European Stars And Stripes (Newspaper) - November 12, 1985, Darmstadt, Hesse                                Tuesday november 12, 1985 the stars and stripes Page 7 government default is nearing reality is would be first hit by bouncing checks Washington a unless con Gress ends its impasse Over the Federal spending this week the . Government faces a super bowl of bureaucratic snafus on Friday the likes of which the country has never seen. For the first time in its history the government May default on its financial obligations bouncing millions of Federal checks. In addition much of the Federal govern ment could be shut Down sending a half million or More non essential workers Home on an unscheduled Holiday and Clos ing government offices from Washington to Anchorage Alaska. The country is being brought to the Brink of this double doomsday because of continued wrangling Over Federal finances. While Congress has until Midnight thursday to reach a Resolution of the impasse officials reluctantly Are beginning to make contingency plans if this deadline is not met. The two problems a government shut Down and a default will require separate congressional solutions. The shutdown can be averted if Congress passes a Stop Gap appropriations Bill to fund government agencies Post the expiration of the temporary spending Bill Midnight thursday. That is also the deadline for the govern ment to run out of Money because con Gress has been unable to reach agreement on a measure to raise the government s Bor rowing authority above its limit of si.823 trillion. An appropriations Bill gives the govern ment the Legal Power to spend Money but it needs an increase in the borrowing limit to raise the Money to spend since it will have exhausted its financial reserves by Friday. A government shutdown would be Noth ing new. It has happened twice during the Reagan administration. The first one in november 1981 Cost an estimated $65 Mil lion in lost time and paperwork. The second one occurred oct. 4, 1984, when 500,000 employees out of a civilian work Force of 2.9 million were sent Home. Both times the administration claimed it had no Choice but to Send All employees considered non essential Home since it did not have the authority to pay them. Doth shutdowns had Little Impact on the Public. The mail got delivered on time air traffic controllers stayed at their Post the military continued to defend the Courry and Many other offices stayed open with reduced staffs. However a default which has never occurred before could have far ranging implications. The Treasury department says that As of Friday the government s coffers will be empty. Unless Congress Grants the authority to borrow More Money Treasury Secre tary James a. Baker Iii said he will be forced to notify the Federal Reserve Board and the nation s Banks that Federal checks can no longer be honoured. Since the government issues 600 million checks a year that leaves a lot of rubber to Bounce. The first to feel the Pinch would be the 2.1 million members or the armed forces who along with a smattering of smaller government agencies arc scheduled to get paid on Friday. They would still get their checks but would be unable to Cash them. Some of the nation s largest Banks and pension funds along with numerous Small investors Wou i so feel the effects right away. The government is scheduled to pay j16 billion in interest payments on Treasury securities on Friday payments that could t be made if the country is in de fault. Recipients of the government s biggest Benefit program. Social Security would not feel any immediate Impact since those checks went out on time at the first of the month. However if any individual had delayed cashing that Check it would not be honoured since the government says it has no Way to discriminate Between obligations once it reaches a negative Cash balance. Administration officials arc concerned that a default even one due to congressional wrangling would raise doubts about the country s economic health around the world. Such doubts could Send the value of the Dollar plunging. A default could also raise the Cost of future borrowing since investors would no longer be As sure of the safety of govern ment securities. If people Start losing Confidence in government securities that could increase the Cost of borrowing pretty substantially said David Wyss. An economist at data re sources inc., a private forecasting firm. It would also give countries like Bra in a Nice precedent to cite the next time they wanted to hold up paying their  because of such consequences Many 25 50 75 100 125 150 175 200 -$225 19 of tag source Jhaj federa deficit dior fit Down