If you have paid any attention to the national news over the past month or so, you have likely heard of the United States’ very significant pending deadline. By August 2, Congress and the President must reach an agreement on whether to raise the nation’s debt ceiling. If that decision is not made, the U.S. will lack the funds necessary to make all of its debt payments during the month of August, likely falling short by some $130 billion by the end of the month.
On Tuesday night, both President Obama and Speaker of the House John Boehnor each made speeches before the American public in support of their differing budget plans. During his speech, President Obama described the potentially harmful benefits of a default on Social Security Disability recipients, as well as on others who rely on government benefits for survival. “If we default, we would not have enough money to pay all of our bills,” he said, “bills that include monthly Social Security checks [and] veterans’ benefits.”
In response, many people have argued that the government should simply tap the Social Security trust fund in order to make August benefit payments. After all, this has been done before: in 1985 when the Reagan administration redeemed trust fund securities earlier than planned so it could borrow against them, and in 1996 when the Clinton administration borrowed money from the fund to pay benefits.
However, according to a non-partisan report from the Congressional Research Service, that may not be an option this time around. The trust fund doesn’t contain any actual money, just more than $2 trillion in IOUs from the Treasury Department. And converting them to payable benefit funds isn’t as easy as some are making it sound.
But according to Jason Fichtner, former acting deputy commissioner of the Social Security Administration, the fact that administration officials are not decisively saying whether the trust fund can be used for benefits in the case of a default is telling. “They can always pay Social Security if they choose to,” he said. “The debt limit is not a reason not to pay Social Security.”
Source: CNN Money, “Debt ceiling: Will I get my Social Security check?” Tami Lubhy, 28 July 2011