Budget Options Growing Scarce Government Faces Debt Default At The End Of Next Month

Treasury Secretary Robert Rubin told Republican leaders on Monday that he has run out of legal options to sidestep the national borrowing limit and cannot keep the government from defaulting on its debts after Feb. 29 without selling off the national gold reserve or holding up tax refunds.

But Rubin described those options as “completely unacceptable” to President Clinton, throwing the issue back at the Republicans, who have tried to use the debt limit as a weapon in the war over the federal budget.

As each side tried to paint the other into a corner, Republican leaders also raised the ante on Monday. House Speaker Newt Gingrich said the only way for the president to get the authority to pay the nation’s bills - including $30 billion in Social Security, Veterans and other retirement payments due on March 1 - is to accede to much of the Republican agenda.

That is a demand Clinton has refused to meet, saying he would not be blackmailed by the threat of national default.

“We are, quite frankly, at an impasse,” Gingrich said.

Rubin has the authority to sell part of America’s gold reserve to raise money, but it is a step many have warned against because it could destabilize the American currency. He also could delay sending refunds to the 70 million or so taxpayers who are owed money by the Internal Revenue Service. But as a White House official put it the other day, “I’ve heard brighter ideas in an election year.”

Rubin’s declaration came after the markets closed, so it was impossible to tell how investors around the world would react to his statement that he could not or would not prevent default if Congress fails to act by the end of next month.

Both Democrats and Republicans have expressed fear that foreign investors in particular would begin to charge a premium for lending money to the United States government, touching off a rise in interest rates that would quickly affect the cost of home mortgages and other loans.

“We’re in the end game now,” one senior administration official said on Monday night.

President Clinton was deeply involved in the decision made on Monday, administration officials insisted, but in public he has stuck to generalities, urging Congress to pass a “clean” extension of the debt limit, one that carries no conditions on the rest of the Republican agenda. “I don’t think we should default on the debt,” Clinton told reporters. “I think that would be a terrible mistake.”

Until Monday, Republican leaders appeared to have assumed that Rubin would find legal authority to tap other government trust funds to keep the government running, even in the absence of an increased debt limit. And a week ago several Republican leaders, including Gingrich and the chairman of the House Budget Committee, John R. Kasich of Ohio, suggested that they would find a way to extend the debt ceiling, which allows the government to borrow money to pay for expenses that exceed its revenues.

But on Monday afternoon, Gingrich seemed to backpedal, moving toward the hard line that his secondin-command, Rep. Dick Armey, the House majority leader, had set on Sunday in an appearance on NBC News’s “Meet the Press.”