Presidential Kabuki Theatre Update: When Obama Says Social Security Checks Might Not Go Out......

[amborin]

Presidential Kabuki Theater update

SS checks can be paid and in fact, the payments are exempt from the debt limit by law.

http://www.washingtonpost.com/blogs/fact-checker/post/can-president-obama-keep-paying-social-security-benefits-even-if-the-debt-ceiling-is-reached/2011/07/12/gIQA9myRBI_blog.html


"Also, there are some options available to pay SS obligations .

One such proposal would be to take the special-issue treasury bonds held by the program's trust fund and convert them to marketable securities. This would free up the needed cash for the payments, without violating the debt cap.

Yet another is to turn over social security payroll taxes directly into benefit checks. This plan would require the Treasury Department to skirt the requirement that the tax revenues go into the trust fund, but a similar solution was adopted in 1985.
"

http://www.businessinsider.com/would-not-raising-the-debt-ceiling-really-jeopardize-social-security-payments-2011-7


".......he's either fearmongering or he's ignorant of the options and the law...."
".....this entire 'crisis' is nothing but hot air which will be resolved by Sen. McConnell's suggestion of allowing Obama to raise the debt limit without congress.
But the rhetoric seems designed to confuse everyone, particularly what's coming out of the White House. ......When the president of the US says millions of people may not get benefit checks if the government defaults, that's a really big statement. Obama casually saying that during an interview is, in my view, irresponsible for someone in his position. He's supposed to be the voice of calm, facts, and reason - it's part of the job of leadership. As a politician, he knows he doesn't have to answer any question asked of him and that he needs to phrase his words carefully. So either he forgot or he made the statement deliberately."

snip

http://correntewire.com/presidential_kabuki_theater_update#more

[SidDithers]

1. Unrec...nt

Sid

[Ruby the Liberal]

3. Rec to offset the one with universal healthcare

Good article. I said this immediately when I heard his remarks. SS checks are not in any way related to the federal budget.

[AlabamaLibrul]

32. I'll match your rec

Canada has a fantastic social safety net. I wish we could be sure that ours was going to be around and STRONG for the long term.

[inna]

55. always a good reason to rec; thanks again for reminding to rec!

:thumbsup:

[provis99]

2. Obama is flat out lying to generate a rise out of old people. Disgraceful politiking.

[inna]

56. "disgraceful" is an understatement. nt

[TheWraith]

4. The payments might be protected--the people who process and ship them are NOT.

Nor are the postal carriers who deliver them, the printers that produce them, or the bookkeepers which arrange them.

[Ruby the Liberal]

5. Direct Deposit doesn't require human intervention

And the Post Office is also not part of the Federal budget. They are a standalone.

[Rabrrrrrr]

22. Someone's gotta run the computers and do the books to make the direct deposit.

[TomClash]

6. Let's assume all of this is true even though it's not

What does the Government cut to compensate for the inability to borrow?

[Yo_Mama]

8. It is all true

Obviously the debt limit has to be raised, but people will get their SS checks next month whether it is or not.

Obama got caught in a lie, or maybe he just did not know. But you would think he has people to ask.

[truth2power]

12. Neither one of those possibilities is acceptable, i.e., that he lied or

he didn't know.

If he lied, well, that speaks for itself. As far as not knowing, he should have tasked someone with getting a definitive answer before he spoke. Remember, it was a couple of years ago, and there was some issue - I don't remember what - and a reporter asked him why he didn't come out with a statement earlier, and he said, "I like to know what I'm talking about before I speak." So, there ya' go!

I don't know why he always gets a pass.

[Fla_Democrat]

28. Have you seen the "D" after his name?

:think:









:smoke:

[girl gone mad]

30. A sovereign currency regime doesn't have to borrow to spend.

The President has many options open to him. You would have to ask him why he chooses not to use them.

[TomClash]

52. I don't think I understand nt

[Roselma]

7. It all sound so promising. But...who buys those marketable

bonds? China? If you were China, would you buy a bond like that knowing full-well that this debt ceiling thing could happen over and over, and the full faith and credit of the US is no faith and no credit?

[Yo_Mama]

11. The same people who are buying treasuries now

There are usually auctions three days a week.

Right now, the European troubles are producing strong bidding at those auctions.

Actually, the government can run for about six months more without violating the debt ceiling. There are two huge Trust funds out there - Medicare and Social Security. By law, the general fund gets those payments each month and gives them to the Trustees. If the government doesn't do that, then the Trustees can give their IOUs from the trust funds (that's all they are) to Treasury, and Treasury can issue real Treasuries that can be sold, and the money will to to the Medicare and SS Trustees to pay benefits. But in the meantime, the monies paid in that normally go to those funds can be used to pay interest and other obligations.

So it's a crock of shit.

You see, those IOUs in the Trust funds are counted under the debt limit, but every time you take 100K out of the Trust fund and sell in on the open market, the debt subject to the debt ceiling doesn't change.

There's over 3 Trillion in those two trust funds.

Edited to add this link re today's 30-year auction, which went great:
http://www.bloomberg.com/news/2011-07-14/u-s-30-year-bonds-pare-losses-as-demand-increases-at-13-billion-auction.html

[Roselma]

19. Seriously...who are the "same people". Once the

government decides to "technically" default, who with an ounce of common sense buys them? I think that maybe some deal might be worked with China, but it will be for a very high return, and it will happen after a "technical default" which sends the markets into a nervous twit.

[Yo_Mama]

20. The government doesn't default until it misses an interest payment

and no one expects that to happen.

Obviously. Or they wouldn't have been buying 28 year and 10 month bonds today.

[DemocracyInaction]

9. The SS Lockbox

..is a pile of bonds. Apparently, the SS recepients would be paid just like other bond holders as, like, first priority status (heard it all discussed on the financial networks). As a senior citizen, I am gut sick of the hell we are being put through. I don't get SS; I get our lovely state pension which our new governor Tea-Shit-Bag just destroyed. Trust me, if it ever happened, you "ain't" gonna like it.

[Zen Democrat]

10. If you have three times more obligations than cash .... there are NO guarantees.

I happen to think the debt ceiling is unconstitutional. But, if the government doesn't have the money, that's it. The SS trust fund is full of Treasury IOUs -- the same bonds that we're going to forfeit on without the ceiling cap being raised. It's not like there's all that money sitting in the fund. Remember Al Gore's lockbox? You know, the one that was laughed about on SNL? Yeah, we don't have one.

[Yo_Mama]

13. Yes, but those IOUs are counted under the debt limit

So if you take those IOUs out and convert them into real treasuries and sell them (which is exactly what the government would be doing if it had raised the debt limit), you haven't changed the debt limit and you do get the money.

It's not like this has never been done before - it has!

[nadinbrzezinski]

14. Read on how traditionally debt obligations are covered

in crisis.. and who gets priority...

[alcibiades_mystery]

15. Oh FER FUCK'S SAKE! The so-called progressive scream and cry for a year

that Obama is not playing hardball with the GOPers, or using their most preposterous battering ram, the "bully pulpit," yet the minute he does, they all catch the vapors about scaring senior citizens, falling right in line with the REPUBLICAN talking points. Holy fuck is this a litmus test for reasonableness!

Here's why Obama CANNOT GUARANTEE (those were his words) that the government can send out the checks ON AUGUST 3, even under your scenarios:

1) "Converting Treasuries to "marketable securities'" - Oh, that's fucking nice. "Marketable securities." Do you know why you wouldn't be able to simply sell off the Treasuries in the trust fund in the case of default? Because if the United States government defaults on its debt, it's NOT GUARANTEED that you would find a fucking COUNTERPARTY for that sale. Fucking comprende? But it is obvious that you'd find a counterparty for these so-called "marketable securities?" HOW? How is that guaranteed? Under the worst case economic meltdown scenarios, who the fuck is buying ANY FUCKING SECURITIES at all in the immediate aftermath of a US default? For fuck's sake, half the world is thrown into a panic even contemplating a default by fucking GREECE! You don't know what the fuck the global financial system would look like if the US defaulted, so you CANNOT GUARANTEE that there would be any market for any securities at all. That's the fucking point. HOLY FUCK. Hell, it might throw the financial system into sufficient crisis that it wouldn't even matter if you got your check, since the dollar might be hit with hyperinflation. The scenarios vary, which is why issuing guarantees about them is the TRUE irresponsible thing to do, and I'm glad the President dealt straight with us on that point.

2) Oh, la di da: let's just convert the proceeds from tax revenue directly to checks! Well when the fuck do you expect this cashflow to happen? At midnight on August 2? Oh, you want to do it beforehand, signalling for absolute sure that the US WILL default, and throwing the bond market into crisis while there's still negotiating time to be had? Do you think that one simply presses a button and diverts incoming tax revenues into a big pile of cash? Incredible!

Obama's statement was not casual at all: it was very careful indeed. It has a number of elements that the Republicans and their leftist enablers are pretending not to see: the first is that nothing can be guaranteed, precisely because it is impossible to predict the response of the economy and financial system to such a catastrophic and unprecedented turn of events. If you claim that you CAN GUARANTEE what will happen in case of default, then YOU ARE THE LIAR, since that is utterly impossible. Second, Obama was referring to a specific time frame: the closeness of the default date to the check issue date: 24 hours. That makes it extremely difficult to institute the other options you name here.

HOLY FUCKING SHIT. Like Obama said yesterday: Enough is fucking enough.

[October]

16. +1 /nt

There are many here who are set to be angry no matter what. They are becoming more and more obvious.

[Kind of Blue]

18. Wow! Sure sounds like truth.

Thanks for giving me enough food for thought and research :thumbsup:

[BumRushDaShow]

23. +infinity

:applause:

[Bobbie Jo]

24. Damn. Thank you.

[joshcryer]

27. LOL, I love that post. Yes, if the US doesn't raise its debt ceiling it is global apocalypse.

We control a QUARTER of the ENTIRE PLANETS' GROSS DOMESTIC PRODUCT.

[amborin]

29. "leftist enablers" sounds like Rahm dissing progressives; otherwise erroneous post

"The government may monetize trust fund obligations by transferring the treasuries held by the Trust Fund onto the Federal Reserve balance sheet. In such a transaction, the bonds would become "assets" on the Fed's balance sheet, and the Fed would create money "out of thin air" to purchase the bonds from the government. Under such a scenario, the bonds are converted into cash, which would then be used by the government to cover social security payments."

http://en.wikipedia.org/wiki/Social_Security_Trust_Fund

[alcibiades_mystery]

31. I like that you scrambled to do additional research

Given that you were completely unable to overcome my objections to the two so-called solutions you actually posted in the OP (indeed, one of the links you actually posted in the OP shows Treasury making the same objections, to wit: "Moreover, this presumes that Treasury will have full access to the financial markets if the debt limit is not raised"). So, since the solutions you actually posted in the OP were insufficient, you went digging a little further, and discovered this third redemption mechanism...on Wikipedia (you did not link it except on edit for some reason that remains a mystery - you clearly know HOW to link):

"(3) The government may monetize trust fund obligations by transferring the treasuries held by the Trust Fund onto the Federal Reserve balance sheet. In such a transaction, the bonds would become "assets" on the Fed's balance sheet, and the Fed would create money "out of thin air" to purchase the bonds from the government. Under such a scenario, the bonds are converted into cash, which would then be used by the government to cover social security payments."

Oh, wait a second. You seem to have cut off the last part of that paragraph that you found in your extensive Wikipedia research. Let me help you out. It continues as follows:

"This scenario would likely lead to increased inflation, as it would inflate the money supply without directly increasing the amount of goods and services produced by the economy as a whole."

Yes, I suppose that tends to happen when you create money "out of thin air!" I certainly noted inflation and perhaps even hyperinflation as a scenario consequent to default, if the dollar drops (as it is already doing with the threat of downgrade), and the Fed is just printing up money to pay Social Security checks! Obviously, this mechanism for making the special treasuries liquid is not contemplated as the sole mechanism for an entire round of Social Security payments (or two? or three?), precisely because it is deeply irresponsible to the economy as a whole, and it would reduce the value of the very checks you're using the mechanism to send out (unless you expect instant cost-of-living increases to deal with the very inflation you yourself created)! Never mind all that. Proceed on your Wikipedia quest.

[girl gone mad]

33. The correlation between monetization and inflation is indirect, at best.

The notion that this would lead to hyperinflation is completely absurd.

[alcibiades_mystery]

35. Yeah

Having the Federal Reserve printing up billions of dollars on the basis of unmarketable pseudo-assets (for if they were marketable, the Fed wouldn't have to be involved), immediately as the full faith and credit of the US government has collapsed due to default is the prudent move, and doesn't pose any inflationary danger. OK.

[girl gone mad]

36. Chicago School drivel.

Bond redemption involves a transfer of funds in return for rescinding the bond. Government debt is reduced by a certain amount and bank reserves are increased by an equal amount. The bond is like a savings account in this respect, and the bank reserves act like a non-interest bearing bank account. Do you also believe that savings accounts are inflationary?

On its face, your assertion is illogical. Workers who pay into Social Security expect to receive their scheduled benefits and plan their finances accordingly. Demand for goods and services is not going to suddenly skyrocket because people continue to receive their expected benefits. Do you understand how foolish your argument is? This is not an inflationary event such as handing millions of people a windfall of new, unexpected money.

[amborin]

37. LOL!

so you must be very upset with Obama's decision to retain Bush's Bernanke, with his QE1, QE2, and QE3, no? for someone so worried about inflation

[girl gone mad]

42. "Inflation!" is the only rebuttal they can ever proffer..

and they use it like the proverbial child with a hammer who thinks every object is a nail.

[alcibiades_mystery]

43. I'm not so worried about inflation

It is one possible consequence of the method of making those treasuries liquid, which, when combined with other negative events attendant on default, could be very dangerous indeed. Or it could go the other way. The point is we don't know.

[amborin]

46. but you just said you were worried about inflation; now you say you're not;

[alcibiades_mystery]

47. Don't play little games

Everyone can read the thread. Inflation is a danger. I'm not SO worried about it, but it is certainly a potential threat that may (MAY) make even your third solution (after you were unable to defend the first two) unworkable. As I have been saying throughout, the problem is the uncertainty, and it is the uncertainty that makes Obama's statement both correct and legitimate.

[amborin]

50. you say you're worried about inflation but that you're not worried about inflation

and then you think another poster is playing games?

you have conceded the article's point many times over now

the inflation that might possibly attend the solution discussed on Wiki is potential only; that method of ensuring Soc Sec payments is sound, and, moreover, would not generate immediate, if any, inflation

secondly, you admit the situation is fraught with uncertainty; all the more reason it is reckless to make baseless threats

[alcibiades_mystery]

51. Yeesh

It's curious that you eliminated that part of the paragraph, then. Talk about disingenuous!

I'm not going to deal with the games anymore; if you don't know the difference between seeing a potential problem or danger with a solution and being "so worried" about it, that's your business. I think you do know the difference, and you're playing little message board games, which is your right, of course, but this is the last time I'll address such silliness. I always said inflation was a potential consequence, and it is.

Obama did not make a reckless threat. He clearly spelled out the potential uncertainty of the post-default environment, which he was quite right to do.

[amborin]

34. disingenuous post; and, inflation is hardly an immediate concern, whereas getting a Soc Sec

paycheck is;

otherwise, i hardly "scrambled" to reply;

[alcibiades_mystery]

39. Your initial two solutions were insufficient

In fact, you haven't defended them. You had to find some other solution, and that one has its own problems. The point stands that the aftermath of a default event is not predictable. That point, even your extensive Wikipedia research hasn't resolved.

Could the whole thing go smoothly, with none of the catastrophic negative consequences I mentioned? Of course. The fact remains that the default would be due to an arbitrary ceiling on debt, and the government's inability to deal with it effectively. There are no necessary economic conditions that would produce default without that arbitrary line. The markets may take this into account and absorb the whole thing without much damage. In such a case, your third solution would probably be fine.

But the point is that the result is unpredictable, and there are certainly scenarios that would make your third solution extremely difficult, if not self-defeating and dangerous. Under such uncertainty, Obama was correct to say that the payments could not be guaranteed.

I would also appreciate it if you stop calling my posts "disingenuous." I understand that this is your rule-skirting way of calling me a liar, but it is a thin veneer indeed.

[amborin]

44. the point remains: there is a way to make Soc Sec payments in times of default

Obama was not correct to state what he did;

otherwise, thinly veiled! LOL! do re-read your invectives

[alcibiades_mystery]

45. Obama was correct

As it's not clear that option would be available, since it's not clear what a default would look like. That's the bottom line.

[amborin]

48. you've proven the article's point; if it's not clear what a default would look like, then

with all that uncertainty, then there was especially no valid basis for Obama to make that threat

[alcibiades_mystery]

49. Quite the opposite

Obama said that he could not GUARANTEE anything. That is an acceptance of uncertainty. In your scenario, the payments ARE guaranteed (i.e., certain) despite the uncertainty, and that's ridiculous. Obama didn't make a threat. He didn't say "You CERTAINLY will not receive your August 3 check." He said that he cannot GUARANTEE those checks, which is another way of saying the situation is uncertain.

[demgrrrll]

41. For what its worth I'm with you. You can almost sense when

The President is getting a leg up and these folks crawl out of the woodwork to express themselves about their "cynicism" about the Presidents motives or in this case "kabuki" theater.

[JoePhilly]

17. Obama hates OLD PEOPLE!!!!!

:sarcasm:

[Rabrrrrrr]

21. He's gonna kill all the elderly with them thar death panels, anyway. Who cares?

:eyes:

[Raine]

25. It's all theater on both sides

they yank the people's chain. I hate them all. :grr:

[bornskeptic]

26. Very selective editing here! What is the reason for that?

From the Washington Post Article:

Late Tuesday night, however, the Treasury Department cast serious doubt on whether it was feasible to keep paying Social Security benefits if the debt limit had been breached.

“This type of financial engineering is untested, may not work, and is of questionable legality,” a Treasury official told us. “It is not feasible for Treasury to borrow from the public, each day, the precise amount of Social Security payments due without breaching the debt limit. In addition, it is questionable whether it is legal to redeem Social Security trust fund assets in advance of payments. Moreover, this presumes that Treasury will have full access to the financial markets if the debt limit is not raised.


How is he supposed to guarantee that the checks will go out on August 3 if Treasury cannot answer the question? Of course he can't.

I don't claim to know for sure, but the idea of converting securities from the Trust Fund into marketable securities looks questionable. Money owed to the Trust Fund isnot counted as a part of the public debt, but the marketable securities created and sold would be counted in the public debt, and thus the procedure would appear to violate the debt limit.

[The Magistrate]

38. Exactly, Sir: This 'Fact Checking' is Anything But....

There is nothing in the piece but rank speculation, and that from the sidelines, and the Bush camp....

[amborin]

40. not really;

the link was there for anyone who cared to read further;

it's a contentious issue, and that's all the more reason O did not need to make the threat;

otherwise: to make Soc Sec payments in times of default:

"The government may monetize trust fund obligations by transferring the treasuries held by the Trust Fund onto the Federal Reserve balance sheet. In such a transaction, the bonds would become "assets" on the Fed's balance sheet, and the Fed would create money "out of thin air" to purchase the bonds from the government. Under such a scenario, the bonds are converted into cash, which would then be used by the government to cover social security payments."

http://en.wikipedia.org/wiki/Social_Security_Trust_Fund

[blindpig]

53. k&r

[spanone]

54. it's called 'politics'

[sarcasmo]

57. I pick fear-mongering.