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August Social Security payments will NOT increase the debt

By: georgeclymer28 (Diary)  |  July 22nd, 2011 at 02:47 PM  | 

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There is a very interesting op-ed about Social Security in today’s Wall Street .  It is written by Thomas Saving, who served two terms as a public trustee of the Social Security and Medicare Trust Funds.  Saving states that making Social Security payments will not have any impact on the legal value of the total public debt.  Here is the money quote:

By law the Treasury is bound to redeem any bonds presented to it by the Social Security Administration.  And when the Treasury does, total government debt subject to the debt limit falls by the amount of the redemption- thus freeing up the Treasury’s ability to issue new bonds equal in amount to the redeemed Trust Fund bonds…  Therefore, meeting Social Security obligations in August, September and all future months in this fashion would add nothing to the gross government debt subject to the debt limit.

So then, the budget gap is really as follows.  Total scheduled expenditures are about $307 billion, while receipts are estimated to be $172 billion.  But the expenditures include roughly $50 billion for Social Security.  Therefore the REAL accounting gap is $85 billion, NOT $135 billion as most people have stated.  See here, for example.

Note also how disingenuous Obama’s statement about not being able to send out Social Security checks is.

COMMENTS

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  • Flagstaff

    It’s nice to have an expert confirm what we knew had to be true.

  • gekster

    It’s create a crisis to good to waste.

  • Flagstaff

    more details about an important issue.

    The point of clymer28′s diary seems to be that payment of Social Security benefits in August has no effect on the “debt ceiling crisis” as the MSM talks about it. It just transfers the debt from one category, “Intragovernmental Holdings,” to another, “Debt Held by the Public,” but it doesn’t increase the amount of debt.

    It puts the lie to Obama’s claim that checks might not be written. In fact, it implies that if the checks aren’t written, the Administration will probably be breaking the law.

    • 6eorge Jetson

      is an opportunity to cut some spending.

      Yes, it is true that it would be Obama’s choice alone to stop sending SS checks out if that were to hapen.

      But IMO, we shouldn’t give off the impression that continued spending at this $135 billion monthly deficit rate enabled by a consolidation of offsetting assets and liabilities is any different than a clean increase in the $14.2 trillion ceiling in the Total Public Debt Outstanding.

      Either way, we add $135 billion per month to the true $9.6 trillion of Debt Held by the Public (issued to entities outside of the US Govt).

  • 6eorge Jetson

    further in debt

    United States Public Debt

    As a consolidated entity (not including the Fed), the US Treasury has issued ~$9.6 Trillion of debt.

    Like my right hand handing money over to my left hand (which spends it), Social Security taxes have been taken in by the US Treasury and spent. Sayeth the SS “Trust Fund”,
    The US Treasury got to spend $2.6 Trillion of taxes taken under my name, and all I got were these lousy pieces of IOU paper.” In all, these offsetting Asset and Liability bookings for all Federal Govt depts amount to ~$4.6 Trillion.

    Summed together, the gross issued liabilities of the Federal Govt are ~$14.2 Trillion, formally called the

      • The Total Public Debt Outstanding

    The two components that comprise the gross liabilities are

      • Debt Held by the Public (representing all federal securities held by institutions or individuals outside the United States Government)
      • 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)

    The $14.2 Trillion debt ceiling is on the gross amount, so if the Federal Govt is allowed by law to consolidate some of the $4.6 trillion of offseting assets and liabilities, then the Federal Govt can lower what it counts as its gross debt.

    But to be sure, we are adding $135 billion to the real $9.6 trillion of Debt Owned by the Public.

    As another sidepoint, when you hear that the US debt level is presently at 60% of the ~14.5 trillion GDP, it’s because the $9.6 trillion Debt Owned by the Public is in the numerator. We are projected to reach ~100% by 2020 at the present rate.