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Jan 31, 2011

Scary Prospects

On this slow news day, let me give a summary of where we are with appropriations and the federal debt ceiling. I will start with the appropriations process which is dangerous for the Social Security Administration and then go on to the debt ceiling which is even more dangerous. Fiscal Year (FY) 2011 began on October 1, 2010. To this point, the only appropriation for Social Security and other agencies has been a Continuing Resolution (CR) that allows Social Security to continue spending at the FY 2010 rate. The CR is bad for Social Security since the agency's workload is increasing with the aging of the Baby Boom generation. The CR ends on March 4, 2011. If nothing else is passed by then, Social Security and other agencies shut down.

Agreement between Congress and the President on a real FY 2011 appropriation seems unlikely at this point. Republicans in the House of Representatives are insisting on rolling back appropriations to FY 2008 levels. This would be disastrous for most agencies. It would be catastrophic for Social Security. There would be mass layoffs of Social Security employees. The agency could not function. The Republican base and Fox News are insisting upon confrontation with Democrats over appropriations yet it seems clear that any government shutdown would be extremely unpopular with the public.

I can only speculate that we will continue to see CRs for the rest of FY 2011 but a government shutdown is not out of the question. Agreement between Republicans and Democrats is possible but hard for me to envision.

At the moment, this situation has caused Social Security to discontinue virtually all hiring. I think the agency has discontinued most if not all overtime. This will hurt more and more as time goes on.

Congress has set a ceiling on the gross amount of federal debt. Because the federal government is running a large deficit, it needs to keep borrowing money. We will reach the debt ceiling sometime around the end of March or early April. If the debt ceiling is not raised, much of the federal government must shut down. It is not at all clear how this would affect Social Security. We have never gone there before. Undoubtedly, there are contingency plans but it would be best if these plans just gather dust.

Raising the debt ceiling requires a majority vote in the Republican controlled House of Representatives. Many Republicans have pledged to vote against an increase in the debt ceiling unless they obtain something dramatic such as huge reductions in appropriations and Social Security benefits. Some have pledged to vote against an increase in the debt ceiling no matter what is offered. Again, the Republican base and Fox News are demanding confrontation but a failure to raise the debt ceiling could have terrible long term consequences since it would shut down much of the federal government and bring into question the nation's creditworthiness.

At best, I think we are going to the brink on the debt ceiling. The chances of going over the precipice are very real.

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  • 7 Comments:

    Anonymous Anonymous said...

    The Appeals Council is still working overtime hours.

    11:43 AM, January 31, 2011  
    Anonymous Anonymous said...

    TSC's are still working OT on days that are level 1 thru 3.

    12:27 PM, January 31, 2011  
    Anonymous Anonymous said...

    There is still limited OT available sporadically in some ODAR offices.

    6:19 PM, January 31, 2011  
    Anonymous Anonymous said...

    Field offices have OT.

    7:10 PM, January 31, 2011  
    Anonymous Anonymous said...

    If all OT and awards were cut SSA could probably have no trouble running on a CR for as long as needed.

    9:36 PM, January 31, 2011  
    Anonymous Anonymous said...

    The reason US Bonds are so in demand all over the world is that our government has a long history (since 1789) of always paying it's debts. The risk, beyond that to any Federal agency or even government operations on the whole, is that a refusal by Congress to raise the debt limit will send a signal to bondholders that US debt is no long as safe and secure as it has been. Interest rates will rise significantly and our nasceant recovery will collapse. There will be a compromise on this issue. Some cuts will be made, but the debt ceiling will be raised in the end.

    9:49 AM, February 01, 2011  
    Anonymous Anonymous said...

    And, social security funds invested with the Treasury are another form of US debt which, if not redeemed as promised, will similarly signal that the US is not creditworthy.

    11:38 PM, February 02, 2011  

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