WASHINGTON (AP) -- President Barack Obama demanded on Monday that lawmakers raise the nation's $16.4 trillion federal debt limit quickly, warning that "Social Security benefits and veterans' checks will be delayed" if they don't and cautioning Republicans not to insist on cuts to government spending in exchange.
Social Security again? The Social Security Trust Fund lacks the vast powers attributed to it by libs but their notional assets do count as part of Treasury debt for purposes of the debt ceiling. Consequently, if the Trust Fund needs to redeem bonds with Treasury to pay benefits the Treasury ought to have room under the debt ceiling to finance that by issuing an equal amount of bonds to the public. Debt held by the Trust fund will drop, debt held by the public will rise, but total debt for debt ceiling purposes will remain unchanged.
Or at least,that is Congressional intent and the point of the law. Glenn Kessler of the WaPo explored this during the debt ceiling debacle of 2011. His conclusion - it's complicated, it seems to be tied in to the specifics of Treasury cash flow management (payroll tax receipts are not segregated, apparently), and there may be glitches in the structuring of the Trust Fund bonds - typically a bond matures owing both interest and the final principal payment; only the principal is counted in the debt ceiling, so Treasury needs to come up with the cash for the interest portion, which may create an issue when they are out of cash. His bottom line:
The Pinocchio Test
The president obviously does not want to show all of his cards in this high-stakes game of poker. Raising the specter of not issuing Social Security checks is designed to raise pressure on Republicans, but could also cause angst among the elderly.
At this point the answer is unclear but we become suspicious when politicians begin to use “may,” rather than speak in definitive sentences. If Treasury has the ability to keep paying Social Security benefits, even if the debt limit is reached, the Obama administration should make that clear. The Treasury Department’s new statement begins to add some clarity. We will keep watching how the president speaks about this issue.
Hmm - the same geniuses who were able to figure out that the Libyan exercise was not covered by the War Powers Act can't figure out how to follow the law and pay Social Security beneficiaries? Why do we even have Turbo Tax Timmy in Treasury if not to come up with personalized rules to fit the situation?