The House voted yesterday to begin debate on a controversial $8.4 billion increase in the U.S. contribution to the International Monetary Fund, but House Democratic leaders warned that there are not yet enough votes to pass the administration-backed legislation.
Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.) told reporters yesterday morning that he would postpone consideration indefinitely, saying he could count about 130 votes in favor of the legislation, far short of the 218 it needs to be assured of passage.
But O'Neill changed his mind an hour later after a surprise visit from Treasury Secretary Donald T. Regan. Regan told O'Neill that the administration wanted to begin debate on IMF funding as soon as possible.
The House approved by 369 to 42 a rule permitting the House to take up the IMF bill, with debate scheduled for Monday. But the Democratic leadership, which supports the administration's bill, is not expected to permit voting on the measure until more Republicans and Democrats get behind it. The Senate passed a similar bill last month.
One administration official said, however, that there already are enough votes to pass the bill. "We're being kicked around by the Democrats. They want their pound of flesh," he said.
Administration officials have said that if the United States fails to produce its share of a proposed $31 billion increase in IMF funding, it will make it difficult for the international lending agency to help debt-ridden Third World countries, such as Mexico and Brazil, surmount their current economic difficulties.
Brazil, which has nearly $90 billion of overseas debts, likely will have to wait more than two months before it can borrow more money from the IMF and commercial banks, central bank governor Carlos Langoni acknowledged yesterday.
The cash-starved nation has just reached informal agreement with the IMF on a new set of policy measures that will enable it to draw money from the IMF that has been held up since the end of May. Commercial banks will not put up more money until Brazil is back into compliance with the IMF.
However, the wide-reaching reforms proposed--in particular the move away from full automatic indexing of wages to inflation--must be put before the Brazilian Congress for 60 days before they become law. The IMF will only take a formal decision on the loan when it is clear that the new measures will be put in place, sources said.
President Reagan is expected to use his weekly radio address tomorrow to push for passage of the IMF funding bill in Congress.
Rep. Barney Frank (D-Mass.) said yesterday afternoon that Democrats would find it easier to vote for the IMF bill if the administration would bend on domestic spending. "The president wants it the IMF funding but he doesn't want to bargain."
Federal Reserve Board Chairman Paul A. Volcker warned that if the House fails to approve the $8.4 billion increase, fears about the health of the international financial system would boost interest rates and hurt the U.S. economic recovery. "The risk is ultimately that the situation would deteriorate into a series of defaults among Third World borrowers . . . . That risk is a very big one," Volcker said Wednesday.
Opposition to the IMF funding comes from both sides of the political aisle. Legislators complain that the IMF bill is nothing more than a bail-out of big banks who lent developing countries more money than they should have.
Rep. Charles E. Schumer (D-N.Y.) wants to require the banks--who charged big fees and set higher interest rates when they extended repayment terms on debts of big borrowers such as Brazil, Mexico and Argentina--to convert much of the short-term loans to long-term, low-rate loans before the United States approves a funding increase for the IMF.
Rep. Jack Kemp (R-N.Y.) said yesterday that the austerity programs the IMF imposes on countries as a condition for the loans keeps the countries from growing.