The scare and intimidation tactics the president has employed during the debt ceiling debate have grown so outrageous that two experts on the Social Security system are imploring Barack Obama, “Mr. President, please stop needlessly scaring the millions who rely on Social Security benefits.”
Obama warned in his nationally televised speech on Monday night that if Congress does not vote to raise the debt ceiling by August 2, “we would not have enough money to pay all of our bills -– bills that include monthly Social Security checks, veterans’ benefits, and the government contracts we’ve signed with thousands of businesses. ”
Social Security historian Nancy Altman and Pepperine Law School professor Mark Scarberry have noted that, in fact, no such threat exists. They write that, while it is true “employer and employee contributions are less than the cost of all benefits plus all administrative costs,” those contributions “are just one source of Social Security revenue.” Another source is investments backed by the “full faith and credit of the United States,” which the president and Treasury Secretary Timothy Geithner can cash at any time they like:
[T]he government bonds held by the Social Security trust funds, $2.7 trillion worth, provide the guarantee that benefit checks can go out in full and on time, whether or not the debt ceiling is raised.
Social Security’s trustees, in particular its Managing Trustee, Treasury Secretary Geithner, are entitled to demand that those bonds be redeemed – cashed in – by the Treasury to whatever extent is necessary to provide the money to pay benefits. Because the principal amount of those bonds is part of the debt that is subject to the $14.3 trillion debt ceiling, every dollar of principal paid to redeem the bonds creates room under the ceiling for the Treasury to borrow more money from the public. Enough could be borrowed back to replace all but a tiny fraction of a percent of the money used to redeem the bonds (all but the very small amount of interest that would have accrued since the semiannual interest was paid on June 30). In effect, the Social Security trust funds’ bonds would be replaced with bonds owed to the public. Nothing would be added to the total debt, and the trust funds’ bonds would be used for their intended purpose: to guarantee that benefits are paid.
Their assessment in part echoes Rep. Joe Walsh, R-IL, who has said “there are government revenues to service Social Security checks” well beyond August 2. And they are far from the only experts to do so. Michael McConnell of Stanford University concurs, “this attempt to scare Social Security recipients is without legal foundation.” Thomas Saving, a former public trustee of the Social Security and Medicare Trust Funds, concludes that Obama “either does not understand the way the system works, or the administration intends to spend the money on something else.”
Altman and Scarberry add, as have others, Obama’s failure to pay Social Security in order to gin up political points with seniors — or, more sinisterly, to allow them to starve to death — will earn a harsh legal backlash. They write, “The trustee of a private pension trust who refused to make pension payments, despite having ample trust assets, would rightly be held to account.”
The legal repercussions for a sitting president who made such a decision would be impeachment. Would Congress have the guts to follow through with such a course? My advice is, Don’t chance it, Barack.