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Contrary to the President, Social Security Checks Are Not At Risk
MICHAEL MCCONNELL | JULY 23, 2011 | 8:41 AM
In his Friday night press conference, for the second time, President Obama raised the specter that Social Security checks might not go out if Congress does not raise the debt ceiling. His words: “Well, when it comes to all the checks, not just Social Security — veterans, people with disabilities — about 70 million checks are sent out each month — if we default then we’re going to have to make adjustments. And I’m already consulting with Secretary Geithner in terms of what the consequences would be.” Earlier he said in an interview on CBS News: “I cannot guarantee that those [Social Security] checks go out on August 3rd if we haven’t resolved this issue. Because there may simply not be the money in the coffers to do it.”
He must not be consulting with his lawyers, because this attempt to scare Social Security recipients is without legal foundation.
As recently explained in much more detail by legal scholars Mark Scarberry and Nancy Altman, and by the aptly-named Thomas Saving, a former public trustee of the Social Security and Medicare Trust Funds, in an op-ed in the Wall Street Journal, , reaching the debt ceiling will not affect the ability of the Social Security Administration to pay its obligations.
The Social Security trust fund holds about $2.4 trillion in U.S. Treasury bonds, which its trustees are legally entitled to redeem whenever Social Security is running a current account deficit. Thus, if we reach the debt ceiling (which I continue to think is a remote prospect, even if less remote than it seemed a week ago), this is what will happen. The Social Security trust fund will go to Treasury and cash in some of its securities, using the proceeds to send checks to recipients. Each dollar of debt that is redeemed will lower the outstanding public debt by a dollar. That enables the Treasury to borrow another dollar, without violating the debt ceiling. The debt ceiling is not a prohibition on borrowing new money; it is a prohibition on increasing the total level of public indebtedness. If Social Security cashes in some of its bonds, the Treasury can borrow that same amount of money from someone else.
To be sure, a small portion of the money due from Treasury to the trust fund on the bonds is accrued interest. Payment of this portion will not have an effect on the debt ceiling, because the ceiling is calculated according to amount borrowed, not amount to be paid. That amount, however, is too trivial to affect the bottom line. Interest rates are low, and interest was last paid at the end of June.
President Obama is therefore wrong when he says that failure to raise the debt ceiling might result in not sending out Social Security checks. Many bad things might happen, but not that.
Obama is a DIC.
ReplyDeleteHe's, also, a "careful" dic.
ReplyDeleteIf you listen closely, he said, "On Aug. 3rd."
Geithner said, "on time."
but if you read this carefully, one of the best options available to avoid reaching the debt limit is to redeem the bonds to send out the social security checks. That frees the Treasury to borrow additional funds to cover the deficit because the overall limit has been reduced by the bond redemption.
ReplyDeleteBetter yet send the checks out early or better yet again send out six months of checks at one time. That can be covered by extending social security coverage to six months after you die. That would be hugely stimulative to the economy and politics being what they are get the senior vote.
You havn't read that anywhere else.
ReplyDeleteSocial Security payments amount to about
ReplyDelete$62 billion per month. Sending six months of checks would be a one time $360 billion stimulus to the group that would be mostly likely to spend it.
Nope, Cain't work that way.
ReplyDeleteFirst, they have to collect the cash.
Then pay the 3rd of month payment,
Then, they can borrow the difference between SS payments, and the amount of the Payout.
All complicated, of course, by the $94 Billion Bond redemption that they have to make on the 4th.
Of course, after making the bond redemption they can sell another 94 Billion in Bonds, and, then pay what bills they can while preparing for the "Next" Bond Redemption, rinse, repeat
Everybody keeps overlooking the fact that they're up against a HARD LIMIT.
ReplyDeleteThey can't go over it, today, with a promise to make it all better, tomorrow (or in an hour, or "as soon as I get back from the bathroom, or whatever.)
Well, it seems safe to say that, so far, the markets aren't the least bit interested.
ReplyDeleteWhich I find "very interesting."
Some days you just realize that you have no idea, whatsoever, how the world works.
ReplyDeleteS&P Futures down a bit less than 1%.
ReplyDeleteOil down about 0.6%
The crash that weren't.
Boehner has taken control of the debt talks after two weeks of foundering. Obama is no longer relevant. He cannot veto a debt extension. The networks couldn't care less. NBC nightly news is more worried about gay marriage in NYC.
ReplyDeleteGold is up $20. You get it?
ReplyDeleteYeah, I get the Gold.
ReplyDeleteOf course, that's just a tad bit more than 1%.
.
ReplyDeleteA month ago I worried that Obama didn't have the balls to to go to the limit with the GOP.
Still uncertain what will happen with half a dozen plans floating around but it kind of sounds like Obama is getting ready to fold on the tax issue.
Typical.
But we should know by Tuesday.
.
The money to repay the bond sold to the SS trust fund comes from where?
ReplyDeleteOh yeah, Benny and the Inkjets.
That's why gold and oil are up.
Oil is actually Down a touch.
ReplyDeleteThat IEA/SPR release went hot a couple of days ago.
Oil's going to have a hard time going up much for awhile, between the SPR release, and an economy sliding into recession.
Third world demand for oil is up. The US isn't the end-all and be-all anymore.
ReplyDeleteBut US gasoline demand is down big time.
That's exactly right, T.
ReplyDeleteChina, India, and even the OPEC Nations are demanding more, and more, every month.
It Ain't all about us anymore.
In fact, since 2005, the OECD Nations have cut their oil consumption almost 5 Million barrels/day.
But, the Non-OECD Nations have increased their demand by the same amount.
Now, we got a problem. We can't cut Our demand much more, but China, India, et al are just getting started raising their demand.
ReplyDeleteThe Treasury can print more cash.
ReplyDeleteIf they do not back this extra printing, it can devalue the dollar causing bigger economic problems.
Most of the time, when they print more money, they back this expansion by selling treasury bills, take out loan. The biggest buyer of treasury bills is China and Saudi Arabia. By printing more money, they are selling our future to foreign governments. If this continues, our kids will be renters and not owners on this planet.
The offset by redeeming Social Security bonds and sending the money to retirees should not be that inflationary in a deep recession.
Fleming v Vestor is Supreme. There is no exclusive Social Security Trust Fund"
ReplyDeleteTo say that there is a Trust Fund, that Social Security is not paid from Congressional appropriations, originating as Federal tax revenue is the lie.
There is no reason that the Social Security recipients should be prioritized.
ReplyDeleteIt is a welfare program, as such ranks lower than Defense in National priorities.
Social Security should rank lower than food inspections and the TSA.
Lower than Customs and Border Patrol.
ReplyDeleteNonsense, why blame the victims of the scam?
ReplyDeleteWhatever they do, it will only last for a few days. A couple of weeks at most. There will be so much disruption, and outcry that the extremes of both parties will be told to pound sand pretty quickly.
ReplyDeleteIn an accidental moment of honesty, White House Deputy Press Secretary Dan Pfeiffer today admitted on Twitter that President Obama will likely sign any debt deal Congress sends his way. This revelation came in an exchange with Stephen Gutowski, the blogger known as The College Politico. Gutowski asked Pfeiffer: “Do you see a scenario where the house & senate pass a deal but the President doesn’t sign it?” and Pfeiffer responded: “No, bc only something that has R and D support can pass both bodies”.
ReplyDeleteUp until today, the White House has attempted to portray President Obama as the mediator of a grand bargain, but his role has increasingly diminished as Congressional leaders have lost faith and trust in the negotiations taking place in the West Wing. It is now clear that President Obama is on the sidelines, without a plan or position, hoping Congress can solve the impasse without him.
White House Confirms
Blame?
ReplyDeleteSome folks paid taxes, other folks received Federal benefits from the money.
That gave the taxpayers NO rights to receive benefits, from future taxpayers.
Ignorantia juris non excusat or ignorantia legis neminem excusat
"ignorance of the law excuses no one".
Welfare recipients have no greater claim on tax revenues than the other appropriated allocations made by Congress..
ReplyDeleteWhy should the FDA be shut down, so the Federals can buy bread for "The Seniors"?
The Law is clear, Mr Obama is telling the truth. He has many obligations to pay, more money appropriated than there is cash to spend.
The priorities for expenditures, if the Congress does not make the full "Faith and Credit" of the United States available to the President, are his to make.
Why should the Welfare payments come before Operational expenses?
We have 12 carrier battle groups to maintain, along with military operations in over 700 foreign bases.
ReplyDeleteThose all are deserving of revenue priorities, especially over Welfare benefit payouts.
No?
(Reuters) - Norwegian Anders Behring Breivik said he killed 93 people to spark a "revolution" against the multiculturalism he believed was sapping Europe's heritage ...
ReplyDeleteHe did the "Christian" thing.
Investigators here in the Norwegian capital continued to pore over a 1,500-page treatise that was apparently posted on the Internet by suspect Anders Behring Breivik shortly before a massive bomb exploded Friday in downtown Oslo, followed by a shooting spree at a youth camp tied to the ruling Labor Party, which is relatively more tolerant toward immigration.
ReplyDeleteThe chilling manifesto advocates an armed campaign against the Muslims it says are overrunning Europe. A hate-filled brew of political, ideological and militaristic cant, the treatise denounces Europeans who support multiculturalism and argues for spectacular violence using tactics similar to those seen Friday, such as adopting a police disguise to fool victims before killing them.
Breivik has admitted to the twin attacks, which left nearly 100 injured and at least four people still missing, without accepting criminal responsibility for them, police said.
His lawyer, Geir Lippestad, told Norwegian public broadcaster NRK on Sunday that Breivik "wanted a change in society and, from his perspective, he needed to force through a revolution. He wished to attack society and the structure of society."
The 32-year-old is expected to appear at a court hearing Monday and wants to "explain himself," Lippestad added.
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