FISCAL: Bumping the Ceiling

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Treasury Secretary George Humphrey took advantage of easier credit conditions last week to borrow some money cheaply and move a step forward in his program of "stretching out" the national debt. He also put the debt within $400 million of the $275 billion ceiling.

On sale went $2 billion worth of 2¾% bonds that mature in eight years instead of short-term securities. To make them attractive to banks, Humphrey made the bonds fully marketable at any time and set the interest rate slightly above the current low market rate on similar bonds, but well below the cost of long-term money last spring. The reception was all he had hoped for: by the end of the first day, the issue was not only sold out, but oversubscribed by $10 billion as investors rushed to buy.

Treasury officials still think that they can stay under the debt ceiling until the first of the year. To keep from breaking through the ceiling, the Treasury has already suspended the sale of its savings notes, two year securities bought principally by corporations and other big taxpayers as tax reserves. In a pinch, they can cut the number of short-term Treasury bills sold each week (normally $1.5 billion), meet day-to-day expenses by dipping into the Treasury's $5 billion in cash balance and its $1 billion reserve of gold bullion. But both are only stopgap maneuvers.

Early next year, said Budget Director Joseph Dodge, Congress will have to raise the debt limit. In the meantime, said he, the Government could probably borrow beyond the limit because Congress has passed appropriations for the next few years which could easily compel government spending beyond the present debt limit. But, he added, nobody in the Administration wants to do that because "people might not like the bonds."