[Congressional Record Volume 141, Number 171 (Wednesday, November 1, 1995)]
[Senate]
[Pages S16449-S16450]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       INCREASING THE DEBT LIMIT

  Mr. DASCHLE. Mr. President, yesterday, Treasury Secretary Robert 
Rubin sent a letter to the congressional leadership warning that a 
refusal to pass an increase in the debt limit by November 6 would force 
the Treasury Department to take extraordinary actions in the coming 
days, actions for which the American taxpayers would foot the bill.
  The Secretary indicated that these moves might include not fully 
investing the Federal Employees Retirement System, the Government 
Securities Investment Fund, the G fund, calling back Treasury cash 
balances held in our depository banks, and suspending the issuance of 
savings bonds.
  These defensive actions, regrettably, may become necessary under the 
circumstances.
  Some weeks ago, the Speaker of the House suggested that congressional 
Republicans might find it acceptable for the U.S. Government to default 
on its obligations if it proves to be useful leverage in the coming 
budget battles. Unfortunately, these comments, once dismissed as 
political posturing, now could be prophetic.
  Mr. President, Secretary Rubin's warnings ought to be heeded. 
Political considerations should not dictate congressional action on the 
debt ceiling.
  The debt limit is serious economic business. It should not be a part 
of the budget debate. The reputation of this Nation throughout the 
world would be irrevocably damaged if the full faith and credit of the 
U.S. Government becomes shaky and suspect.
  Because this is such a serious matter, I was disappointed to read in 
yesterday's papers the characterization by the majority leader that 
Secretary Rubin's credibility and integrity are somehow in question in 
this debate.
  Nothing could be further from the truth.
  Secretary Rubin is engaged in a critical effort to discharge his 
responsibilities to the taxpayers by preventing the U.S. Government 
from defaulting on its debt obligations for the first time in more than 
200 years.
  Moreover, Secretary Rubin has made repeated efforts to meet with the 
Republican leadership and to make other senior Treasury officials 
available to answer questions and clarify disputed numbers.
  No one has credibly disputed what the Treasury has said. It seems to 
me clear that these attacks on Secretary Rubin represent a classic case 
of shooting the messenger.
  Meanwhile, there seems to be an ongoing effort on the other side of 
the aisle to distract the public from the real issue in the debt limit 
debate--namely, that a default will cause taxpayers to pay for 
generations to come in higher interest rates on the trillions of 
dollars in public debt which this Nation must finance in national and 
international capital markets.

[[Page S 16450]]

  It is my understanding that a meeting between President Clinton and 
Republican leaders has been scheduled today to discuss this very 
matter. I certainly hope that this can be the first step in an effort 
to resolve the dispute over the debt limit outside the political 
context in which we will debate our very real differences over the 
budget.
  I ask unanimous consent that a copy of Secretary Rubin's letter to 
the Speaker be printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                   Department of the Treasury,

                                 Washington, DC, October 31, 1995.
     Hon. Newt Gingrich,
     Speaker of the House, House of Representatives, Washington, 
         DC.
       Dear Mr. Speaker: In anticipation of our meeting tomorrow I 
     want to provide information that you should have as 
     background for your consideration of our request for a prompt 
     increase in the debt limit.
       First, I have set forth in an appendix both our current 
     projections and a history of our projections over the past 
     several months.
       Second, I want to make clear that if Congress fails to act 
     by Wednesday, November 1, it will disrupt our normal auction 
     process and could force Treasury to take additional actions 
     that involve the interests of federal retirees, commercial 
     banks, and purchasers of savings bonds.
       As you know from my letter of October 24, and as we 
     discussed in detail with your staff yesterday, the Treasury 
     Department's normal quarterly refunding auctions are 
     scheduled to be announced tomorrow, November 1. The auctions 
     themselves are scheduled to be held during the week of 
     November 6, and settlement is scheduled for November 15 and 
     16.
       There may well be significant costs of disrupting our usual 
     Treasury auction schedule. If there has been no increase in 
     the debt limit by tomorrow morning, our announcement must put 
     prospective bidders on notice that the auctions might have to 
     be delayed or even cancelled. After such a contingent 
     announcement, ``when issued'' trading in the securities to be 
     auctioned cannot occur. Dealers may be less able to pre-
     market securities, and their risk of participation in the 
     auction may thus be increased, raising the costs of the 
     borrowing.
       Should Congress fail to take action to raise the debt 
     ceiling by November 6, we will be required once again to 
     depart from our best financial management practices by 
     canceling the scheduled auctions, and may be forced to take 
     further steps to ensure that outstanding debt remains within 
     the limit and that we have cash available to pay the 
     Government's obligations.
       As I have indicated in my previous letters, there are a 
     limited number of actions we may be forced to take many of 
     which have legal and practical implications. One such example 
     would include Treasury's action to stop reinvesting the so-
     called G-Fund (the Federal Employees Retirement System's 
     Government Securities Investment Fund). Securities held in 
     the G-Fund mature and are reinvested on a daily basis, and 
     the governing law provides for an automatic restoration of 
     any lost interest when reinvestment resumes. Because of the 
     inherent volatility of financing flows, such action may be 
     required even prior to the week of November 6th. Furthermore, 
     it will be necessary to call back Treasury cash balances held 
     in our depositary banks. This action will inconvenience those 
     commercial banks with whom the Federal Government does 
     business.
       Also, should Congress fail to act, Treasury may be forced 
     to suspend the issuance of Savings Bonds--an action that 
     would not only require us to send notices to the 80,000 
     issuing agents, but also would disrupt millions of Americans' 
     use of a safe and convenient investment for their savings.
       While these actions can provide some very limited relief, 
     at the cost of creating significant dislocations and 
     anxieties, it should be clearly understood that they will not 
     be sufficient to substitute fully for the funding that we 
     would ordinarily raise through the regular mid-November 
     refinancings and that should be announced tomorrow. Stated 
     another way, these temporary actions will not satisfy the 
     continuing need for cash to fund the obligations and 
     operations of the Government after November 14. Absent 
     extraordinary steps, Congress must increase the debt limit 
     obligations maturing November 15 and 16.
       Finally, you should know that there are various other 
     measures Treasury has been reviewing to avoid default should 
     Congress not increase the debt limit by November 15, 
     including actions involving the Civil Service Retirement 
     Fund, but all such measures present uncertainties involving 
     serious legal and practical issues and have significant costs 
     and other adverse consequences.
       Furthermore, the U.S. government's need for financing will 
     not end on November 15 and 16. The financing calendar we 
     distributed last week, and discussed in detail with your 
     staff yesterday, showed four auctions in the last two weeks 
     of November, and additional cash management bills may be 
     needed. Successful completion of those auctions is critical 
     to raising cash to make vital benefit payments on December 1 
     and during the week of December 4. As we have mentioned 
     before, the months of October, November and the first half of 
     December traditionally have very large seasonal cash deficits 
     due to the absence of any large tax payment dates.
       You and other members of the leadership have raised the 
     prospect that Congress might enact a temporary debt limit 
     increase, and we have expressed our total availability to 
     work toward that end. Last Friday, at the President's 
     direction, I proposed that the debt limit be increased by $85 
     billion, to $4.985 trillion. I would hope to discuss this 
     proposal, and any other approaches you might have, at our 
     meeting tomorrow.
           Sincerely,
                                                  Robert E. Rubin,
     Secretary of the Treasury.

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