GOP-Clinton Fiscal Standoff Is Brinkmanship Exercise : Finances: Each side in the federal debt ceiling standoff wants the other to blink first in the quest for leverage in the overall budget battle.

It’s the federal budget equivalent of a nuclear standoff.

Republican budget hawks are vowing that if President Clinton does not agree to their deep spending cuts, they will block a scheduled increase in the federal debt ceiling--a move that could theoretically force the government into default.

In response, the Clinton Administration is warning Congress that even talking about such a move risks a fiscal “disaster,” including panic in world financial markets and soaring interest rates at home. And the Administration promises to fix the blame for any such debacle squarely on the Republicans.

“Even the appearance of a risk of default can start to have unsettling effects on the markets,” Treasury Secretary Robert E. Rubin warned this week.

At least one Republican leader agreed: “It’s going to really get dicey if we can’t pay our bills,” said Senate Majority Leader Bob Dole (R-Kan.).

But House Speaker Newt Gingrich (R-Ga.) and his budget-slashing followers were less impressed. “There’s no immediate risk of a default,” Gingrich spokesman Tony Blankley said coolly. “There are gnomes in the basement of the Treasury who are paid to find ways to avoid that.”

In fact, both sides are partly right. The bond markets are already worried about a fiscal “train wreck” if Congress refuses to increase the debt ceiling before Nov. 15, the approximate date when Rubin says the Treasury will run out of money. But there is little chance that the federal government actually will default on its debts; there is a long list of emergency actions that the Treasury can take to scrape up cash to pay the bills.

Instead, the escalating fight over the federal debt ceiling is an exercise in budgetary brinkmanship, a game of political chicken with billions of dollars at stake.

“This is like the nuclear bomb,” said Robert D. Reischauer, former chief of the Congressional Budget Office. “The difference is, you drop this bomb on yourself.”

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Just as in the nuclear faceoffs of the Cold War, most of the Republicans who are threatening to touch off a debt-ceiling crisis do not really want to drop the bomb; they merely want to use the threat as leverage in their overall budget battle with Clinton.

Already, their leaders are looking for ways to avoid looking like what Reischauer called “budgetary terrorists.” This week, both Gingrich and House Budget Committee Chairman John R. Kasich (R-Ohio) said that they would consider a temporary increase in the debt ceiling--if it would help them get to their goal of a balanced federal budget in seven years.

Even so, the nation’s financial markets are beginning to worry--if not about an actual federal default, then about the increased risk to investors in Treasury bonds if the process of federal borrowing is thrown into turmoil.

Behind the crisis is a simple coincidence: By chance, the Treasury is running out of borrowing authority just as this year’s epic budget battle is coming to a head.

The federal government borrows money--by issuing Treasury bills and other securities--both to finance the annual budget deficit, now running about $160 billion a year, and to cover its own short-term cash flow needs.

Congress sets a ceiling on how much the Treasury is allowed to borrow--in other words, the total public debt. Since 1993, that debt ceiling has been $4.9 trillion or $4,900,000,000,000.

This fall, the Treasury is bumping up against that ceiling. Officials predict that the “drop-dead date” will be Nov. 15, when $25 billion worth of three-year and 10-year Treasury securities come due for payment.

Leverage is the key issue underlying the entire standoff, both Democrats and Republicans agree. Conservative Republicans seized on the debt ceiling as a weapon for forcing Clinton to sign a budget package to their liking; 162 House members signed a letter earlier this year pledging to vote against an extension of the debt ceiling until they have the budget they want.

Among those who signed the letter were dozens of the firebrand conservatives who entered the House as freshmen after the election of 1994. Among those who did not sign was Gingrich, who warned Rubin and Clinton at a White House meeting this week that he could not control many of the freshmen’s votes.

“It’s brinkmanship,” Reischauer said. “But the thing that distinguishes this from past episodes of brinkmanship is that when we come down to D-day, the generals may not be able to control their troops.”