Debt Ceiling Squabble Cost Pension Funds $70 Million, Treasury Says
A top Treasury Department official said Wednesday that Social Security and other key federal pension funds have lost $70 million in interest because of an emergency bookkeeping device that the government may be about to repeat.
House Democrats contended that the losses eventually could reach $2 billion.
Earlier this month, when a partisan logjam blocked an increase in the national debt ceiling and prevented the government from borrowing money, the government sold interest-bearing, high-yield securities held by its trust funds.
That chopped $70 million from interest the trust funds otherwise would have earned in October, the acting assistant Treasury secretary, John J. Niehenke, told a House Ways and Means subcommittee.
Congress still has not increased the debt ceiling, and Niehenke acknowledged that future earnings in the trust funds may drop by “tens of millions” of dollars if the Reagan Administration again finds it necessary to sell more interest-bearing securities to cover the government’s bills for the first half of November.
The Congressional Budget Office has projected that the bookkeeping measure could ultimately cost much more in lost interest if the government has to sell still more securities in November, according to Rep. James R. Jones (D-Okla.), chairman of the Ways and Means subcommittee.
“As a result, if interest rates do not dramatically increase by the time Treasury replaces the high-interest bonds it has cashed in, . . . the trust funds could stand to lose between $1 billion and $2 billion in interest over the next five years,” Jones charged.
Jones and other Democrats also questioned the legality of selling trust fund securities to raise the cash needed to run the government.
The government ran out of borrowing power early in the month when it reached the current $1.8 trillion ceiling on the national debt and Congress failed to enact a bill to lift the ceiling above $2 trillion. Lawmakers have been wrangling over a measure, added to the debt-ceiling bill by the Senate, that is designed to force the deficit-ridden federal budget into balance by 1991.
Administration officials said on Wednesday that, unless Congress raises the debt ceiling by Friday, they will be forced to sell more long-term trust fund securities to cover government checks that will be issued next week. Those checks include November Social Security payments. But officials said they will continue resorting to that funding device for only two more weeks.
At a White House briefing for reporters, Budget Director James C. Miller III warned that “the government will close down Nov. 14 unless action is taken” on the debt and budget measures. He said he has drafted a set of “Draconian measures” that President Reagan may be forced to implement to keep essential programs operating if the impasse continues.
Miller suggested that Reagan may exercise authority to postpone programs and impound funds and he acknowledged that “there would be a lot of pain and suffering.”
In what perhaps underscored growing Administration edginess, White House spokesman Larry Speakes began mixing his metaphors Wednesday as he blamed Democrats for the financing dilemma. “Damocles need not drop the sword if the Democrats get off the dime and act,” Speakes told reporters.
Despite that assertion, House Democrats have given a qualified endorsement to the budget-cutting concept, authored in the Senate by Republicans Phil Gramm of Texas and Warren B. Rudman of New Hampshire.
However, Democratic leaders have been holding out for changes in the measure, which they insist has been constructed to force painful budget cuts only after the 1986 elections in which Republicans fear they may lose control of the Senate.
House-Senate conferees Wednesday continued negotiations over both the debt and the Gramm-Rudman proposals, but they appeared far from an accord. House members, led by Democrats, voted to trim the first-year deficit target ordered by the plan from $180 billion to $162 billion. Senate members of the panel expressed dismay over the proposal, but pledged to offer a counterproposal today.
Staff Writer Eleanor Clift contributed to this story.