As an Aug. 2 deadline looms for Congress to agree on a debt-ceiling increase, Hawaii U.S. Rep. Colleen Hanabusa says she’s confident Social Security benefit payments are not in jeopardy.
But Hanabusa’s confidence contrasts with the statements of both President Barack Obama and U.S. Treasury Secretary Timothy Geithner. It also doesn’t jibe with a new report on debt limits by the Bipartisan Policy Center.
In a town hall meeting Hanabusa held by phone Tuesday night, the congresswoman assured callers that their Social Security checks would reach them regardless of whether or not the federal debt limit is lifted by Tuesday. The deadline marks the point at which U.S. Treasury officials say the federal government will begin to default on its payments.
“Social Security is a trust fund, not monies that you take from the government,” Hanabusa told callers. “It is solvent to at least the year 2036. There is no reason why your check should not be issued. It is actually your money that the government holds.”
President Obama seems to disagree.
Obama told CBS News back on July 12 that he cannot guarantee Social Security checks will go out after Aug. 2 if a deal isn’t reached to raise the $14.3 trillion debt limit.
Obama said in the CBS interview: “I cannot guarantee that those checks go out on Aug. 3 if we haven’t resolved this issue. Because there may simply not be the money in the coffers to do it.”
In a Wall Street Journal article, Treasury Secretary Geithner singled out Social Security obligations as one reason to seek special authority from Congress to borrow money even if lawmakers don’t raise the debt ceiling.
“However, I would emphasize that failure to increase the debt limit would raise questions about the creditworthiness of the United States and about our ability to borrow for any purpose, including payment of Social Security,” Geithner wrote in a letter to Florida Sen. Bill Nelson, who reached out following Obama’s comments about the uncertainty of Social Security payments.
“Therefore, the only solution for the nation as a whole is to enact an increase in the debt limit as soon as possible,” Geithner wrote.
And while House Speaker John Boehner initially brushed off the president’s concerns, he later told Fox News that if the federal government has no revenues come Aug. 3, Social Security checks would be affected:
Fox News anchor: “Does the money from the Social Security come from a different account essentially, so that even if we do hit the debt ceiling and there is still some government shutdown, those checks still go out?”
Boehner: “Oh, I don’t believe so. At the end of the day, it all comes out of the general fund, and the general fund is expected to be out of cash come August 3rd or August 4th, and then the Treasury Secretary would have to make decisions on what to pay and what not to pay.”
The Washington, D.C.-based Bipartisan Policy Center says if the ceiling isn’t raised, paying Social Security benefits will “quickly become impossible.”
The organization put out a report this month after studying U.S. Treasury receipts and expenditures for August 2009 and 2010. The 38-page report concluded that without a ceiling increase, the government likely would not have enough money to pay the full $23 billion payment to Social Security recipients due on Aug. 3.
Here’s a conclusion page from the report, which includes a bullet point stating that an outcome would be “individuals not receiving government checks.”
In an FAQs page on the Social Security Administration’s website, it explains how Social Security benefits are paid each month:
“Money to cover expenditures — mainly benefit payments — from the (Social Security Trust Funds) comes from the redemption or sale of securities held by the trust funds. When “special-issue” securities are redeemed, interest is paid. In fact, the principal amount of special issues redeemed, plus the corresponding interest, is just enough to cover an expenditure.”
Bottom line: While Hanabusa says Social Security recipients shouldn’t worry, it’s clear that the president and the head of the Treasury believe not raising the debt ceiling will impact Social Security benefits. The Bipartisan Policy Center report also came to the conclusion that failure to raise the ceiling will lead to Social Security cuts.