Politics as usual

The Bush administration plans to borrow billions of dollars from federal employees' retirement funds to avoid exceeding the congressionally controlled federal debt ceiling — and employee unions aren't happy.

Bobby Harnage, president of the American Federation of Government Employees, is vehemently opposed to this move. President Bush "gave the surplus and more away to his wealthy supporters, and now he wants to go after our retirement savings," Harnage said in a release. "We say, 'Hell no!' " Some members of Congress, perhaps a majority, support the strategy because it would enable Congress to avoid, for now at least, being in the unpleasant position of raising the current $5.95 trillion debt ceiling.

Bush had asked Congress to raise the debt ceiling by $750 billion by late March or risk a federal default. But House Republicans don't want to pass a stand-alone increase in the debt limit and encouraged the Treasury Department to come up with an alternative.

Treasury Secretary Paul O'Neill has the legal authority to shift money in retirement funds invested for federal retirees by Treasury into noninterest- bearing accounts to meet federal obligations. Once the money is shifted, it does not count against the federal borrowing limit. That would enable Treasury to borrow more money to keep the government running. The funds eventually would have to be repaid, with interest.

The National Association of Retired Federal Employees and the American Federation of Government Employees both want Congress to enact a new debt limit now and not borrow retiree funds to do so. "Refusing to increase the debt ceiling is nothing more than a political ploy to hide the fact that the surplus was squandered on tax cuts for big corporate contributors," Harnage said.

The Republican strategy is to put off increasing the debt limit and attach such a provision later to a popular measure, such as legislation paying for the war in Afghanistan. Although Democrats may be eager to blame Bush's $1.35 trillion, 10-year tax cut for a return to government deficits, it would be difficult to vote against a debt increase attached to an anti-terrorism spending bill. There is also a political risk in playing with federal retirement funds given the ongoing fallout over the collapse of Enron's employee retirement funds.

This approach is not new. In 1995, Republicans criticized then Treasury Secretary Robert Rubin when he employed a similar tactic during a Clinton administration budget battle with Congress. At that time, Rubin authorized borrowing more than $61 billion from the Civil Service Retirement Fund and the Thrift Savings Plan G Fund. Rubin gave each account a temporary IOU, identical to what Bush and O'Neill are contemplating. The Rubin IOUs were not counted against the debt limit. Treasury repaid the IOUs with interest after a permanent increase in the debt limit was approved. I think this may be a case of the pot calling the kettle black!

Zall is a retired federal employee who since 1987 has written the Bureaucratus column for Federal Computer Week. He can be reached at [email protected]


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