Why Is It That The Social Security Payments Due To Be Made On August 3 May Not Be Made On Time Or In Full?

Let me try to explain again why there is a threat to the payment of Social Security benefits in August. I'll do it in a Q and A manner. The problem is that the people who want and need to know this sort of thing are unlikely to read through this.

Question: How can there possibly be a threat to the payment of Social Security benefits -- Social Security is taking in enough money each month to pay benefits? 

Answer: Actually, Social Security is no longer taking in quite enough money to cover each month's benefits. Due to the aging of the baby boomer population, the trust funds are actually going down very slightly, although this may vary from month to month depending upon tax receipts. But that is not the real problem. The real problem is that the tax receipts don't arrive at the U.S. Treasury in one big lump sum at the beginning of each month. They come in drips and drabs throughout the month. A big chunk of Social Security payments are due to be made on the 3d of each month and there won't be enough money in the U.S. Treasury to make that payment on the 3rd of August.

Question: What's the Treasury got to do with it?
Answer: By law, the Secretary of the Treasury is the managing trustee of the Social Security trust funds. By law, all Social Security payments are made from the U.S. Treasury.

Question: Why doesn't Social Security just sell to the public some of those U.S. government bonds it is invested in?

Answer: It can't. The law says those bonds can't be sold to the public. They're non-marketable.

Question: If they can't be sold to the public, who can they be sold to?

Answer: They can be sold to the U.S. Treasury but if the debt ceiling isn't raised, the Treasury won't have money to buy back any of the bonds.

Question: Why not just sell some Treasury bonds to the public and use that money to redeem some of Social Security's non-marketable bonds?
Answer: To avoid going over the debt cap, the Treasury would have to redeem Social Security's bonds first and then sell Treasury bonds to the public. There wouldn't be money in the Treasury to redeem Social Security's non-marketable bonds.

Question: Does this mean that no Social Security benefits will be paid if the debt ceiling isn't raised?

Answer: No, it just means that the checks due to be paid on August 3 can't be paid in full, on-time. They can be paid, at least in part, later in the month. However, a failure to raise the debt ceiling would create chaos at the U.S. Treasury.. It is unclear exactly when payments would go out.

Question: You say that Social Security might not be paid in full but why?

Answer: Social Security's cash receipts do not quite cover the payments it needs to make but more importantly, failure to raise the debt ceiling would leave the government without the money to meet many crucial obligations. No one wants Social Security recipients to be left without part of their checks but no one wants to close federal prisons and release all of those prisoners. No one wants to stop Medicare and Medicaid. No one wants to stop paying soldiers in the field. No one wants to send all the air traffic controllers home. No one wants to stop paying those who work in the Border Patrol. Total up all these and many other crucial functions and you've got more money that needs to be paid than the government's cash flow. Something's gotta give. It is possible that Social Security payments would be reduced to help out in this impossible situation.
There's also a possibility that money that should be paid to Social Security beneficiaries would have to go to service the U.S. debt. Some U.S. bonds sold in the past will be coming due in August. Normally, this debt would be rolled over by issuing new bonds. The problem is that because of the debt ceiling, the Treasury won't be able to issue new bonds before paying off the old bonds. Where does the money come from to do that? This would be temporary but a big problem. Of course, the problem would become immense if the U.S. could not sell new bonds because of the chaos at the Treasury, which is a real possibility.

Question: Why are we so worried about the bondholders?
Answer: The U.S. Constitution says that the validity of U.S. bonds may not be "questioned." In any case, trying to stiff the bondholders would make it impossible for the U.S. to borrow money would certainly cause a collapse in world financial markets.

Question: This proves that the Social Security trust funds are a myth, doesn't it?

Answer: The nature of the Social Security trust funds has never been a secret. Most people have misconceptions about the nature of the trust funds. They think, literally, that there is some pot of dollar bills somewhere with their name on it or they think that there is some huge pot of dollar bills somewhere labeled "Social Security trust fund." The fact that there are common misconceptions about the trust funds does not make the trust funds a myth.. The U.S. government bonds in the trust funds are real. The existence of the trust funds is the crucial reason that Americans believe that they "own" their Social Security benefits. We should all agree that this sense of ownership is no myth. It is of crucial political importance. It is why there is almost no chance that those who want to destroy or dramatically alter Social Security will succeed. No other sort of trust fund has ever been a realistic possibility.

Social Security Wants Computer Fix For SSI Resources Issue

From a notice posted by Social Security on FedBizOpps.gov:

This is a SOURCES SOUGHT NOTICE.  It is NOT a solicitation for proposals, proposal abstracts, or quotations and in no way obligates the Government to award a contract.  The purpose of this notice is to obtain information, for planning purposes, regarding: (1) the availability and capability of potential sources that are capable of accessing detailed electronic data on property ownership for all 50 states, the District of Columbia and Northern Mariana Islands.  (Access to property information in U.S. territories and foreign countries is desirable but not mandatory);  (2) the ability to provide data elements related to a specific property which should include:  Social Security Numbers (SSNs) of owner(s); Names(s) of owner(s); full address of property including description and parcel number; tax assessed value; encumbrances if any i.e. mortgages, liens, etc.); dates of ownership; sale information (date and price); and use of property (i.e. commercial, residential, farm, etc.); (3) the ability to deliver data current, timely data in an electronic format protecting the personal information of Supplemental Security Income (SSI)  receipts; (4) provide access/search capability using SSN; and have ability to transfer multiple data records via an automated process; and develop routine management information reports and ad hoc request.

Nutty Death Master File Theories

A match made in hell: 9/11 conspiracy theorists meet the Social Security death master file.

Shakeup Continues At Social Security

Memorandum

Date:    July 15, 2011   

Refer To:  S7K

To:    Senior Staff

From:    Michael J. Astrue  /s/
            Commissioner   

Subject:    Executive Personnel Assignments - INFORMATION

I have several announcements to share.

San Francisco Regional Commissioner, Pete Spencer, will retire September 2, 2011.    Pete’s career started as a Management Intern in 1968 and from there he built an extensive resume within the agency that spans programmatic, administrative, and operational organizations.  He served as Senior Advisor and Executive Officer with the Bureau of Supplemental Security Income when it was in its infancy in the early 1970’s through 1979.  In the 1980’s, he served as Director of Labor and Employee Relations and Director of Human Resources.   In the 1990’s, he was Executive Staff Director for the SSI Modernization effort before moving to Operations as Acting Associate Commissioner for Public Service and Operations Support.  He later served as Assistant Deputy Commissioner for Legislation and Congressional Affairs, Assistant Regional Commissioner for Management and Operations Support in San Francisco, and Acting Deputy Commissioner for Budget, Finance and Management.   Pete also spent a year on assignment as Senior Policy Officer with the National Performance Review.

Pete exemplifies the finest qualities of a public servant, always focused on delivering service to the public with the highest standard of integrity.    

Following Pete’s retirement, Bill Zielinski, currently the Associate Director for Retirement and Benefits with the Office of Personnel Management, will return to be Regional Commissioner. 
Please join me in wishing Pete the very best in retirement and in welcoming Bill back to the agency. 

Chief Information Officer (CIO) Frank Baitman has announced his resignation effective  August 19, 2011.  With Frank’s departure, Kelly Croft, Deputy Commissioner for Systems, will assume the CIO responsibilities. Personnel from the immediate OCIO and the Office of Information Security will move to the Office of Systems. 

Mary Chatel, Senior Advisor to the Deputy Commissioner for Retirement and Disability Policy, will retire July 31, 2011. 

In the Office of Disability Adjudication and Review, Jim Julian is Acting Associate Commissioner for Executive Operations and Human Resources (OEOHR).  Kelly Salzmann, is Acting Deputy Associate Commissioner, OEOHR.

Little Progress On New Union Contract

The American Federation of Government Employees (AFGE), the labor union that represents most Social Security employees,  has posted an update on how its contract negotiations are going with Social Security. It is dated June 15 but it was just posted this week. It shows that there has been little or no progress.

Republicans Coming To Their Senses?

An increase in the debt ceiling is needed to keep the August Social Security checks from being delayed or reduced.  From the Los Angeles Times:

Republican leaders in the House have begun to prepare their troops for politically painful votes to raise the nation's debt limit, offering warnings and concessions to move the hard-line majority toward a compromise that would avert a federal default. ...

At a closed-door meeting Friday morning, GOP leaders turned to their most trusted budget expert, Rep. Paul D. Ryan of Wisconsin, to explain to rank-and-file members what many others have come to understand: A fiscal meltdown could occur if Congress fails to raise the debt ceiling.

House Speaker John A. Boehner of Ohio underscored the point to dispel the notion that failure to allow more borrowing is an option.

"He said if we pass Aug. 2, it would be like 'Star Wars,'" said Rep. Scott DesJarlais, a freshman from Tennessee. "I don't think the people who are railing against raising the debt ceiling fully understand that."

The warnings appeared to have softened the views of at least some House members who, until now, were inclined to dismiss statements by administration officials, business leaders and outside economists that the economic impact would be dire if the federal government were suddenly unable to pay its bills.

Freshman Rep. Steve Womack (R-Ark.) said the presentation about skyrocketing interest rates that could result from downgraded bond ratings was "sobering."

Grand Plan In The Works?

From Larry Kudlow writing at National Review Online:

As has been reported, [Senate Minority Leader Mitch] McConnell is negotiating now with Sen. Harry Reid for a large-scale package that will allow the debt ceiling to rise unless overturned by a two-thirds vote. If a White House debt-ceiling deal comes through with $1.5 trillion of spending cuts, that will be part of the package. Right now, it’s not completed because enforceable spending caps have not been determined.

The key part of the new McConnell package is a joint committee to review entitlements in a massive deficit-reduction package. Unlike the Bowles-Simpson commission, this committee will be mandated to have a legislative outcome — an actual vote — that will occur early next year. No White House members. Evenly divided between Republicans and Democrats. No outsiders. This will be the first time such a study would have an expedited procedure mandated with no amendments permitted. Also, tax reform could be air-dropped into this committee’s report.

Greg Sargent writing in a Washington Post blog reports that the McConnell package would force a major review of entitlement programs, such as Social Security and Medicare, with Congress being forced to vote on entitlement changes.

The Republican leader in the Senate wants to make sure there are Congressional votes on cutting Social Security and Medicare in an election. That sure sounds like a winner for Republicans!

Meanwhile, Senator Jim DeMint (R-SC) is pledging to do everything possible, apparently meaning a filibuster, to force the U.S. into default.

"If You Argue With A Fool, You've Got Two Fools"

 From John Avlon writing in the Daily Beast:

Call them Debt Ceiling Deniers. Believers in faith-based fiscal policy. Math-challenged cause-and-effect-skeptics. ...

The costs of courting conservative populists should be clearer than ever to reality-based fiscal conservatives inside the Republican Party.  Their “all-or-nothing” meets “what, me worry?” negotiating stance is not only the newest symbol of D.C.’s dysfunction—it is beginning to have an impact on the entire U.S. economy. ...

The fact that defaulting on our debt would raise interest rates—deepening the fiscal hole we’re in by compounding the size of our deficit and debt overnight—is not addressed.  Instead we are greeted with nihilistic bubble talk—at its best, economic incompetence and at its worst evidence of tactical Leninism—the belief that “the worse things get, the better they are for me politically.” ...

If you argue with a fool, you’ve got two fools.  Nonetheless, I thought a reality check might help some of the Republicans in Congress currently deciding how they’ll vote as we pedal ever closer to the cliff that is the August 2 deadline.

So I reached out to two former Republican chairmen of the Council of Economic Advisors, with presumably impeccable fiscal conservative credentials: Michael Boskin, who served under Bush 41, and Glenn Hubbard, who served under Bush 43.

"A real default would have severe ramifications in financial markets and the economy.  We need to maintain the full faith and credit of U.S. government securities," says Boskin, now a senior fellow at the Hoover Institution.  "The deficit and debt are primarily a spending problem that could condemn us to stagnation or stagflation if not seriously addressed soon. So trying to leverage the debt ceiling increase into spending control makes economic sense...The worst outcome is a default with no real spending control."

While you’re digesting that considered opinion, here’s Glenn Hubbard, advocate/architect of the Bush tax cuts and dean of the Columbia Business School.  “The debt ceiling must be raised—not doing so is irresponsible,” Hubbard emailed.  “The real discussion needs to be about to stabilize, then reduce America's burgeoning debt-to-GDP ratio…From here, the most sensible path would be an agreement on spending reductions.  Then should come a debate (post-raising the ceiling) over reducing entitlement spending versus raising taxes.  That debate can also address raising marginal tax rates (as the president proposes) versus limiting tax expenditures (as the [Bowles-Simpson] commission proposes).  These debates will be the domestic policy stage for voters to judge in 2012.”