Did Barack Obama have one of those unwelcome political moments when the harsh reality of truth accidentally spills out when he said he couldn’t assure Social Security recipients that their checks would be mailed in August unless he got the debt ceiling increase he wanted?
Because, the facts are that although there is a specific Social Security trust fund in which Social Security taxes are tabulated, and the government reports there is a $2.7 trillion balance in that account, the taxes go into and the retirement and disability checks come straight out of the nation’s general fund.
That circumstance has prompted U.S. Rep. Bill Posey, R-Fla., to propose, along with half a dozen other House members, legislation that would make certain the payments to senior citizens are made in a timely manner.
The president’s comment came during an appearance recently on CBS.
“I cannot guarantee that those checks go out on August 3rd,” he warned. “There may simply not be the money in the coffers to do it.”
Posey insisted, however, that if the checks are not mailed, it will only be because Obama wants them withheld.
“The president is essentially saying he could take incoming Social Security payroll taxes and spend them elsewhere,” Posey said. “That money belongs to the nation’s retired seniors who have spent their entire lives working and paying into the system.
“The federal government is obligated to make these payments and anything short of doing so should be considered theft,” he said.
His Social Security Check Guarantee Act, H.R. 2581, removes the payment of Social Security benefits from the debt ceiling limit discussion by requiring that checks be sent to seniors even if the federal government reaches the statutory debt limit.
“The federal government takes in enough Social Security payroll taxes each month to pay the lion’s share of Social Security benefits,” Posey said.
His office has posted a chart showing categories of mandatory and discretionary spending:
The chart shows that in the Fiscal Year 2010 spending plan of $3.5 trillion, Social Security will take up $701 billion, Medicare $519 billion, Medicaid $273 billion, interest on debt $202 billion and other mandatory spending $433 billion. But there are hundreds of billions of dollars in spending that is optional.
The issue of defense spending, Social Security and interest payments on the nation’s debt have been debated intensely in recent days. Obama has demanded that Congress increase the nation’s debt limit so he can borrow and spend more money..
But a number of analysts have said it is not necessary to borrow more to meet current obligations. They point out that the nation could not, however, pay for the many programs that Obama proposes.
Jacob Lew, the director of the White House Office of Management and Budget, said Social Security should be of no impact on the debt ceiling issue, either.
“Social Security benefits are entirely self-financing,” he said. “They are paid for with payroll taxes collected from workers and their employers throughout their careers. These taxes are placed in a trust fund dedicated to paying benefits owed to current and future beneficiaries.”
He said the trust fund is in surplus now and growing. He said it would continue to accrue interest and grow until 2025 and will “have adequate resources to pay full benefits for the next 26 years.”
A congressional committee, however, documents that the Social Security trust fund is an accounting procedure.
“The trust fund neither receives payments from taxpayers nor makes payments to beneficiaries. It is simply an accounting device used to record transactions made on behalf of Social Security by the government,” said the Joint Economic Committee’s explanation.
“When individuals pay Social Security payroll taxes, the money goes into the general fund of the Treasury along with all of the other taxes collected by the government. When individuals receive Social Security benefits, the money comes out of the general fund of the Treasury just like any other government expenditure.
“The government records these transactions by increasing or decreasing the balance in the trust fund.”
The government explanation continued, however, with the warning that there is no cash there.
“The balance is comprised of federal debt, or more precisely, special issue non-marketable U.S. government debt securities. When payroll taxes exceed benefits, Social Security is said to ‘invest’ its surplus in these securities and the balance goes up. Conversely, when benefits exceed payroll taxes, Social Security is said to ‘redeem’ its investments in these securities to cover the deficit and the balance goes down.”
Commentator Charles Krauthammer wrote in the Washington Post that the reality is the Social Security trust fund contains nothing.
“Here’s why. When your FICA tax is taken out of your paycheck, it does not get squirreled away in some lockbox in West Virginia where it’s kept until you and your contemporaries retire. Most goes out immediately to pay current retirees, and the rest (say, $100) goes to the U.S. Treasury – and is spent. On roads, bridges, national defense, public television, whatever – spent, gone.”
Obama today warned that the debt ceiling must be raised “at a minimum” after House members passed a plan called Cut, Cap and Balance Act of 2011, which would cut $6 trillion from the proposed budget but failed in the Senate. Since then, several ideas have been proposed.
A spokesman for Posey, George Cecala, said seniors should not feel threatened.
“You can’t not pay Social Security benefits with Social Security money and pay something else with that money. “That money belongs to the seniors. It’s their money.”
According to a Social Security Administration snapshot, there are some 60 million receiving benefits from Social Security in retirement and disability income. The average monthly benefit is $1,079.
The Joint Economic Committee report also confirmed the “arcane” budgetary treatment of Social Security simply includes fallacies.
“Social Security has its own ‘trust fund;’ Social Security receipts and outlays are labeled ‘off-budget;’ and the Social Security Administration is an ‘Independent Agency.’ Despite all of these special features, Social Security is still a government program. When Social Security has a cash-flow surplus, Social Security taxes are available to pay for other programs. When Social Security has a cash-flow deficit, the government must collect other non-Social Security taxes or borrow from the public to pay for Social Security benefits,” the report said.
“When people talk about the ‘trillions’ in the trust fund, they are knowingly or unknowingly referring to the balance of unredeemed non-marketable U.S. government debt securities, not a pile of unspent cash.”
Joseph Farah, CEO of WND and the organizer of the grass-roots “No More Red Ink” campaign, which is lobbying to simply cut off the government’s credit card, said the House Republicans have it within their control to stop the borrowing and force the federal government to reduce spending.
“The only reason to raise the debt limit is to continue business as usual in Washington,” said Farah. “There is no necessity to do it. The prudent and responsible move would be to run the government with the trillions in revenues it takes in. No individual, no business and no state or local government can just keep borrowing to justify uncontrolled spending. It’s time the federal government starts operating like the rest of us do.”
In recent weeks, a number of high-profile commentators also have come out in favor of calling a halt to the borrowing – estimated at some $5 trillion since Obama took office.
Radio host Michael Savage blasted House Republicans for even considering allowing the Obama administration to pile up more debt.
“Where did all the ‘fiscal conservatives’ go?” Savage asked in a recent e-mail to WND. “Of course we should not extend the debt limit! What kind of insanity is this?
“If a family is broke and dependent on loans,” Savage continued, “what bank would extend a new credit line until the family 1) sold assets; 2) worked out a repayment plan for existing loans? We will become a bigger ‘banana republic,’ like Argentina 20 years ago, if we increase our national debt.”