HERE COMES DEFAULT LANE

By MATTHEW MILLER

WHILE THE BUDGET EQUIVALENT OF MELROSE PLACE reached a climax this week, a new installment in the spin-off drama, Default Lane, began filming. For those who hate suspense, here's a preview of the final scene: there's no chance the U.S. government will default on its debt, now or ever.

In our last episode, you'll recall, there was a tremendous wringing of hands when Congress refused in mid-November to extend the official $4.9 trillion debt limit, a tactic designed to force the President to approve its budget. Yet markets remained unruffled, knowing that Treasury Secretary Robert Rubin had internal bookkeeping changes up his sleeve that could lower our "official" debt and let Uncle Sam keep paying the bills. What Rubin has done to date--mostly shifting civil service pension money to accounts that aren't constrained by the debt limit--should take the government through mid-February. Such short-term cosmetic changes have no impact on the retirement funds, since they'll be repaid with interest. As the next deadline nears, frustrated Republicans hope to raise the political stakes nonetheless, calling Rubin's "evasion" of the debt limit "unconstitutional."

That's a difficult argument to win, since Rubin's actions so far have been authorized by a statute passed while Ronald Reagan was in office. Meanwhile, with the G.O.P. budget plan itself calling for the debt to rise toward $6 trillion over seven years, a renewed debt-limit showdown can't help looking hypocritical. The Administration won't say what happens next if the limit isn't raised soon. But there's more than $1 trillion in trust funds and plenty of gold in Fort Knox that might be temporarily "reclassified" if the G.O.P. won't budge. Yes, it might stretch the lawyers' ingenuity, but that's a lesser evil than triggering a financial meltdown. Look for the Treasury to find ways to muddle through. But to put heat on the Republicans, Rubin will keep protesting that this is no way to run a government.

--By Matthew Miller