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Just cash in a few Social Security Trust Fund bonds

By: Bob Weeks (Diary)  |  July 12th, 2011 at 05:28 PM  | 

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Speaking about Social Security, President Barack Obama told CBS news today that “I cannot guarantee that those 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.” The issue he refers to is raising the federal debt ceiling.

That’s a very curious statement for the president to make. Because liberals, he included, refer to the $2.6 trillion Social Security Trust Fund as money socked away, available to pay benefits for a long time.

So couldn’t the president simply cash in a few of the bonds held by the trust fund to pay benefits in August?

The answer is: Of course he can’t do that. The money represented by those bonds in the trust fund has already been spent. The only way for government agencies to pay them back is through some source of income of their own such as taxes or fees, more debt (which the debt ceiling would prevent), or providing fewer services.

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  • http://travismonitor.blogspot.com Freedoms Truth

    “So couldn

  • audax

    nt

  • 6eorge Jetson

    pay the direct obligations it contractually owes, i.e., the principal and interest on Treasurie bills/notes/bonds. As any maturing principal can be reissued without raising the total net default, to avoid default, the Treasury merely needs to direct the first ~$200+ billion of its ~2.2 trillion revenues to pay the ~$200+ billion in interest that it incurs each year.

    Social Security and Medicare recipients have no legal claim to the funds until Uncle Sam’s checks are cashed. Stiffing Grandma would be an outrage but not a default. THe “Trust Fund” is no more real than if you were to give it to me, which in turn I’d give it to my wife, which in turn it would get spent, but then I’d reassure you that I have an IOU from my wife who is spending $1.6 trillion more than she is taking in.

    WHile there’s no way that the predictability of government inflows and outflows are so precise so as to allow an absolute Aug 2 deadline, we are likely in the late term of the broken spigot pregnancy.

  • 6eorge Jetson

    The difference between

    • Debt Held by the Public

    representing all federal securities held by institutions or individuals outside the United States Government and

    • Intragovernmental Holdings

    representing U.S. Treasury securities held in accounts which are administered by the United States Government, such as the OASI Trust fund administered by the Social Security Administration; and

    • Total Public Debt Outstanding

    which is the sum of the above components.[2]

    So

    paying out from sold Treasury bonds in the “trust fund”

    really means no economic changes, just some accounting consolidation of assets (e.g. the cashflows from the special-issue securities owned by the SSA “Trust Fund” ) and liabilities (e.g. the cashflows to the special-issue securities owed by the Treasury )

    So that’s why we hear the public debt is “only”
    ~60% of GDP Public Debt and Govt Accounts

    As of February 2011, the “debt held by the public” was $9.6 trillion and the “intragovernmental debt” was $4.6 trillion, for a total of $14.2 trillion.

    on a GDP of $14.66 trillion

  • GregInFla

    And I have not heard a leftist get confronted by this question. Where’s the (impartial) press?

  • techartlead

    Its not clear to me where Treasury gets the money to pay off this debt. Do they sell more bonds, do they print more money?

    I believe Treasury lent that money to the Federal Government, and the government spent it, and now owes the principal and interest to Social Security Trust Fund.