Skip to comments.The Real Reason Hitting The Debt Limit May Mean Social Security Checks Stop
Posted on 07/17/2011 2:49:15 PM PDT by blam
The Real Reason Hitting The Debt Limit May Mean Social Security Checks Stop
July 14th, 2011
By Aaron Krowne Founder, ML-Implode.com
Its crunch time, and now were hearing as part of the hyper-political debt ceiling debate that that Social Security checks may stop.
But interestingly, were not just hearing that from Congressional Republicans: Obama has raised that spectre as well.
Many left-leaning critics are shocked, believing Social Security to be well secure, and are incensed that Obama would be willing to slaughter this sacred cow. After all, if in the case of default, the government can prioritize payments to various areas, why would Social Security be among the first? Talk about giving Main Street the finger!
Well folks, this one may not be about politics: there is a good legal and economic reason Social Security is put in jeopardy by hitting the debt limit.
As Ive been ringing the alarm bell about for years (heres a relatively-recent example), Social Security already has a funding problem, as it has gone cash flow negative. The program is supposed to be self-funding (from payroll deductions), but that only holds so long as current benefits do not exceed the total revenue from payrolls.
Now, liberal econo-bloggers and pundits will always at this point say that doesnt matter, Social Security has a big trust fund. But it doesnt. You see, all it has are IOUs from the federal government. These arent even Treasury securities that could simply be sold at market they are bookkeeping entries. This is because the government long ago restructured Social Security, taking the accumulated and current savings and spending it on the usual guns-and-butter, leaving the Social Security Trust (and apparently most inside-the-beltway types and pundits) with a bunch of IOUs and warm fuzzies inside.
Technically, these bookkeeping entries are just the federal government keeping track of how much money it is supposed to re-allocate to Social Security expenditures at a later date. Uhm-hmm. Its exactly like that scene from Dumb And Dumber, where Harry and Lloyd have spent nearly $1 million in found money on frivolities, but dutifully replaced each dollar with an IOU. They happily present the suitcase full of IOU Post-It notes to the rightful owners of the cash when they finally meet them.
Thats Social Security. And to make up for that lack of true savings, the government has (for the past year) quietly been borrowing additional amounts each month to pay SS benefits, in essence, voluntarily exchanging the IOUs for Treasuries (which are immediately both borrowed and sold to pay out benefits).
So now we have this progression of disturbing facts:
1) Social Security is dependent on ongoing borrowing to meet current obligations at the 100% level.
2) Social Security trust fund obligations are just intra-governmental IOUs.
3) The government has no external obligation to pay anything back on these IOUs.
4) The government is about to stop being able to borrow.
5) All US Treasury obligations are senior to these intra-governmental IOUs (the Treasury obligations are external and legal; the internal obligations are internal and extra-legal, or at least of flexible legality). Most notably: no US default is triggered if SS payments are violated, and doing so would help conserve cash to pay down actual, legal Treasury obligations.
CONCLUSION: The FIRST thing the government will HAVE to default on when it hits the debt ceiling is Social Security! This doesnt mean every single check will stop, but SS will no longer be able to pay out anything above its current revenue, which means there will be some shortfall in benefits.
Further, it is difficult to see how the government could just selectively pay some SS benefits but not others, so the most likely course will be that everyone will get a monthly SS check that has some haircut, by some unknown amount (my guess is not more than 5%, though this percentage would naturally go up as time goes on).
Have you heard people in Congress raising the 14th Amendment debt shall not be questioned clause, as if it provides some sort of legal protection in the event of default? Well, even if it did, it clearly doesnt apply to the Social Security debt, because those are just internal government bookeeping entries (as discussed above). No debt has ever been issued for this trust fund!
This appears to be the dirty little secret Obama is acknowledging by raising alarm bells about Social Security payments.
It would all be amusing if it werent so sad, for so many people on fixed incomes that are already being absolutely KILLED by the lack of returns on their savings (thank you Ben Bernanke!)
I imagine some debt deal will be reached before the events above transpire, because acknowledging the true reality of the governments finances would probably be too painful for the political establishment. Aside from raising the ire of millions of voting pensioners, haircuts on Social Security checks would show in the bright light of day that Social Security is at its core a scam, not only from the outset, but also when it was reformed in the 80s. Frankly, our government has reached the point where it cannot pay even the most meagre of promised benefits to retirees (and the vast majority of them are really going to need that money.)
More than anything, this would show the federal government simply is not omnipotent as has been assumed since the Great Depression; it has just been coasting for decades on raw dollar imperialism, and then when that ran out, a series of macro-financial scams to keep the status quo going and politicians in their cozy dynastic tenures.
See why (in all probability) Bernanke is already hinting about further quantitative easing?
So when seniors default on credit payments, get thrown out of their house/apartment/trailer guess who will be blamed.
These political maggots can pay out hundreds of BILLIONS per year in direct and indirect costs to educate, feed, medicate and otherwise support ILLEGAL ALIENS but they feel they must cut Social Security to real citizens....we know what the game here is. Pure filthy politics — the politics of fright and intimidation.
What goes around, will come around.
If the U. S. defaults on debt obligations (bonds), then there is no longer any moral obligation for taxpayers to pay taxes.
Awww, They shouldn’t worry.
Politicians of all stripes and levels have no doubt been closely watching the example of Prichard, Alabama. They officially ran out of money two years ago and stopped paying pensions. We have John Stossel’s latest to show that Prichard somehow still manages to pay everybody else.
The city’s retirees just suck it up, struggle on somehow, or suffer and die in silence with some desultory protesting.
So far the Mayor and town council have not been impeached, voted out of office or even assassinated.
Go figure, I’m sure, after due consideration, our solons are not so afraid of having a few elder mobs beating on their limos with placards for a while.
The Republicans will be blames, the seniors will be at fault. Social Security (An unconstitution, ponzi scheme), was to be a supplement to one’s own retirement plans. Those who supported the plan rather than abolishing it, are now finding out what they should have known all along: “DON’T TRUST POLITICIANS WITH YOUR MONEY” and “YOU CAN’T SPIN FLAX INTO GOLD.”
The next lesson up (for those that didn’t learn it young), “Take care of your kids, someday they’ll have to take care of YOU.”
Social Security is coming down one way or another. And thank goodness, it’s about time. Communism NEVER works. You ALWAYS run out of OPM.
Except for defense and a few other things, there is no moral obligation now.
Stopped right there. The author is clearly clueless.
But that would make too much sense.
Basically...Federal Gov’mt as currently operated, is a liability to the States and We the People.
Especially considering Soros can get Kapos on the cheap from AARP.
The funds to pay Social Security have been put in a lock box and are all available for many years to come!!!
“These political maggots can pay out hundreds of BILLIONS per year in direct and indirect costs to educate, feed, medicate and otherwise support ILLEGAL ALIENS but they feel they must cut Social Security to real citizens....we know what the game here is.”
We sure do, it’s called “Vote buying with other people’s money.” The politicians did it for decades, buying the “citizen vote” paid for by future debts, then they did it by funding it through foreigners’ credit. Now they’re doing it by printing money which will bring down the entire system.
End ALL social welfare programs, and “PRESTO!” you end the vote buying. No evil redistribution of wealth=no political Robin Hooding. The production class ALWAYS has paid for the elites and the poor. The elite take the money from the productive (be they rich or not), and line their pockets and give what’s left to the poor to keep them in power. It has NEVER changed. Which is why true conservatives are never fooled by the plan, it’s as old as the War in Heaven.
BILLIONS FOR JIHAD!
Obamas 2009 Supplemental Appropriations for Iraq, Afghanistan, Pakistan, and Pandemic Flu was revised and passed by the full committee.
It gives billions http://creepingsharia.wordpress.com/2009/05/13/obamas-supplemental-bill-passes-gives-billions-to-enemies/
of U.S. taxpayer dollars to countries and entities that support Sharia law and/or harbor, hide and support those who want to destroy the U.S. and our allies.
Read the summary from David Obeys office that was quietly released last week with nary a word from any media.
$3.6 billion, matching the request, to expand and improve capabilities of the Afghan security forces
$400 million, as requested, to build the counterinsurgency capabilities of the Pakistani security forces
Afghanistan: $1.52 billion, $86 million above the request
West Bank and Gaza: $665 million in bilateral economic, humanitarian, and security assistance for the West Bank and Gaza
Jordan: $250 million, $250 million above the request, including $100 million for economic and $150 million for security assistance
Egypt: $360 million, $310 million above the request, including $50 million for economic assistance, $50 million for border security, and $260 million for security assistance
Pakistan: $1.9 billion, $591 million above the request
Iraq: $968 million, $336 million above the request
Oversight: $20 million, $13 million above the request, to expand oversight capacity of the State Department, USAID, and the Special Inspector General for Afghanistan to review programs in Afghanistan, Pakistan and Iraq
Lebanon: $74 million
International Food Assistance: $500 million, $200 million above the request, for PL 480 international food assistance to alleviate suffering during the global economic crisis
Refugee Assistance: $343 million, $50 million above the request, including humanitarian assistance for Gaza. Funding for the UN Relief and Works Agency programs in the West Bank and Gaza is limited to $119 million (Note: Gaza = Hamas)
Disaster Assistance: $200 million to avert famines and provide life-saving assistance during natural disasters and for internally displaced people around the world, including Somalia, Zimbabwe, Ethiopia, the Middle East and South Asia
Peacekeeping: $837 million for United Nations
peacekeeping operations, including an expanded mission in the Democratic Republic of the Congo and a new mission in Chad and the Central African Republic
Department of Justice: $17 million, matching the request, for counter-terrorism activities and to provide training and assistance for the Iraqi criminal justice system
The mainstream media remains silent on this but the International News has now picked up the story http://www.thenews.com.pk/top_story_detail.asp?Id=22164
and then there is Obamas $108 billion IMF bailout scheme http://michellemalkin.com/2009/05/13/obamas-100-billion-imf-bailout-scheme/
in addition to the Supplemental.
And THIS is what Obama is doing to American taxpayers:
THE BIGGEST TAX HIKE IN AMERICAN HISTORY:
Obama gives your tax dollars to rebuild Muslim mosques around the world
ACCORDING TO THE ASSOCIATED PRESS, THE OBAMA ADMINISTRATION WILL GIVE AWAY NEARLY $6 MILLION OF AMERICAN TAX DOLLARS TO RESTORE 63 HISTORIC AND CULTURAL SITES, INCLUDING ISLAMIC MOSQUES AND MINARETS, IN 55 NATIONS. See the State Department document here.
We take away the Social Security from those who,
for the most part, have contributed to it
all their working lives
But we keep open the utterly parasitic:
Dept. of Education
Internal Revenue Service (Fair Tax)
Separate Health plans for Federal Workers, and
Aggressive retirement plans for federal workers
Unionized Federal Workers
Most of National Institute of Health
Grants to other Countries
Pet projects of Congress Critters
Dare I say, If necessary, much of Military
But No, they have to pull the rug out from the elderly
From a plan they have, for the most part,
have individually paid into in the past
How dare he threaten us!! Don't pay Congress for a while makes much more sense!! And those Congressmens' expense accounts?? Forget paying them for a while.
If you don't create jobs and get rid of stupid programs like Head Start etc...there will NEVER be enough money.
What Congressional Republican has been talking about this? Obama is the one that brought it up.
Guns & Butter?
LBJ raided the SS trust fund to pay for his "war on poverty" and if they can't even cover that, who will believe in ObamaCare?
This whole thing is BS as Mark Levin has been saying. Without touching the debt ceiling at all the country will take in 200B in August of which something like 30B is interest on debt. They could pay debt interest, SS, medicare, medicaid even, and all military costs and then worry about what else to pay for but pain is the name of the game here and putting SS in jeopardy is pure politics. Bork Obunga has a basic and severe problem with priorities.
Beautiful voice, but I’m not cheap, just fed up. The fact of the matter is that the United States is broke, because she has spent money for decades that she didn’t have. The problem now is that the “golden goose” is slaughtered, roasted, eaten and people are still fighting over the next golden egg.
The U.S. can prosper again, and then some, but the free market has to come back, and that means no more socialism AT ALL. Social Security was the camel’s nose in the tent. We either learn from it, and grow, or ignore the lesson and repeat until it’s too late. But, I still liked the song. : D
Slash your wrist kind of song.
“If the U. S. defaults on debt obligations (bonds), then there is no longer any moral obligation for taxpayers to pay taxes.”
Indeed, you will be able to comfort yourself with that in jail after having had any remaining assets seized by the IRS, who will be even MORE humorless than ever in collecting their due.
Why dont We the People take charge of this?
We need to TELL the Government where and where not - to make cuts!
It is OUR money!
I say, give grandma her check and cut off foreign aid. Give grandpa his check and quit supporting illegals!
Where does it say that WE THE PEOPLE don’t have a say in these matters?
I was thinking, you know how everybody was so interested in pouring over Palin's memos to find "something of interest"? Well how about people dig through the annual budget to find examples of wasted taxpayer money?
Here are a couple of suggestions I received in an email today. To this list I would add the Department of Education which I believe is not necessary.
These are all the programs that the new Republican House has proposed cutting.
Corporation for Public Broadcasting Subsidy. $445 million annual savings.
Save America 's Treasures Program. $25 million annual savings.
International Fund for Ireland . $17 million annual savings.
Legal Services Corporation. $420 million annual savings.
National Endowment for the Arts. $167.5 million annual savings.
National Endowment for the Humanities. $167.5 million annual savings.
Hope VI Program.. $250 million annual savings.
Amtrak Subsidies. $1.565 billion annual savings.
Eliminate duplicative education programs. H.R. 2274 (in last Congress), authored by Rep. McKeon, eliminates 68 at a savings of $1.3 billion annually.
U.S. Trade Development Agency. $55 million annual savings.
Woodrow Wilson Center Subsidy. $20 million annual savings.
Cut in half funding for congressional printing and binding. $47 million annual savings.
John C. Stennis Center Subsidy. $430,000 annual savings.
. Community Development Fund. $4.5 billion annual savings.
Heritage Area Grants and Statutory Aid. $24 million annual savings.
Cut Federal Travel Budget in Half. $7.5 billion annual savings.
Trim Federal Vehicle Budget by 20%. $600 million annual savings.
Essential Air Service. $150 million annual savings.
Technology Innovation Program. $70 million annual savings.
Manufacturing Extension Partnership (MEP) Program. $125 million annual savings.
Department of Energy Grants to States for Weatherization. $530 million annual savings.
Beach Replenishment. $95 million annual savings.
New Starts Transit. $2 billion annual savings.
Exchange Programs for Alaska Natives, Native Hawaiians, and Their Historical Trading Partners in Massachusetts . $9 million annual savings.
What the hell is this anyway ?(are we trading Alaskans for Hawaiians?) Guess so I think we should trade those two groups for their Hysterical Trading Partners in Massachusetts and throw in the entire population of Vermont to sweeten the pot. (You know what pot Im talkin about.)
Intercity and High Speed Rail Grants. $2.5 billion annual savings.
Title X Family Planning. $318 million annual savings.
Appalachian Regional Commission. $76 million annual savings.
Economic Development Administration. $293 million annual savings.
Programs under the National and Community Services Act. $1.15 billion annual savings.
Applied Research at Department of Energy. $1.27 billion annual savings.
FreedomCAR and Fuel Partnership. $200 million annual savings.
Energy Star Program. $52 million annual savings.
Economic Assistance to Egypt . $250 million annually.
U.S. Agency for International Development. $1.39 billion annual savings.
General Assistance to District of Columbia . $210 million annual savings.
Subsidy for Washington Metropolitan Area Transit Authority. $150 million annual savings.
Presidential Campaign Fund. $775 million savings over ten years.
No funding for federal office space acquisition. $864 million annual savings.
End prohibitions on competitive sourcing of government services. Repeal the Davis-Bacon Act. More than $1 billion annually.
IRS Direct Deposit: Require the IRS to deposit fees for services it offers (such as processing payment plans for taxpayers) to the Treasury, instead of allowing payments to remain as part of its budget. $1.8 billion savings over ten years.
Require collection of unpaid taxes by federal employees. $1 billion total savings. WHAT THE HELL !
Prohibit taxpayer funded union activities by federal employees. $1.2 billion savings over ten years. HUH?
Sell excess federal properties the government does not make use of. $15 billion total savings.(What are they? If it's Yosemite, no.)
Eliminate Mohair Subsidies. $1 million annual savings. MOHAIR? REALLY?
Eliminate taxpayer subsidies to the United Nations Intergovernmental Panel on Climate Change. $12.5 million annual savings.(Hell yes!)
Eliminate Market Access Program. $200 million annual savings.
USDA Sugar Program. $14 million annual savings. NEVER NEW THE GOVT WAS PROMOTING SUGAR.
Subsidy to Organisation for Economic Co-operation and Development (OECD).$93 million annual savings. THIS MUST HAVE BEEN WRITTEN IN BRITAIN. NOTICE THE SPELLING ON ORGANIZATION? NASTY BRITS, ALWAYS MEDALING IN OUR POLITICS.
Eliminate the National Organic Certification Cost-Share Program. $56.2 million annual savings.
Eliminate fund for Obamacare administrative costs. $900 million savings. ABSOLUTELY! ALLEHLUIA!
Ready to Learn TV Program. $27 million savings.
Eliminate death gratuity for Members of Congress. WHATS THIS, TO HELP PAY BURIAL FEES? DO THEY HAVE TO BE DEAD?
HUD Ph.D.. Program.
Deficit Reduction Check-Off Act
TOTAL SAVINGS: $2.5 Trillion over Ten Years
My question, what THE Devil is all this doing in the budget in the first place ?
Is there anything listed you cannot do without?
My question, why do we have to wait 10 years? I say get rid of it all now! Makes a person wonder what kind of people have we been electing to office who allow such greed and corruption to fester and grow to this intensity? I bet for every program listed, theres probably fifty others still out of control.
Thomas J. Jackson
Here something which can be added!
Do away with this agency and save over 20 billion! Them let the states manage its fossil fuel in their boards
and off their coast. This act would increase supply and lower your cost!
History The Department of Energy was formed after the oil crisis on August 8, 1977 by President Jimmy Carter's signing of legislation,
The Department of Energy Organization Act of 1977 (P.L. 95-91, 91 Stat. 565).
Formed August 4, 1977
Preceding agencies Energy Research and Development
Federal Energy Administration
Employees 16,000 federal (2009)
93,094 contract (2008)
Annual budget $24.1 billion (2009)
Department executives Steven Chu, Secretary
Daniel Poneman, Deputy Secretary.
Department of Energy - Fossil Fuels
Fossil fuels - coal, oil and natural gas -- provide more than 85% of all the energy used in the United States. They are also used to create nearly two-thirds of our electricity and almost all of our transportation fuels. It is likely that our reliance on fossil fuels will increase over the next two decades, even with aggressive development and use of new renewable and nuclear technologies. DOE's Office of Fossil Energy (FE) has a key role in helping America meet its growing need for secure, fairly priced, and environmentally sound fossil energy supplies. FE's main goal is to ensure the U.S. can continue to rely on fossil fuels for clean, affordable energy. This is accomplished through two major efforts: Emergency stockpiles of crude oil and heating oil
The Department is in charge of maintaining the Strategic Petroleum Reserve and the Northeast Home Heating Oil Reserve. In the event of a major supply interruption, the President can release oil from these reserves into the market.
Research and development of future fossil energy technologies
New technologies can make the future production and use of fossil fuels more efficient and environmentally cleaner. Coal-based power plants, due to FE's cutting edge R&D, can now produce electricity while creating almost no emissions. Carbon Capture and Storage (CCS) reduces carbon dioxide (CO2) emissions from both existing and new coal-based power plants. The U.S. is now the world's leader in CCS science. FE is also working to diversify domestic natural gas supplies to meet the needs of American consumers. This includes making it safer and cleaner to produce gas from methane hydrate, shale, as well as from deepwater regions. For statistical information relating to oil, natural gas, coal, and the electricity it produces, visit the Energy Information Administration
Notice I said moral obligations, not legal. But once their ability to shame people into paying taxes goes away, then seizure becomes all the more difficult.
Make no mistake, tax collections are essentially voluntary. If enough people say “no” to paying taxes, there is simply nothing government can do about it.
You just haven't been paying attention. You know full well, which one he will fund.
Communism = Death.
This is a twofer!~!
That’s what I’m saying.
And until they make the proper cuts, we shuld withhold our financial support.
Unless, we are too skeerded...
Yep, but I doubt Aaron Krowne is clueless. When an article starts out with a clearly fallacious premise, such as the one you quoted in your post, it is more likely that he just stated it to build a political polemic on.
Where’s the media graphics of grandma being pushed down the stairs by the evil RATS?
“Stopped right there. The author is clearly clueless.”
You got that impression also? I read that and went “huh?”
The SSTF is part of the $14.3 trillion national debt. It is included under "Intragovernmental Holdings," as distinct from the publicly held debt. But it is still debt and counts against the debt ceiling.
Every elected official from the President on down should take a pass on their salaries until SS, the military, and the VA checks are written. If that is not enough money, throw in the judicial branch and all the czars, and all the bureaucrats.
Even if the SSTF had real assets, the program is structurally unsustainable.
“But once their ability to shame people into paying taxes goes away, then seizure becomes all the more difficult.”
The real problem comes when people decide to stop using banks - either because they’ve lost all their money, or it has become worthless.
When there is no electronic, automated way to harass people, freeze or seize their assets, there is no leverage.
They won’t do it face-to-face, they’ll just take it from you electronically - just like they create money.
That’s what’s new here. They used to have to take everything you own in person with possible consequences along the way. Now it’s easier.
Good point. But to do that, we would have to regress to a barter system. Not practical in today’s times.
Wont be much paid in taxes anyway. Unemployment is high and profits for domestic businesses are down significantly. So Obama was lying when he stated.
He is not bluffing. They have not only stolen our retirement savings, but they intend to not return the funds they stole. This government is illegitimate.
All illegal aliens and visa holders should be kicked out of the country. That is what Japan did when they were overwhelmed by the Tsunami. We cannot support the worlds transients anymore because our corrupt government has stolen our money.
Probably alluding to reformist Republicans who have been saying that social security will default if not reformed. Default meaning not paying. The Dimwits were the one saying that default was not possible because the magical fairy prince told them so.
Yep - they left is threatening SS for the same reason that the local school board threatens after-school programs and bus service instead of trimming a few layers of useless administrators whenever they want a tax increase.
“Good point. But to do that, we would have to regress to a barter system. Not practical in todays times.”
I’m not so sure the IRS will care if certain people they select are forced to barter. I’m sure there will be banking alternatives for some of those people. I think to your point though, once people stop paying - and become scofflaws in the eyes of the government over taxes, it’s awfully hard to imagine them coming back into the fold.
You’ve hit on the Achilles Heel of the modern (last 100 years) political state.
Politicians campaign on giving away Free Stuff, and not surprisingly get elected. They then either don’t fund it because they want to get re-elected, or they raid whatever money is accrued to campaign for yet more Free Stuff.
Eventually though, the bills come, the numbers don’t lie. And here we are.
So that is the reason they squandered the money, because it was unsustainable?
Are you taking inflation into account when you say that?
I remember a nice new house with a big yard could be had for 7 or 8 thousand dollars.
I hate to be the one that breaks it to you, but politicians at the local, state, and federal level stopped caring about public sentiment about a hundred years ago. They’ve done a reasonable job of brainwashing many into thinking all of this nonsense is really what they want, or “it’s for the children” or various other techniques to quash dissent, but the mask will soon come off. It has to, because of what’s likely coming. It was all planned that way, if you can believe that. Unfortunately you are talking of a world that no longer exists.
The IRS looks at barter transactions the same way they do cash transactions.
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