THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Tuesday, November 14, 1995 TAG: 9511140009
SECTION: FRONT PAGE: A12 EDITION: FINAL
TYPE: Editorial
LENGTH: Medium: 55 lines
Nations have credit ratings too, just as individuals do. And no budget squabble in Washington should be allowed to damage the credit rating of the United States. The possible consequences are too dangerous and expensive. Default should never have become part of the game.
As long as this nation keeps running deficits, it will have to keep borrowing to pay for the servicing of the debt. Raising the debt ceiling, the limit the government can borrow, is an unfortunate but necessary part of the process.
This time, however, Republicans in Congress decided to attach riders to the debt ceiling legislation to force President Clinton to accept a seven-year path to a balanced budget, changes to environmental, health and safety regulations, the death-penalty appeals process and Treasury department borrowing practices. Some of the Republican ideas have merit; some don't. But playing chicken with the nation's credit-worthiness is reckless.
Ordinarily, Clinton could have been counted on to veto several of the added measures. Since Republicans lack the votes to override, sticking them on the debt-ceiling authorization looked like a way to force them on Clinton.
When push came to shove Monday, however, Clinton went ahead and vetoed the bill and demanded a clean bill - one without the extraneous provisions. The Treasury moved quickly to avoid default even in the absence of an increase in the debt ceiling.
Actual default remains highly unlikely. But many bond experts say that just talking about default is liable to raise doubts about Treasury bonds, bills and notes. Treasury instruments are now the world's standard for security. But if doubts are raised, risk-averse investors could flee elsewhere. That would force the government to pay higher interest rates to get investors to accept more risk.
Higher interest rates would mean more expense for the government and ultimately for taxpayers. And, since Treasuries are a widely followed benchmark, higher interest rates for them would mean higher interest rates for almost all other borrowing - home loans, credit cards, you name it.
Standard and Poor warned Friday that any hint of default could downgrade the United States' triple-A credit rating. Federal Reserve Chairman Alan Greenspan said, ``A failure to make timely payment of interest and principal . dissipate for many years.''
Playing political hardball over the budget is one thing. Let the best man win. Playing around with the full faith and credit of the United States is a fool's game that no one should be playing. Politicians may think advancing their agenda worth any risk, but it's the public that winds up paying the price. by CNB