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.
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