Clinton threatens to shut government close government

RUPERT CORNWELL

Washington

President Bill Clinton yesterday raised the stakes further in the great budget war with Congress by vetoing a bill that would have raised the US Treasury's debt ceiling, and vowing the same fate for another - a rejection that would virtually ensure a partial government shutdown today.

In a Churchillian speech to the centrist Democratic Leadership Council, the President declared war on the Republican plan to balance the budget in seven years, promising to "fight it today, fight it tomorrow, fight it next week and next month". He supported a balanced budget, but not one "that robs the American Dream from millions of Americans."

Hours after he spoke, the Senate sent Mr Clinton a final version of the second bill, permitting the government to continue spending for a further month, despite Congress' failure to finalize a budget for the 1995/96 fiscal year which started last October 1. But like the debt ceiling measure, it too has conditions the White House deems unacceptable.

Assuming a veto, the government's spending authority would run out at midnight last night, and this morning 800,000 federal employees in non- essential parts of government would be sent home without pay. Air traffic control, the mail and the military would continue. Federal museums and monuments would close, as would offices for first-time passports, social security and veterans' benefits applicants.

A partial government shutdown is almost routine. Feuding over the budget has led to nine brief closures since 1980, most recently in 1990, when George Bush had to break his "no new taxes" pledge, possibly costing himself re-election.

This time, the rhetoric is even more heated and the political stakes, arguably, even higher. At one level, the posturing is a game of bluff, whose object is to push the blame on to the other side, ahead of a settlement that sooner or later must come. But great ambitions and careers, even the 1996 presidential contest, could depend upon the outcome.

For Mr Clinton, the confrontation is a last opportunity to depict himself as a man who can stand up to pressure, a lone voice of reason holding back Newt Gingrich, the Speaker, and his ruthless Republicans, bent on taking from the poor to line the pockets of the rich.

Hence the President's impending veto of the temporary spending bill, on the grounds that the Republicans have attached to it increases in premiums on Medicare, the federal health scheme for the elderly.

"This is irresponsible, this is wrong," he told the DLC.

The Republicans' goal is different: to show that they really mean to balance the budget and keep the promise which helped them win control of Congress in 1994. In dispute, most fundamentally, are two different visions of government's role in society, an argument which will underly next year's presidential campaign. Right now, it is an argument Mr Clinton seems to be winning, at least in the opinion polls - even if the end result in the country beyond Washington may be a new surge of contempt for politicians.

Meanwhile Robert Rubin, the Treasury Secretary, announced moves to prevent a default which might otherwise have come as early as tomorrow or Thursday, when $102bn of scheduled debt interest and principal payment would have sent the government through its current $4.9 trillion debt ceiling.

Instead, Mr Rubin plans to find the money to meet the government's creditors by "disinvesting" from two federally-run pension funds. In this way, economists say, he could stave off default for weeks, if not months. That realisation sent bonds, shares and the dollar all smartly higher yesterday.

Later this week a third presidential veto is all but certain when Congress sends Mr Clinton the omnibus "reconciliation" bill containing the blueprint of a balanced budget by 2002. It includes $270bn of cuts in Medicare, deep welfare cuts, offset by income and capital gains tax cuts worth $245bn.