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Abercrombie plans for fed default

By B.J. Reyes

POSTED:
LAST UPDATED: 01:03 p.m. HST, Jul 30, 2011



With time running out for Congress to reach a deal on raising the debt limit, Gov. Neil Abercrombie began taking steps Thursday to ensure the state would be protected if the government is unable to meet its obligations.

Abercrombie convened members of his Cabinet and representatives from the state's financial sector to prepare for various scenarios.

"We have a sound plan and are prepared to keep our economy stable," Abercrombie said in a news release. "We are carefully managing the state's finances and our local banks are ready to step forward if the need arises."

Meanwhile, in Washington, D.C., House Republican leaders put off a vote Thursday night on legislation to avert a threatened government default and slice federal spending by nearly $1 trillion. GOP leaders announced the decision after abruptly halting debate on the legislation and plunging into an intensive round of meetings with rebellious conservatives.

"I would say that (House Speaker John) Boehner does not have the votes, and it doesn't look like he's going to get it any time soon," Hawaii Democratic U.S. Rep. Colleen Hanabusa said in a telephone interview. "I think the fact that he's called it off means that he may be losing votes versus gaining votes."

Both she and Democratic colleague U.S. Rep. Mazie Hirono had planned to vote against the Boehner proposal before debate was cut off just before 6 p.m. in Washington.

"This bill virtually guarantees cuts to Medicaid, Medicare and Social Security while protecting oil companies and the wealthiest in our country from any pain or paying their fair share," Hirono said in prepared floor remarks entered into the Congressional Record. "Billionaires are not being asked to pay more in taxes; loopholes that benefit the few are sacrosanct. But the programs seniors and children rely upon receive no such consideration."

Congress has until Tuesday to reach a deal on raising the debt ceiling or face a historic default, meaning the government would run short of money to cover all of its bills. President Barack Obama has said a default could put at risk government payments for obligations such as Social Security, Medicare and Pell Grants.

Abercrombie said the state's contingency plan aims to avoid interruptions to programs that depend heavily on federal funding.

Budget Director Kalbert Young described the plan as a "cash conservation" strategy that would cover federally funded state programs in the short term.

"We will have to wait to see which federal programs might see reduced funding and by how much," Young said.

The state typically covers the cost of the federal program and then is reimbursed for the cost. The state would look to see what it could cover in-house before seeking help from local banks in the form of loans, the Governor's Office said.

How long that might be is unknown because of the uncertainty surrounding the government default.

Abercrombie discussed the plan with the banking community to keep it abreast of the situation.

"Our banking community has substantial liquidity that is ample to weather any temporary financial correction," said Gary Fujitani, executive director of the Hawaii Bankers Association.

In Washington, Hanabusa questioned the need for Abercrombie to announce his contingency plan publicly.

On Wednesday, during a "telephone town hall" conference call, Hanabusa sought to ease constituents' fears saying she was confident a deal would get done before Tuesday and that the president would place a high priority on making Social Security and Medicare payments on time.

"The governor is going to have to do what he thinks is in the best interest of the state," she said. "My issue is, Why would you make it something that would affect people and give them a sense of insecurity when you can prepare for it without making a public statement?"

Governor's spokeswoman Donalyn Dela Cruz said the response from the public had been positive. "As the deadline approaches there has been heightened news reports about the uncertainties that lie ahead. The governor has taken steps to ensure that Hawaii is stable, and it's important for the citizens of Hawaii to have the security of knowing that we are prepared."

———

The Associated Press contributed to this report.






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