WASHINGTON (AP) – The Reagan administration has stepped up presure on Congress to increase the national debt ceiling, warning that failure to act would be disastrous for financial markets and would push the government into default.
Meanwhile, President Reagan denounced the budget approved by the Democratic-controlled Senate as ”a giant step in the wrong direction.”
The Treasury’s current borrowing limit of $2.3 trillion reverts by law to 2.111 trillion at midnight next Friday. Because government borrowings are already nearing the upper limit, no new government securities, savings bonds or other debt could be issued beginning May 16.
As a result, the Treasury would be forced to pay cash to cover government costs. The money will run dry and the government will default on May 28 unless Congress acts, said George Gould, under secretary of the Treasury, in testimony Friday before the debt subcommittee of the Senate Finance Committee.
“Default means not meeting debt payments, both foreign and domestic, and being unable to make June benefit payments, with all the negative financial, legal and moral consequences that implies,” said Gould, who earlier warned the House an unprecedented U.S. government default could cost in the hundreds of billions of dollars in the long run.
At the White House, presidential spokesman Marlin Fitzwater said, “We want to, at all cost, avoid default on government obligations.”
Democrats in Congress, including House Speaker Jim Wright of Texas, have said they would cooperate with the administration in seeking a straightforward debt bill without amendments that might delay passage. But they have insisted that the administration first convince most of the GOP lawmakers to take that unpopular vote.
Sen, Max Baucus, D-Mont., who held Friday’s hearing, told Gould that Reagan himself should send a letter to Congress asking for the debt increase, instead of leaving that unpleasant task to subordinates. Gould said he would give the message to Treasury Secretary James Baker.
The administration has asked for another half trillion dollars in debt $500,000,000,000 – to last through Reagan’s term. That’s more than half the total debt that had accumulated in the nation’s history up to the day Reagan took office, and would bring the total to $3.8 trillion.
“We are imploring the Congress to not let the country default on their payments – that it would be disastrous for the financial markets, not to mention irresponsible for the operation of the government,” Fitzwater said.
At the same time the administration was asking for new borrowing authority, the president issued a statement attacking the budget approved by the Senate.
Reagan objected strongly to the Democrats ploy of withholding a boost in military spending unless Reagan agrees to a tax increase.
“Here we go again.” the president said. “Democrats in the Senate have decided to hold our national security hostage to a $137 billion tax increase over the next four years.
“The Senate budget is a giant step in the wrong direction.” Reagan added, pointing to the failure of the Democrats to cut more out of domestic programs.
The Senate budget, approved 56-42 with only three Republicans supporting the plan, would allow Pentagon spending to grow to $290.6 billion, enough to cover the increase in costs due to initiation. However, it would cut it $7 billion, almost back to the current year’s level, if Reagan refused to accept $18.3 billion in tax increases.
The House approved a military spending level even below the Senate’s lower figure. A joint House-Senate conference committee convenes next week in an effort to work out a compromise between the two plans.