EVERYTHING YOU NEED TO KNOW ABOUT SOCIAL SECURITY BUT ARE AFRAID TO ASK – PART 1
Will Seniors receive their Social Security checks if Congress fails to raise the debt ceiling?
With a possible government shutdown looming in a dispute in Congress over raising the debt ceiling, seniors may be wondering if they will receive their Social Security checks. After all, the Social Security Trust Fund accumulated surpluses over the past 4 decades totaling $2.7 trillion. With that much money in reserves, surely the Social Security Trust Fund should be able to continue making regular payments regardless of whether the debt ceiling is raised. Right? Wrong.
Under the “Unified Budget Concept,” the $2.7 trillion was siphoned into the General Fund over the years and spent on day-to-day operations of the U.S. Government. The money is gone, ostensibly “borrowed” by the General Fund and, therefore, owed to the Trust Fund. Rather than show the reality of an empty coffer, the Trust Funds received newly issued, non-marketable “special obligation” government bonds representing the General Fund’s $2.7 trillion indebtedness to the Social Security Trust Fund. In practice, these non-marketable bonds express nothing more than the government’s intention to borrow up to 2.7 trillion dollars in the General Fund to repay the Trust Fund as needed to cover future Trust Fund deficits.
Hence, if the debt ceiling is not lifted, the General Fund will be unable to borrow the additional funds required to cover the Trust Fund’s current deficit, so Social Security checks won’t be mailed.
The proof of this assertion can be found in President Obama’s reply to CBS’s Scott Pelley who, during a similar situation, asked the same question in July 2011, just days before a looming government shutdown prompted by Republican’s refusal to raise the debt limit:
“I cannot guarantee that those checks go out on August 3rd if we haven't resolved this issue. Because there may simply not be the money in the coffers to do it.”
That’s a remarkable admission, revealing the fundamental reality of Social Security then and now: current revenues do not fully cover outlays, and there’s not enough money in the coffers to make up for the shortfall without further borrowing. For the record, Social Security checks did go out in 2011 after House Republicans agreed to raise the debt ceiling after bludgeoning the Obama Administration into cutting spending to avoid a government shutdown.
This is as far as you need to read if all you want is an answer to the question posed in the title. For those curious readers with a wonkish bent, free time, and rare powers of concentration these days, continue reading the remainder of this 4-part series to learn the extent of the problems facing the Social Security Trust Fund, how it got into the present predicament, and how it might be resolved.