Countdown to Turmoil?

Citing the attachment of unrelated provisions, President Clinton has vowed to veto legislation that would raise the federal debt ceiling and a second bill, expected Monday, that would provide temporary funding to keep the government running until a final budget plan is passed. The veto threat is raising the chances of a government shutdown and a technically bankrupt Treasury.

IF A SHUTDOWN OCCURS:

* Most government offices would be closed.

* Retirees would still get Social Security checks, but new applications could not be processed.

* Welfare checks would continue to be issued, along with food stamps.

* No veterans benefit checks would be mailed. Medical staff would remain on duty at veterans hospitals and clinics.

* The Postal Service, which is self-supporting, would continue mail deliveries as usual.

* Visitor centers at national parks and monuments would be closed. Visitors would still have access to many parks and battlefields, but without the usual services.

* Air traffic controllers, railway inspectors and other essential safety personnel would remain on the job, as would all active-duty military personnel and about 571,000 of the Defense Department’s 866,000 civilian employees.

IF THE TREASURY RUNS OUT OF CASH:

The Treasury is scheduled to make regular interest and principal payments on its debt Wednesday, but it has run out of borrowing power. Treasury Secretary Robert Rubin’s options:

* Suspend reinvestment in government trust funds, except for Social Security. That would effectively raise the debt ceiling by taking the securities in those funds off the government’s books.

* Adopt other accounting maneuvers to use the government’s daily cash intake of tax revenue solely for debt service.

* Allow default to occur. Some analysts believe the private sector would by necessity continue to treat the $4.9 trillion in Treasury securities as if default was mythical, betting that the Treasury would soon make good on any missed payments. Nonetheless, there is no way to predict what chain reaction might occur if investors began missing payments to each other because the Treasury missed its payments. Concern over default could spark dumping of bonds that would send yields surging at least temporarily--also raising mortgage rates and other market interest rates.

Source: Associated Press, Reuters

*

* BUDGET IMPASSE: Federal officials prepare for possible shutdown, as bickering continues. A1