Skip to comments.Treasury to tap pensions to help fund government
Posted on 05/16/2011 8:08:46 AM PDT by Qbert
The Obama administration will begin to tap federal retiree programs to help fund operations after the government loses its ability Monday to borrow more money from the public, adding urgency to efforts in Washington to fashion a compromise over the debt.
Treasury Secretary Timothy F. Geithner has warned for months that the government would soon hit the $14.3 trillion debt ceiling a legal limit on how much it can borrow. With the government poised to reach that limit Monday, Geithner is undertaking special measures in an effort to postpone the day when he will no longer have enough funds to pay all of the governments bills.
Geithner, who has already suspended a program that helps state and local government manage their finances, will begin to borrow from retirement funds for federal workers. The measure wont have an impact on retirees because the Treasury is legally required to reimburse the program.
The maneuver buys Geithner only a few months of time. If Congress does not vote by Aug. 2 to raise the debt limit, Geithner says the government is likely to default on some of its obligations, which he says would cause enormous economic harm and the suspension of government services, including the disbursal of Social Security funds.
Administration officials have expressed interest in raising the amount that federal employees contribute to their pensions, sources told The Washington Post.
The Republicans have suggested that the civilian workforce contribute more to its retirement in the future, effectively trimming 5 percent from salaries. The administration has not been willing to go that far in talks being led by Vice President Biden.
(Excerpt) Read more at washingtonpost.com ...
Of course, Republicans will be blamed.
Not to worry. They’ll put in IOUs to replace the funds.
All is well in Lala Land.
For every low rent brain dead Obama bot he entices into his social justice moral equivalence hell hole, a federal worker will be flipping him the bird.
I like it. Government got us into this “Spending” problem, and they should be the FIRST to pay up.
All of that pension money is cash that will be physically withdrawn from the bank vault where it is sitting at the present time ... which means the Fed won't have to print any more money ... and Congress will not authorize replenishment of the pension funds in the event a deal is not reached ... so my boys are not stepping over the legal debt limit ... and they are not creating more inflation ... and all of this is the honest and for real absolute truth ... or my name isn't Helicopter Ben!
Well, theyve been tapping Social Security for 75 years.
And just about every government, at every levelmunicipal, county, state, and federal, has been tapping pensions, or underfunding them.
But now I suppose Boehner will cave when they all scream that its his fault.
Hey, Boehner, how about just pointing out that theyve been doing this for decades, and that the problem is that Democrats and their Republican accomplices keep spending money that they dont have?
use the cash, replace with IOUs, and ‘by law’ return the cash...ponzi is jumpin sharks again...
poetic Justice! the first thing the usurper has done that I approve of. It really is our money, money the fed stole from us to bribe their flunkies.
That's okay, government will replace the pension fund with a promise that THEY will take care of everyones retirement. /s
I can see it now..........
"The government worker is making a sacrifice, time for you clingers and whiners to step up too"
BFD "Plugs" Biden
Right now he is trying to make the lack of ability to borrow look transparent. Public opinion is solidly against extending the debt limit, that can change fast, but right now Republicans have the upper hand politically.
So now the taxpayers are going to owe the money twice?
(1) Federal pensions are invested in T-bills—government bonds—the governemtn is already on the hook to pay this money back with interest.
(2) Now the gov. is going to borrow money from the pensions—which means they are on the hook to pay this money back a second time (again with interest I assume).
So the gov. is going to borrow money against the T-bills, or they are going to borrow the T-bills? In any case, this is just borrowing money from your left pocket, putting it in your right pocket, and pretending both pockets have money in them.
There are no real funds in the government pensions.
Just like there are no real funds in Social Security and MediCare.
Gov Christie goes him one better. NJ ignores paying in the government’s share of pension costs so he doesn’t have to take it out.
So, the Treasury is evidently taking existing U.S. debt, which is held by the retirement funds, and will sell that debt in order to raise cash to run the government. And, the Treasury is "legally required" to reimburse that pension fund.
The result will be that the U.S. will have exactly the same debt total due to paper obligations of the U.S., but IN ADDITION will owe reimbursement to the pension fund.
Though there is a claim that there exists a law which permits this, it is hard for me to imagine how such a transaction can be considered anything other than an increase in debt.
The Federal Reserve has been buying U.S. debt. Imagine now that the Fed gives back the debt instruments so that the U.S. can sell them a second time. The government got the dollars the first time the debt was sold to the Fed. Then the government gets the money a second time when it "redeems" the debt, taking back the paper without paying back the cash, and then sells the paper to somebody else.
Am I missing something about how all this works?
would seem that any pol that wants to, could relate this to the loomin [cough] ‘insolvency of SS/medicare’ and why all the money pissed away, everyday , needs to be cut...NOT holdin my breath fer that, but awaiting the declaration that we need to go ahead and extend the debt, to cover all the promises...even to fence jumpers and terrorist countries...
Make this a permanent feature of our budgeting process.
So the Treasury can overstep congress and do this?
How about all the money 'I paid in' ?? It's not there? I just want the bad gubmnt to pay me my entitlements, not charge the taxpayers. I thought cutting PP and ACORN would save enough money for that, no ??? :)
They symbolically repealed Obama-care, then symbolically repealed medicare.
What about the pesions of Congressmen? Will they be touched?
“The result will be that the U.S. will have exactly the same debt total due to paper obligations of the U.S., but IN ADDITION will owe reimbursement to the pension fund...Am I missing something about how all this works?”
It’s government accounting- they play by different rules. (This is older, but may still be relevant):
This article is a hoot!
First it says “The measure wont have an impact on retirees because the Treasury is legally required to reimburse the program.” AND then immediately after it says
IF IT defaults it won’t be able to meet it’s obligations!
I think that is exactly what it is.
A friend in the Army Corp of Engineers told me a couple of weeks ago that the federal government tried to do this same thing back in ‘95 or ‘96 when we had the same government budget limit issue, and he said the courts slapped the fed’s attempt down and prevented them from doing this. If that’s the case, then a legal precedent was set that I would think should hold up again this time. Thoughts?
First they came for the Social Security Funds and no one complained.
Then they came for the Federal Retirement Funds and no one complained.
Then they will come for the private retirement funds and no one complained because there was no one left.
Welcome to the Dark Ages people when everyone and everything belonged to either the local Laird of monastery.
take a close look at all the “privileges’ the local Laird had up to an including to the first night in the new wife's wedding bed.
It has happened before and will happen again.
I have no doubt they would if they could. But I'm trying to wrap my head around the idea of how they would do it without outright rebellion
Most 401 (k) are employer run and I can't see the US government mandating them to transfer the value of the stocks, bonds to the treasury
I could see them asking companies to let the government borrow against the value, but again it would be political suicide
“Most 401 (k) are employer run and I can’t see the US government mandating them to transfer the value of the stocks, bonds to the treasury
I could see them asking companies to let the government borrow against the value, but again it would be political suicide”
I wonder if there’s anything lurking around in the FinReg law that they would attempt to use. (Nobody ever seems to talk about that monstrosity anymore).
I have seen this Obama government do a lot of things I never thought I would see. Maybe it’s time to pull our money out of the 401K
In my darkest moments, I think that is precisely what Obama will do in the end:
He won't do it to re-shape society.
He won't do it cut the deficit.
He won't do it to increase spending.
He won't do it as part of some political or electoral strategy.
On my darkest days, I think Obama will do something like that because he wants this country utterly destroyed by a revolution. We would be shoved off the world stage for years and all of the anti-Western Civilization forces which Obama loves so much would move up in the world. All he has to do is try to seize our retirement assets and then this country all falls apart.
He doesn't have to successfully grab the assets.
He doesn't have to win the war.
He doesn't have to hold on to political power.
But he would win if he destroyed us, and this is one of the ways he could do that.
read this discussion (dating from 2006) and you will be wiser than your friend
However, what happened in the past, under a different Congress and a different presdient....is not guaranteed to happen again under the lawless arrogant contemptuous fobs now running the USA into the ground. These effete foreign- raised snobs like obama and geither would love to remake America because they currently hate Americans
The bailout was temporary, now this.....delay tactics until the real planned pillage of Vampire-Care begins.
So now the Feds own base can feel the pain, of having Obama and his inept Cabal of Czars taking the money from them.
Maybe the Dems will begin to see the Implosion coming, from Obama’s Mismanagement of the US economy.
This is assuming the federal worker is smart enough to know who to blame...
More than likely "the rich" will be blamed...
It will be really simple and people will laud them for it. They will "protect" private retirement by requiring all qualified plans to be invested (say 25% or 50%) in "safe" treasuries. Nobody will ever have to worry about losing their retirement to "evil" financial institutions.
IOU’s to replace the IOU’s that are in those retirement funds instead of the cash they already stole.
Yes they can ignore Congress, who do you see standing in their way?
Just wait 401k’s are next, if he can find any that still have money in them.
Now I'm sure dems would jump at the chance to rob our 401 K out from under our noses
That's exactly right...and the crash in early 2009 scared a whole bunch of folks right into this trap. I have no problem with people investing in treasuries if that's what they want to do but when they are forced to do so we're at a whole different place.
I can’t believe how little this thread has gotten notice.
What could possibly go wrong?
Darn good question
I think it’s funny that mostly liberal government employees’ “wealth” is be redistributed.
My husband is 52, 7 and 1/2 years away from withdrawing his money from his plan without penalty. (and yes, this is his money, contributed by him with no federal matching).
Do we bite the bullet and take the 33% penalty? Do we leave it there and trust that it will be there in 7 years?
Or go see a financial advisor and figure it out with them?
I’m thinking about going ahead and taking my Virginia retirement....at a reduced benefit just so I actually see some of the money. I miss you guys at MMS, but I’m so very happy in WVa....no CM!
This is just one opinion, but if you’re worried that the federal government will default, don’t. The federal government will always print the money, though it may be depreciated. I can’t say the same for state and local pensions. I suspect withing the next decade you’ll see many state/local pensioners take mild to significant haircuts in payouts