- The Washington Times - Wednesday, May 15, 2002

ASSOCIATED PRESS

Treasury Secretary Paul H. O'Neill, for the second time this year, is moving money around to prevent the federal government from defaulting on the national debt as his agency faces a standoff in Congress.

To dodge a default for now, Mr. O'Neill intends to temporarily shift billions of dollars in civil service retirement funds to non-interest-bearing accounts starting today or tomorrow , the Treasury Department announced. That would allow more government borrowing.

The move is necessary because Treasury's request to extend the government's authority to borrow has been mired in a political fight on Capitol Hill. Lower-than-expected tax payments are squeezing the government's cash flow.

Mr. O'Neill has asked Congress to boost the debt limit by $750 billion. The limit now stands at $5.95 trillion.

The juggling of federal retirement accounts which has been done before by other Treasury secretaries, including the Clinton administration's Robert Rubin, in standoffs with Congress will not harm federal employees' retirement nest eggs, Treasury officials said, because the lost interest payments will be made up in coming months.

Treasury's latest action to avoid breaking the debt limit involves temporarily shifting money from both the government securities retirement fund and the civil service retirement and disability fund into non-interest-bearing accounts. Treasury avoided a default in April by shifting funds from the government securities retirement account.

"The Treasury faces obligations in late June that, on the basis of current projections, cannot be surmounted without an increase in the statutory debt limit," Treasury said in a statement yesterday.

"Lack of certainty will challenge the Treasury's ability to ensure timely processing of payments to Social Security and other beneficiaries," the Treasury Department statement said.

June 28 is also the last day that Congress is scheduled to be in session before recess for the July 4th holiday.

Republicans who control the House lack the votes to pass a measure. Republicans are sensitive about an election-year maneuver that would help the government borrow more. Democrats, meanwhile say President Bush's tax cut last year created the problem and they don't feel compelled to help him fix it.

"Many Republicans still in Congress today considered these same actions an 'impeachable offense' when Secretary Rubin used them. Now that it's a Republican Treasury secretary, the silence from these same lawmakers is deafening," said the House Ways and Means Committee's top Democrat, Rep. Charles B. Rangel of New York. "The House Republicans should explain why they flip-flopped."


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