President Obama is needlessly scaring seniors by suggesting that their Social Security benefit checks may not arrive on time if the U.S. runs out of borrowing authority at the debt limit. The 57 million Americans who receive Social Security benefits should know that their benefits will not be affected—unless President Obama and the Treasury deliberately choose not to pay them.
President Obama threatened Social Security benefits last week, saying, “In a government shutdown, Social Security checks still go out on time.… In an economic shutdown, if we don’t raise the debt ceiling, they don’t go out on time.”
Here are three reasons why President Obama and the Treasury can continue to issue Social Security payments at the debt limit:
- The Full Faith and Credit Act. The House of Representatives passed H.R. 807, allowing the Treasury to pay all public debt obligations and Social Security benefit payments after the debt limit has been reached. If the President and his allies were truly worried about defaulting on the debt and about not being able to meet Social Security payments, they could quickly take up this bill and assure America’s creditors and Social Security recipients that they need not worry.
- The Social Security trust fund. Treasury could redeem Social Security trust fund bonds early to pay benefits at the debt limit. Treasury used this option in 1985 to meet Social Security payments at the debt limit, and a law from 1996 authorizes the Treasury to redeem Social Security bonds early for the purpose of “payment of benefits or administrative expenses.” By making room under the debt limit from redeeming trust fund bonds early, Treasury is able to borrow additional funds from the public to make benefit payments.
- Revenues. Treasury will collect more than enough revenue in fiscal year 2014 to meet all debt obligations and most non-debt obligations on an annualized basis. After prioritizing interest on the debt, the Treasury could fund $2.8 trillion in additional obligations with projected revenues. This would cover, for example, Social Security and disability payments ($848 billion), discretionary defense programs ($582 billion), Medicare ($505 billion), Medicaid ($298 billion), and $517 billion of all other obligations—in total, more than three-quarters of the non-interest budget.
While Social Security is in desperate need of reform, there are at least three reasons why Social Security benefit recipients should know that President Obama and the Social Security Administration are scaring them needlessly.