Two years ago, in the midst of the previous debt ceiling crisis, President Obama told worried beneficiaries that he could not guarantee that Social Security benefit checks would be paid. Fast forward to this week…here we go again. A Social Security Administration official warns that benefits could be cut if a debt ceiling agreement is not reached. Two years ago, the Washington Post fact checker offered an analysis of possible scenarios for Social Security. It just so happens that the chance of seniors not receiving benefits is about nil. Let”s look at two events: the government shutdown and debt ceiling.
First,regarding the government shutdown, Social Security benefit payments are not affected by that, as noted here on the Social Security Administration website, and also in their detailed contingency plan here.
Second, regarding the debt ceiling, as of August 2013, Social Security had $2.6 trillion in the “trust fund.” (I put this term in quotes because as we all know, the trust fund is spent on other programs). However, as the SSA notes, the trust fund “provides automatic spending authority to pay benefits.” This is further enforced by the fact that so far, payroll tax revenues are enough to cover this year”s benefit payments, with some cash left over – at least for now. The time to worry is when the trust fund is exhausted, which is projected to happen in 2037 (and we should obviously not wait until then to come up with a reform plan.) As NCPA senior fellow Thomas Saving two years ago, if Social Security redeems trust fund bonds, the Treasury is obligated to pay them, which reduces Social Security”s debt, allowing the Treasury to issue new bonds in the same amount.
While the president has not yet jumped on the “scaring seniors” bandwagon, let”s hope he does not. It will make the leader of the free world look like he”s asleep at the wheel.