Last August, if you'll cast your mind back, President Reagan created a bureaucratic crisis, a potential payless payday for the armed forces, by vetoing a supplemental appropriations bill while Congress was out of town.
But government is creative when put to the test. The Office of Management and Budget and the Treasury Department (home of the Internal Revenue Service) came up with a cash-shuffling scheme that warmed the hearts of tax lawyers the nation over, while giving the paymaster the cash he needed to prevent revolt.
The Defense Department simply kept for its own use about $600 million in income tax withholding and Social Security payments that were supposed to go to the Treasury. The IRS has closed countless small businesses for doing the same thing when cash flow got a little tight, so to make all this legal it had to issue a regulation, blessed, of course, by the Justice Department.
Well, the crisis is over, and there is no longer a need for the regulation. This week, right there in the Federal Register and effective Feb. 9, the IRS withdrew special permission for the Pentagon to delay forwarding tax and Social Security payments.
Asked why it took so long to repeal the special regulation (you may recall that Congress overrode the supplemental veto shortly after returning to town last September), IRS spokesman Scott Waffle said it was written in such a way that it could be used only once. Repeal, he said, "was just a housekeeping matter."
And only the IRS knows exactly how large the Pentagon's short-term Treasury loan was. "Provisions of the IRS code prohibit discussing the amount of money which any tax entity, including the Defense Department, is in arrears," said Waffle.