President Obama on many occasions has said and his Treasury Secretary Jack Lew has intimated, if the government shuts down they can’t guarantee Social Security checks will go out on time and we may default on our debt.
Of course we all know the economics. The Fed collects roughly $200 billion every month. The interest on the debt is around $20 billion a month or roughly 10%, so of course we can pay our debts rather easily.
But what about Social Security, the dreaded “third rail” of politics? Both Republican and Democrat politicians like to play word games with the “third rail.” Yet it is only the Democrats that claim if this or that demand isn’t met, granny may not get her Social Security check.
As an aside, as of May 1, 2011, the government began phasing out physical checks, not only for Social Security but all benefit payments. As of March 1, 2013, all benefit payments are electronic transfers. So let’s stop with the “granny won’t get her check” business. It’s all automatic, but I guess semantically speaking, she won’t.
So why is what Obama and Treasury Secretary Lew are saying so shameful? The answer is that it is impossible for Social Security not to have the money to pay out each month, regardless of the debt ceiling or government shut down of any kind. It is however estimated that by between 2033 and 2038 Social Security will indeed be dead if nothing changes.
Obama said, “In a government shutdown, Social Security checks still go out on time. In an economic shut down – if we don’t raise the debt ceiling – they don’t go out on time.”
Well, that not-so-subtle threat is just that, a hollow threat and an outright lie, and they know it. And of they don’t, they are too stupid to hold office or even work the counter at the local convenience store.
What none of them ever mentions is the existence of the famed Social Security lock box or “Old Age and Survivor Trust Fund,” filled to the brim with $2.4 trillion in IOUs (government securities). They also fail to mention, maybe figuring taxpayers won’t notice, that the FICA tax (12.4%) is still being taken from every paycheck, every week, and theoretically placed in the lockbox.
The government estimates that Social Security will collect approximately $740 billion this year, which according to Forbes covers 86% of all Social Security payouts. If nothing changes – no debt ceiling increase, no tax increase, the trust fund ($2.4 trillion) as it stands now, can fill in any payment gaps for 20 years.
But you may ask, I thought there were no Social Security funds. That Congress took the money (surplus) out of the lockbox and spent it on other things? You’d be right – they did, but the treasury left behind IOUs or government securities as collateral.
These treasury securities or IOUs by law must be redeemed when the Social Security administration has an account deficit.
Obama and Lew are lying so they can turn all the grannies against the Republicans in the next election.
Neither Obama nor Lew can stop grandma’s check unless they act illegally, although I wouldn’t put it past this vindictive bunch. Remember, this is the same crowd that’s removing water fountain handles “from all sources of drinking water along several popular scenic bicycle and jogging paths.”