Disentangling Social Security From the Debt Ceiling

From the Huffington Post:

By Nancy Altman and Mark S. Scarberry

Nancy Altman
Nancy Altman

Social Security appears to be a key bargaining chip in the struggle over the debt limit. President Obama may have played smart politics when he threatened that, if the debt limit is not raised, Social Security checks might not go out on time. But he was needlessly scaring the program’s fifty-five million beneficiaries, the vast majority of whom are highly dependent on each month’s Social Security check. So was Speaker John Boehner who, in a recent interview, also spoke of the possible interruption of benefits.

Mark S. Scarberry
Mark S. Scarberry

The truth is that checks can go out, in their full amount, without adding a penny to the federal government’s total debt. They can be paid without subtracting more than a tiny fraction of a percent — if anything — from the funds currently being used for other government purposes — a reduction so small that it could be considered a rounding error.

Three key facts make this true. First, Social Security has its own dedicated income stream for payment of benefits and associated administrative costs. Second, in addition to its current income, Social Security has an accumulated reserve of $2.7 trillion in its trust funds. That reserve is invested, as Congress has always required, in what has been the safest investment on Earth — treasury bonds backed by the full faith and credit of the United States. And third, the $2.7 trillion in treasury bonds held in the trust funds is included in the $14.3 trillion total debt that has reached the statutory limit.

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