Social Security can go out on time if debt limit not raised?

[madfloridian]

Are they really playing political games like this with the lives of seniors and the disabled? It seems that way. A needless scare tactic?

From Huffington Post's Nancy Altman and Mark Scarberry.

Nancy J. Altman co-chairs the Strengthen Social Security campaign, which consists of over 300 national and state organizations. She is the author of "The Battle for Social Security: From FDR's Vision to Bush's Gamble."

Mark S. Scarberry is a professor of law at Pepperdine University School of Law. He teaches and writes in the areas of bankruptcy law and constitutional law. Some of Scarberry's recent publications are available on his Social Science Research Network author page at http://ssrn.com/author=48574.

From the article at Huff Post:

Disentangling Social Security From the Debt Ceiling

The truth is that checks can go out, in their full amount, without adding a penny to the federal government's total debt. They can be paid without subtracting more than a tiny fraction of a percent -- if anything -- from the funds currently being used for other government purposes -- a reduction so small that it could be considered a rounding error.

Three key facts make this true. First, Social Security has its own dedicated income stream for payment of benefits and associated administrative costs. Second, in addition to its current income, Social Security has an accumulated reserve of $2.7 trillion in its trust funds. That reserve is invested, as Congress has always required, in what has been the safest investment on Earth -- treasury bonds backed by the full faith and credit of the United States. And third, the $2.7 trillion in treasury bonds held in the trust funds is included in the $14.3 trillion total debt that has reached the statutory limit.

If the debt limit is not raised, Social Security's Board of Trustees could and should exercise its right to redeem (cash in) as many of Social Security's bonds as needed to pay benefits. Every dollar of principal (though not accrued interest) that the federal government would be required to pay to redeem the bonds would reduce the total debt subject to the $14.3 trillion limit. That would make room under the debt ceiling and allow the government to borrow an additional dollar from the public to replace every dollar of principal paid by the government.

They say that "federal government is the plan sponsor, the president should be especially careful to act as a fiduciary. That means ensuring that all plan income and assets are carefully accounted for and used for their intended purpose."

And it appears Tim Geithner is the managing trustee.

The only threat that benefits will not be paid, in addition to the threat that the United States might default with respect to all creditors, is if the Managing Trustee, who happens to be the Secretary of the Treasury, Timothy Geithner, refuses to exercise Social Security's right to redeem the bonds. Any technical difficulties in doing so can be resolved, if there is a will to do so.

Using Social Security as a bargaining chip is harming seniors and making them fearful.

And it is making me angry.

[The Big Vetolski]

1. K&R for making a very important point. Geitner and Obama

threaten withholding checks from SS recipients. They could just as easily threaten to withhold all interest payments on the debt owned by the billionaire bondholders and the Chinese. But that is clearly one of those things that is not on the table. :nuke:

[madfloridian]

2. The propaganda worked on me. I did not realize this.

I guess I never thought I had to pay such close attention to what our party leaders were doing. I never remember such a dire threat to Social Security, and it is coming from a Democratic president.

I thought if the president said it, I could believe it. I hate thinking I can't.

[The Big Vetolski]

8. The last five presidents have lied so many times that if they say it,

I doubt it. Mostly lies since 1981. After 30 years, I've kinda grown to expect it. I thought things might be different twice--in early 1993 and early 2009. I was sorely disappointed both times.

[madfloridian]

10. You are right. Neither time did the rhetoric change.

Now when someone speaks out for seniors, they are considered the minority. Amazing how propaganda works.

[SammyWinstonJack]

18. I can't believe what Obama says. I hate that he lies.

[FreakinDJ]

3. The point was to get the public involved in the debate

The FUX News and others were holding up the polling saying only 48% of Americans wanted the Debt Ceiling raised. Now that number is up to 58% and climbing

[madfloridian]

5. Oh, well, then...

that's okay to make seniors fearful to get the poll numbers up. :shrug: These are people's lives, you know.

[elocs]

4. If I were the Chinese I would be nervous that if they could so casually rob those on SS

of what they are owed, then how hard would it be for the U.S. government to do that to me?

[The Big Vetolski]

7. The Chinese bought all of this debt so that they would have

influence, as well as make money off of a rival power. It also puts them in the position of being able to dump US Treasury bonds to damage our economy if they want to do so. OTOH, if we just defaulted, they would be screwed. It's an old Chinese principle called calculated risk. But China would survive no matter what happened, just as we would. They know that, too.

The Chinese have survived for thousands of years. They're not stupid. Most of the time, anyway.

[catabryna]

6. Just a reminder...

"Are they really playing political games like this with the lives of seniors and the disabled?"

You forget about the survivors. :hi:

[customerserviceguy]

9. Help me out here

The article you quote from says, "...Social Security's Board of Trustees could and should exercise its right to redeem (cash in) as many of Social Security's bonds as needed to pay benefits."

When the trust fund goes to attempt to redeem these specialized securities, assuming they even have the right to do so upon demand, where does that money come from? It can't be borrowed, so it would have to be printed, thus devaluing the dollar. You might get away with this once or twice, but after that, you risk serious inflationary damage on a weak economy.

Think that inflation and economic weakness are incompatible? Perhaps you're 40 or under and don't remember something we called 'stagflation'.

[madfloridian]

11. James K. Galbraith on paying Soc. Sec.

"DFAF: What do you think then that Democrats in Congress should do to force the issue of constitutionality?

JKG: It's not for the Democrats in Congress. They should simply point to the constitutional language and say, "These claims are not to be questioned." And that the Constitution orders the Treasury to take whatever steps are necessary to continue to service the debts and to continue to send out Social Security checks and to meet other obligations that are duly authorized by law. That's an obligation that falls on Secretary Geithner who is extremely aware of it. He has, in fact, read that passage out to a roomful of reporters at a briefing a few weeks ago.

...."
DFAF: ...And now the president is talking about willingness to cut into some programs such as Medicaid and Social Security. But this -- again -- shouldn't be necessary. So why...

JKG: Well, it's not necessary on any economic ground. It's a preposterous position. The president is saying that in his view the burden of sacrifice should be shared equally by those who can afford to bear it and those who can't. That it should fall on Social Security recipients -- the weakest players in American society. On Medicare recipients -- people who are old and either ill or likely to become ill and need medical care. This is just crazy! These programs ... Social Security certainly does not add to the deficit. Nobody is suggesting here that when you cut the benefits you're also going to cut the payroll tax. So basically what they're saying is that we're going to use the payroll tax as a piggy bank to close the deficit that's being caused by other parts of the budget. From every political and moral and social standpoint, this is a disaster. And Democrats should stand up and say to the president, "You take this position? You're not a Democrat anymore! You're frankly stepping on the most important social program that holds together American society." It is outrageous. It suggests to me that the White House has, in fact, been taken over by a group of mean, rather dim people who are totally in the pockets of the powerful financial interests that have been pushing cutbacks in Social Security and Medicare all along..."

http://prairieweather.typepad.com/big_blue_stem/2011/07/the-14th-amendment-and-the-debt-ceiling.html

[jtown1123]

21. This exchange needs to be an OP

[roxiejules]

12. Good Cop - Bad Cop charade

"It’s a good cop-bad cop charade. The Republicans are playing the role of the bad cop. Their script says: 'You cannot raise taxes on anybody. No progressive income tax, no closing of tax loopholes for special interests, not even prosecutions for tax fraud. And we can get a lot of money back into the economy if we give a tax holiday to the companies and individuals that have been keeping their money offshore. Let’s free the wealthy from taxes to help us recover.’

Mr. Obama can turn around and pretend to be the good cop. 'Hey, boys, let me at least do something. I’m willing to cut back Social Security. I’m willing to take over what was George Bush’s program. I share your worries about the budget deficit. We have to balance it, and I’ve already appointed a Deficit Reduction Commission to prepare public opinion for my cutbacks in the most popular programs. But you have to let me get a little bit of revenue somewhere.'

In the end the Republicans will make some small token concessions, but they’ll get their basic program."


- Michael Hudson

[madfloridian]

13. Interesting paragraph from that link.

"So what is happening today was signalled even before Mr. Obama too office, by the right-wing economic appointments he made – Larry Summers, who had pushed bank deregulation and replacing the Glass-Steagall Act as his chief economic advisor; Tim Geithner, the bank lobbyist as Secretary of the Treasury; and Rahm Emanuel representing Wall Street the interests in the way that the Democratic Leadership Committee had done since the Clinton administration. Later, after Mr. Obama appointed Bush Administration carry-overs Ben Bernanke at the Fed and Defense Secretary Gates, he said that in order for there to be a recovery, the banks had to be made whole. That meant, not take a loss – and leaving their management in place even when the government took over their stock, as in the case of Citibank."

[bahrbearian]

14. While I've known for a long time that Obama is not a Liberal

A true liberal and honest president would have 'Guaranteed that the checks would go out ont time'

[madfloridian]

15. Wow, another fascinating paragraph about Obama and mortgages...

"Last weekend’s New York Times magazine had an interview with Sheila Bair, whose five-year term heading the Federal Deposit Insurance Corp. (FDIC) expired last week. Now she can begin to tell what happened. She said that Mr. Obama promised her that he would try to prevent the mortgage frauds that were occurring, especially in subprime mortgages, and support better bank regulation. But then she would learn, just an hour before he gave a speech, that he would have changed the draft that she had seen, and took out what he’d promised her. The rewrites apparently were done mainly by Tim Geithner, who acts as a lobby for the big bank contributors. Instead of running the Treasury to benefit the U.S. economy, he’s benefiting his Wall Street constituency. Significantly, he was a protégé of Clinton Treasury Secretary Robert Rubin, who gave the name “Rubinomics” to pro-Wall Street opposition to bank regulation and a dismantling of public control over the banking system."

http://michael-hudson.com/2011/07/the-euthanasia-of-industry/

And Obama, Rubin from 2006....we should have paid attention then. Oh, wait, the Clintons were just as tied to Rubin.

Obama and Rubin's Hamilton Project

The Hamilton Project, which will be based at the Brookings Institution, a think-tank, will be run by Peter Orszag, an economist and senior fellow at Brookings. Policy papers unveiled yesterday proposed vouchers for summer schools and giving teachers tenure based on standards for effectiveness. “That is not consistent with certain orthodoxies we are familiar with. I think that’s a fairly controversial proposal. I wouldn’t say that’s a yawner,” said Mr Altman.

The white paper also called for entitlement reform but acknowledged the political constraints that helped stall Mr Bush’s drive to reform Social Security. “The principal problem is one of political choice and will and what is most needed is a bipartisan approach for deciding among the options,” it said.

Barack Obama, a Democrat senator from Illinois, welcomed the initiative as a way of transcending “tired ideologies”.

[chervilant]

16. OMG!!!

Are they really playing political games like this with the lives of seniors and the disabled?

Hell, yes, they are! And, I am BEYOND angry!

October 6, Freedom Plaza. Be prepared to stay as long as it takes.

[libmom74]

17. Anyone who still thinks

Obama is a Democrat is delusional at this point. This is really pissing me off. My 80 year old widowed grandmother who lives on a tiny pension and Social Security is terrified right now.

[SammyWinstonJack]

19. I am stressed too. Thank Obama for this...fun times, eh?

x(

[jtown1123]

20. Altman is a credible source but there is still a lot of disagreement among experts

we really don't know...