Checks should be in the mail
There's no legal reason for Social Security recipients to worry about getting their August checks.
The proposals are flying almost as fast as the rhetoric in Washington, D.C., where Republicans and Democrats are struggling to reach an accommodation on the details surrounding the proposed increase in the federal debt limit.
Try not to get too upset about the posturing. It's the usual sausage-making, not appetizing but part and parcel of the noisy business Americans call representative democracy. A deal will ultimately be struck.
In the meantime, parties to the negotiations — President Obama, Senate Democrats and House Republicans — each are trying to get the best deal they can and using heated rhetoric to push the public argument in their favor.
But President Obama overplayed his hand when he suggested the debt ceiling debate could force him to withhold August Social Security payments.
If he does so, it'll be his voluntary choice, not an option forced on him.
Obama hasn't said explicitly that he will withhold the August payments, just that "I cannot guarantee that those checks go out on Aug. 3. ... because there may simply not be the money in the coffers to do it."
Obama was referring to the failure of Social Security revenues to equal the amount paid out each month to recipients. Social Security has been running a deficit for months, the difference made up by cashing in federal bonds the Social Security Administration holds from money it loaned to the U.S. Treasury.
Obama is suggesting the federal government won't be able to cash in the bonds because that would require an increase in the debt limit, which is what the current dispute is about.
But law professor Michael McConnell, a former federal appeals court judge, said that Obama "must not be consulting with his lawyers, because this attempt to scare Social Security recipients is without legal foundation."
McConnell said that "reaching the debt ceiling will not affect the ability of the Social Security Administration to pay its obligations."
Why?
Social Security hold $2.4 trillion in federal bonds, which its trustees are required to redeem if it needs more money.
"The Social Security trust fund will go the 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," McConnell wrote.
He said the process will work because "the debt ceiling is not a prohibition on borrowing new money: it is a prohibition on increasing the total level of public indebtedness. What the treasury pays to Social Security, it can borrow from someone else."
Now this is no way to run a railroad. Indeed, that kind of transaction demonstrates why the debt ceiling debate, along with cutting spending and gaining control of the federal debt, is so important. But the threat of withholding payments from Social Security recipients is an empty one, at least as far as the legalities go.
I think it's irresponsible for you to claim, with just one source, that reconstructing the Federal budget on the fly is possible. As anyone who has ever handled a large budget knows, funding streams operate under many different restrictions; they also interact in ways that are hard for a person outside of the process -- e.g. a random law professor who may or may not be a conservative ideologue -- to understand. You fail to quote the opinion of the current and previous secretaries of the treasury, who have said that the federal government's payments will be thrown into chaos by the failure to pass a debt ceiling bill. It is impossible to predict what will happen. The Tea Party is showing great arrogance and disregard for human suffering by risking everything on such cocksure assertions as the one made here, on the thinnest of expert opinion.
Ditto goes for what I heard at Timothy Johnson's office this morning: the idea that if the debt ceiling is not approved, we can always sell off the national gold reserves! While Representative Johnson's office may think that great idea will calm our nerves, most of us will be only further dismayed by it.
Those of us who aren't ideologues and just believe in responsible government should be very afraid that the lives of millions of Americans are being threatened by people who seem to feel comfortable risking everything on second-hand theories, cherry picked evidence, and uncompromising ideology. I long for the days when we had real conservatives in America -- that is, people who went with the tried and true (as in bipartisan debt ceilings) over the latest talk radio talking point. I also think it's shameful for a newspaper to publish such uninformed speculation.
Oh, and regardless of whether treasury manages to jerry-rig social security for a week or two, the economy will still get hammered by the bond markets -- over the massive uncertainty the Republicans have created.
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