstanding government checks by today or Wednesday at the latest.

Despite the warning, Republicans and Democrats in the Senate continued to fight over the debt lid as each side raised the threat of impending chaos to pressure the other into giving way on competing riders seeking to mandate a balanced budget within six years.

Senate leaders managed to squeeze in several bargaining sessions between rounds of finger pointing and late in the day there were signs that some form of stopgap compromise might be worked out to prevent federal bank accounts from running dry.

Caucus Scheduled Today

Republicans have scheduled a caucus this morning to consider a Democratic proposal that would give the government 10 to 15 days of new borrowing authority, while ensuring a final vote on the GOP deficit-cutting plan by the end of the week. Democratic leaders have used parliamentary maneuvers to delay consideration of the Republican plan.

Federal borrowing reached the current ceiling of $1.8 trillion last week, forcing the Treasury Department to drain cash reserves to keep the government running. The Administration, faced with projections of a federal deficit near $200 billion over the next 12 months, has asked Congress to raise the debt limit to more than $2 trillion.

Pleads for Action

In a letter to Senate Majority Leader Bob Dole (R-Kan.), Deputy Treasury Secretary Richard G. Darman repeated pleas for immediate congressional action on the debt limit and said that the government would run out of cash either today or Wednesday. If that occurs, Darman said, his department would order banks through the Federal Reserve “not to honor any government checks or electronic fund transfers.”

Technically, the government would not be broke because tax and other revenues would continue to flow in, though not in sufficient amounts to cover all bills. But Darman said that it would be inappropriate to honor some government checks and not others.

“Accordingly, all those with federal payment claims--whether Social Security recipients or defense contractors or holders of government securities with interest payments due--would then be unable to have those claims honored,” Darman wrote.

The impact of an order to stop payment, should one be issued, is unclear. Monthly Social Security checks were delivered last Thursday, and most non-military government workers got their paychecks Monday, with the next ones not due for another two weeks.

Similarly, the 100 members of the Senate were handed their latest bimonthly payroll checks, each worth $2,884, last Friday, the day after they began arguing about the proposal to raise the debt ceiling.

A Treasury spokesman said that it was unclear whether checks issued before a cutoff order would be honored after the deadline passes.

Still, Marty Corry, a lobbyist for the 20-million-member American Assn. of Retired Persons, ridiculed the impasse over the debt limit, calling it “an almost annual ritual,” and said that senior citizens should not worry about the viability of their Social Security checks.

“It’s a typical kind of scare story they use,” Corry said. “What these guys (senators) are trying to do is stir up a lot of worry so that the other side will cave in . . . . But it still gets people upset.”

Indeed, Congress has put off action to extend the debt limit many times in the past, but the government has never failed to honor checks it has issued.

Annual Reductions

The current move to increase the debt limit is beset by a controversy over proposals to force down deficits in annual stages until the federal budget is balanced in six years. Republican Sens. Warren B. Rudman of New Hampshire and Phil Gramm of Texas are trying to capitalize on the “must pass” nature of the debt-limit extension in efforts to attach their deficit-cutting proposal to it.

The Rudman-Gramm amendment requires annual cuts in budget deficit levels that would bring the budget into balance by the fall of 1991. If spending in any year exceeded targeted deficit levels, Congress would either have to order necessary cuts or the President would be required to impose across-the-board trims on virtually the entire range of federal programs.

Only Social Security benefits would be spared under the Rudman-Gramm proposal.

Most Democrats have endorsed the motives, if not the specifics, of the measure, and party leaders have proposed an alternative that they contend would be more equitable.

The competing Democratic plan lays out a schedule of deficit trimming goals and mandatory spending cuts. But it would give President Reagan the option of delaying defense reductions if he thought they would damage national security and would require the adoption of a minimum tax on business corporations to raise revenues before ordering spending cuts.

However, many Democrats, like Dale Bumpers of Arkansas, said that their main objection to the GOP plan was that it was proposed only a few days ago and that they had not been given a chance to study it.

“It’s like going to the bank for a loan,” he said. “If you have to have a fast answer, the answer is no.”