Senator offers way to cover Social Security checks, if government defaults
Similar step was taken by Congress in 1996
July 13, 2011
WASHINGTON, D.C. – The Treasury Department would be able to cover tens of millions of Social Security checks in the event of a government default, under legislation introduced in the Senate today.
Saying nearly four million people in Florida alone rely on Social Security checks, U.S. Sen. Bill Nelson ( D-FL ) filed legislation that would temporarily let officials not have to count Social Security obligations against the national debt limit.
A similar non-traditional approach was passed by Congress in 1996 during a conflict between then-Democratic President Bill Clinton and the Republican-controlled Congress over funding for major programs including Medicare.
Nelson disclosed he’s filing an updated version of the 1996 bill to protect Social Security in a letter to Treasury Secretary Timothy Geithner. His letter comes in the wake of President Obama's stark warning this week that Social Security payments may not go out next month, if Congress cannot agree on a package of spending cuts and an increase in the debt ceiling before Aug. 2.
A few Social Security measures already have been filed by other lawmakers, but they are generally limited to making benefits a priority among competing government payments. They do not ensure that Social Security checks will be paid.
“During the 1996 debt-limit situation Congress passed a special temporary law that said Social Security didn’t count against the debt limit,” Nelson wrote in his letter to Geithner. “Would such a non-traditional measure be needed today? Would pending legislation that prioritizes Social Security obligations suffice? If not, I stand ready with legislation that would temporarily exempt Social Security obligations from the public debt limit.
“If congressional leaders fail to get beyond the partisan games and reach an agreement on spending cuts … the stakes are high not only for our economy, but also for the millions of seniors who depend solely on Social Security,” he wrote.
The Treasury secretary anticipates the country will hit the debt limit on Aug. 2. Some benefit checks are supposed to go out as soon as Aug. 3.
“Time is of the essence,” Nelson said in his letter in which he asked Geithner for an immediate response on the best option.
Following is a copy of Nelson’s letter, along with the draft of his legislation and an AP background article:
July 13, 2011
The Honorable Timothy F. Geithner
U.S. Department of the Treasury
1500 Pennsylvania Ave., NW
Washington, D.C. 20220
Dear Secretary Geithner:
This week I heard the President say we cannot guarantee the 27 million Social Security checks that are due to be mailed on Aug. 3, the day after the Treasury Department has anticipated we will hit the debt ceiling if congressional leaders fail to get beyond the partisan games and reach an agreement on spending cuts and increasing the nation's borrowing limit.
The stakes are high not only for our economy, but also for the millions of seniors who depend solely on Social Security.
My question is: What plan does the Treasury have to continue payment of Social Security checks under the worst-case scenario?
During the 1996 debt-limit situation Congress passed a special temporary law that said Social Security didn’t count against the debt limit. Would such a non-traditional measure be needed today? Would pending legislation that prioritizes Social Security obligations suffice? If not, I stand ready with legislation that would temporarily exempt Social Security obligations from the public debt limit.
There are nearly four million Social Security recipients in my state alone who need answers to these questions. Please respond immediately, as time is of the essence.
SHORT TITLE: SOCIAL SECURITY BENEFIT PROTECTION ACT
(b) Guarantee of Social Security Benefit Payments.--In addition to any other authority provided by law and for the purpose of ensuring that payments to beneficiaries are not barred or delayed, the Secretary of the Treasury may issue under chapter 31 of title 31, United States Code, obligations of the United States in an amount equal to the monthly insurance benefits payable under title II of the Social Security Act in August 2011.
(c) Obligations Exempt From Public Debt Limit.--
(1) In general.-- Obligations issued under subsection (b) shall not be taken into account in applying the limitation in section 3101(b) of title 31, United States Code.
(2) Termination of exemption.-- Paragraph (1) shall cease to apply on the earlier of--
(A) the date of the enactment of the first increase in the limitation in section 3101(b) of title 31, United States Code, after the date of the enactment of this Act, or
(B) August 31, 2011.
Social Security Checks Could Be Delayed Without Debt-Ceiling Deal
Published July 13, 2011
President Obama's stark warning that Social Security payments may not go out next month is a choice the administration has to make, but entitlement benefits could be withheld if the cash flow dries up over an impasse in Washington on raising the debt ceiling.
Obama issued the warning on Tuesday when he said Social Security payments and veterans' checks, among other payments, could be at risk if negotiators don't reach a deal to raise the debt limit above $14.3 trillion by Aug. 2. That's when the Treasury Department says the government will stop being able to borrow money.
"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," Obama said in an interview with CBS News.
The warning rippled through Washington, though some continued to question whether the administration was over-hyping the consequences of creeping too close to the cut-off date for borrowing.
Meanwhile, seniors are left wondering whether they'll get their promised retirement benefits.
Washington is obligated to pay Social Security benefits, but a Congressional Research Service report last month revealed that the Treasury Department can delay them if necessary.
"Social Security benefit payments may be delayed or jeopardized if the Treasury does not have enough cash on hand to pay benefits," reads the report, which notes that the Treasury occasionally needs to issue debt to pay benefits, and a failure to raise the ceiling could make that impossible.
A Government Accountability Office report several decades ago also said it is "generally recognized" that, in the event of a national default, the government would be precluded from honoring some obligations -- including Social Security benefits, employee wages and other payments.
So far, the government is not at that point, and leaders in both parties are not showing the stomach for testing the fallout from failing to raise the debt ceiling. But the sides are conflicted about how much to increase the borrowing limit -- with Republicans insisting the government stop spending an equal amount as it borrows, and Democrats calling for tax hikes to pay for the additional loans.
On Tuesday, Senate Republican Leader Mitch McConnell offered a Plan B, which could allow for an increase by Aug. 2 even if there's no deal to cut spending.
Some lawmakers claim the administration could limp along at least for a short period by prioritizing payments, and in turn avoid default.
"I don't know what to believe," Boehner told Fox News in an interview after the latest White House meeting with congressional leaders Tuesday.
"The Treasury secretary is going to have options in terms of who should be paid and who shouldn't," he said. "Yes, there are some debts that have to be rolled over. But there's going to be money available on August 3, and I think it's way too early to be making some types of veiled threats like that."
Washington has found ways to protect Social Security payments in the past. The Treasury Department in 1996 announced it did not have enough money to pay Social Security benefits for the month of March because it could not issue new debt. However, Congress passed a law allowing the department to temporarily issue securities in an amount equal to those payments, in such a way that would not count against the debt ceiling in the short-term.
The benefits were paid and Congress subsequently raised the debt ceiling from $4.9 trillion to $5.5 trillion. At the same time, Congress also locked off Social Security and Medicare funds from the purposes of "debt management," according to the CRS report -- though the move still doesn't protect the payments if Treasury does not have the money to pay them.
Republican presidential candidate Newt Gingrich told Fox News that Republicans "should call President Obama's bluff."
"House Republicans ought to go in tomorrow or the next day, pass a $100 billion cut in spending and a $100 dollar increase in the debt ceiling so it is exactly balanced. That takes us all the way through to September. They should call that 'the Social Security payment guarantee bill.'
"Then they should say to the president. Here we've taken care of August. All you have to do is get Harry Reid and the Senate Democrats to pass it. You sign it. We can guarantee every senior citizen their Social Security check," Gingrich said.