Letter: Debt limit impacts Social Security
Thursday, July 28, 2011
In his July 20 letter, “Obama unclear on Social Security,” John Bala questioned President Obama’s statement that he could not ensure payment of Social Security checks if the federal debt ceiling is not raised on Aug. 2.
He questioned claims that Social Security will be solvent for decades, and couldn’t President Obama just go to the Social Security trust fund to get the money for Social Security checks? Social Security will be solvent for the next 20 to 75 years, depending on the cost model used, but that doesn’t mean there will be enough money in the Treasury on Aug. 3 to pay.
Social Security trust funds aren’t kept in cash.
They are invested in “zero risk” securities, special issues of the U.S. Treasury guaranteed by the full faith and credit of the United States. Last year, S.S. collected $1,020 billion used to purchase these securities, and $929 billion was redeemed and used to pay benefits and expenses.
Treasury must have enough money to redeem the securities. To get money to fund Social Security checks and all other bills, Treasury must use cash on hand from incoming tax receipts plus whatever they can borrow.
If the debt limit isn’t raised, it will be illegal to borrow more money. Tax receipts will only cover about half of what’s needed.