We’re still at an impasse in debt limit talks. Republicans are holding fast to their requirement that any debt-ceiling increase must be accompanied by spending cuts, and that tax increases are completely off the table. Yesterday, President Obama told Scott Pelley of CBS News:
I cannot guarantee that the checks will not 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.
The notion that Obama is even floating this as an option may surprise many who thought their Social Security taxes (12.4% of salary, half of which appears as a withholding on your payroll stub) were being held in a “trust fund” strictly for payment of Social Security benefits. They have not and never have been.
Obama is lying to the American public. There is enough “money in the coffers” to cover these payments past the arbitrary deadline of August 2: the Treasury has cash-on-hand at the beginning of each month in order to meet those first of the month obligations (so far in 2011, it has been around $100 billion on the first federal work day of each month).
The fact is that Obama WILL NOT guarantee that the Social Security payments will be made because he needs to use the elderly, the disabled, and our war veterans as hostages in his own petty political game against the Republicans. As Charlotte said, what kind of person would do such a thing?
Obama CAN guarantee that Social Security checks go out August 3* even if the debt ceiling deadline of August 2 passes without lawmakers reaching a deal.
Here’s how: the federal government spends about $307 billion each month. The Treasury gets almost $172 billion each month in revenue, and so we generally have to borrow around $134 billion to make up the difference.
Without Congressional authorization to borrow more money, the Treasury can only spend what it receives in revenue. Treasury Secretary Geithner (at Obama’s direction) has discretion to pay the bills in any order that he wishes.
Obama could tell Geithner to take the revenues received, and use them to pay the following bills first (amounts based on those paid in June 2011):
- $ 172 Billion in Projected Revenue for month of August
- $ 29 billion for debt servicing (so we don’t default)
- $ 50 billion for Social Security (based on June 2011 Treasury payments)
- $ 4 billion for veteran’s payments (based on June 2011 Treasury payments)
That would leave $89 billion from monthly revenues to spend on the rest of governmental functions for August. Now, Obama could tell Geithner to sell Treasury assets to raise the money necessary for a shortfall, or he could order a partial government shutdown. Neither are particularly pleasant options, but as they say, desperate times call for desperate measures.
We have money coming into the Treasury each and every month-it is just not enough money to cover the federal government’s unbelievably reckless spending. No matter what happens regarding the failure to raise the debt ceiling by August 2, our country will keep operating.
But if Social Security checks are not mailed out on August 3, it is because Obama ordered the Treasury not to pay them. If the Treasury fails to service the debts we’ve already undertaken, then it is because Obama ordered the Treasury to default on our debts. What kind of person would do such a thing?
*Note that the Treasury may not be able to stop the August 3 Social Security checks even if Obama wanted it to, because it could take weeks to reprogram the software responsible for printing the checks.