The Debt Ceiling Debacle – What Does It Mean To Social Security Beneficiaries?

In a little under three days, unless Congress recovers its sanity and passes legislation to raise the debt ceiling, or the President takes charge of the issue himself and issues an Executive Order to raise the debt ceiling, using the 14th Amendment as legal basis, the Treasury Department will not have enough money to pay for everything it has to pay for. How much of a fiscal catastrophe this will be for the country is debatable; it has never happened before. Since the days of President Kennedy, the debt ceiling has been raised about 75 times. Up until now, It has always been a routine housekeeping legislative action.

What will happen if no one acts to fix the situation? The US government has about $306.7 billion that it must pay out on or after August 2, 2011. (It can cover payments it makes on Aug 1.) It expects to receive $172.4 billion from August 2 through August 31 from taxes (including FICA taxes.) This is $134.3 billion less income than expenses. Treasury will have to cut its spending by about 43.8% for August. If the impasse continues past August, then the expenses will exceed the income by a larger amount in September, since payments which were covered on August 1st will not be covered on September 1st. Republicans say this isn’t so bad. It would be like an instant (but temporary) balanced budget amendment. No White House or Treasury official has said what would be paid and what would not be paid, but there have been some educated guesses.

The Bipartisan Policy Center has put out their best guess about what would be paid and what would not be paid.

Would Be Paid – $172.7 Billion

Interest On Treasury Securities
Social Security Benefits
Medicare and Medicaid
Defense Vendor Payments
Unemployment Benefits

Would Not Be Paid – $134.3 Billion

Military Active Duty Pay
Veterans Affairs Programs
Federal Salaries and Benefits
Food and Nutrition Services for Low Income Individuals
Department of Education
Department of Labor (this would eliminate the CPI report due out in mid-August)
Department of Justice
Department of Energy
Department of Health and Human Services, including Grants
Federal Highway Administration
Federal Transit Administration
Environmental Protection Agency
Small Business Administration
IRS Refunds
HUD Programs
Other Unspecified Spending (pretty much everything else.)

Everyone I have read agrees that the interest on Treasury Securities must be paid. This prevents the government from defaulting to its creditors. Everyone also pretty much agrees that Social Security benefits will be paid, but they may be late. The Treasury Department will not have enough money by August 3 to pay the checks due that day timely. Some commentators think that our troops who are actually engaged in fighting wars will be paid, but if they are, then something else will come off the “will be paid” list.

Something to consider that this deletes $134 billion from our GDP (Gross Domestic Product) which is a little less than 1%. Considering how weak the growth in our economy is, losing 1% is almost enough to start a new recession all by itself.

Another thing to consider is that the credit rating agencies will certainly lower our credit rating from AAA to AA. Opinions vary widely how much this would increase interest rates, anywhere from 3 to 5 basis points (0.03% to 0.05%) up to 100 to 150 basis points (1.0% to 1.5%.) Most commentators I have read think that a 1% increase is likely. This would immediately affect people who have credit cards or adjustable rate mortgages, or who are trying to get a new mortgage. Housing sales would plummet, another causative factor for renewed recession.

As I said, this is a simple routine housekeeping measure that Congress has done dozens of times since the debt ceiling was put into law in 1917.  The actual legislation itself is simple. It is 1 sentence long. Here is a copy of a House and Senate Joint Resolution to raise the debt ceiling at the very end of the 109th Congress (which was Republican) in January, 2006.

H.J.Res.47

One Hundred Ninth Congress of the United States of America

AT THE SECOND SESSION

Begun and held at the City of Washington on Tuesday, the third day of January, two thousand and six.

Joint Resolution

Increasing the statutory limit on the public debt.

Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $8,965,000,000,000.

Speaker of the House of Representatives.

Vice President of the United States and President of the Senate.

That’s all there is to it. But now we have a President that conservatives viscerally hate. Rush Limbaugh broadcast to his millions of idiot dittoheads on the day after Obama was elected that he hoped that Obama would fail. He seemed to miss the point that if Obama failed, the country could also fail. Remember that the economy was in full collapse mode at that time. At least twice that I know of, Senate Minority Leader Mitch McConnell has said to interviewers that the main goal of the Republican Party was to defeat President Obama. The Republican’s main goal was not and is not to this day doing anything about jobs, shoring up the economy, preserving and protecting the environment, or taking concrete action to help the vast majority of ordinary Americans who are struggling to survive in this corporate controlled nightmare which is our current society.

One of the tricks that the Republicans have discovered is to attach things they want but which are strongly opposed by Democrats and the majority of Americans, such as tax cuts for millionaires and billionaires, cuts to entitlement programs, or their outright elimination, and removing laws which prevent corporations from raping the environment or gouging ordinary Americans to legislation which must be passed. Thus it is with legislation to raise the debt ceiling.

I still believe that something will be done on or before August 1st, to prevent all this from happening. Those of you who read this please join me in calling and/or emailing not only your own Representatives and Senators, but the leaders of both the House and Senate. Also call the President. Tell them all to stop acting like spoiled brats and bullies and fix this entirely self-inflicted crisis, or you will withhold your vote in November, 2012. This fooling around hurts everyone in the country, even the rich.

The Teabaggers are a minority of the minority. They represent the views of probably less than 20% of the population, but, like Lenin, who called his faction “Bolsheviks” (the majority) when it was in fact the minority, they have influence and control far in excess of what their numbers permit. They don’t even represent the people who put them into power. Remember back in 2009, at all the Teabagger rallies and demonstrations, all the people holding signs saying things like “Keep Your Hands Off My Medicare” or “Don’t Touch My Social Security.” They’re no happier about what is happening in Washington than anyone else is. The problem is, their anger has inflicted a bunch of amateur ideologues on the Congress and the rest of the country, like cockroaches or a plague of locusts.

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8 Responses to The Debt Ceiling Debacle – What Does It Mean To Social Security Beneficiaries?

  1. Edgar Bates says:

    Things are getting worse and worse since Obama has been in the Presidency! The only way to inprove things is to change the President!

    • ssapotluck says:

      Unless you give the Presidency to a Republican.

      Also. let’s not forget the 111th and 112th Congresses and the US Supreme Court, all of which were equally responsible, if not more so, for the turn to the worse. Never forget, not for a moment, that the right is engaged in a power grab they began over 30 years ago. They have come out into the open, everyone can see, and I hope they get their well earned unemployment next year.

    • Arthur L. Diggs says:

      There is no way you are blaming the President for the mess he got from the pass
      eight years of the Republican administration.

      • revenuer says:

        You’re correct. President Bush took office with a healthy surplus which President Clinton had worked hard to attain. He ran through it like water and then began a record round of negative spending.

        Bush left the economy in terrible shape for Obama. On the other hand Obama did not keep his campaign promises to address the economy aggressively and start it on a more healthy course. He did not end the wars in the mid east, he expanded them using Bush advisers and personnel. He did not let the Bush tax cuts expire and he did nothing to create jobs or any lasting stimulus for the economy,.

        He said “Yes.” to most Republican initiatives, sold out his base, and went to court to legalize torture, allow the murder of people he designated as “unlawful combatants,” including American citizens; and to suspend Habeas Corpus a constitutional guarantee.

        In the meantime he trumpeted “bipartisan ship” which was not why he was elected. He was elected to get rid of Bush and the conservatives not to parrot their every move as he has done.

        He has a share of the responsibility for the state of the economy. Bush has the bigger share but Obama has failed to do anything to rectify the situation. During the debt ceiling debate he could have demanded a clean bill and started negotiating with that, letting the Teabaggers know that they would get nothing else.

        He could also have followed the course ex president Clinton advised on using the fourteenth amendment to bypass the issue, extend the debt ceiling and let the matter go to court where it would have bounced around for a few years before the court said Yea or Nay, Instead he chose to follow the Republican lead and here we all are.

        You are entitled to your opinion, and to express it, but please examine this issue from all sides. He does have some responsibility and he should accept it and start to lead to get us out of this mess.

        We voted for another FDR in 2008, but what we got was Ronald Reagan Jr,.

  2. Ken Connor says:

    Actually, VA Disability payments are covered under a different statute…and will be paid. Actually, it is a moot point, as these checks have already been ACH’d for tomorrow. Sadly, the rest of your points are dead on.

  3. Arthur L. Diggs says:

    Of course it is hard for the president to make good on his pledges when the US Congress is
    controlled be the GOP who in turn are lead by Freshmen Tea Party members. Please tell me
    when the USA had GOP in the White House, and we was at peace in the world. The Rich
    need to humble themselves and begin to give back—Not have the poor finance the over
    spending of the Rich and powerful. I’m not an expert on the nation’s money, but when I see
    that 48.5 million people are on Food Stamps just to live, and the Republican lead Congress
    plan on cutting the very same programs that if Congress is not careful, the members might need
    to survive too. It is really sad that a college grad has to somehow travel overseas to find
    work, since the people who have the power to hire, are outsourcing jobs. Yet they say that if
    taxes are raised, they cannot create jobs. GIVE ME A BREAK. Everyone seems to have the
    solution to the problems of this country. People think that President Obama can undo in the first two years of his administration the mess that took 16+ years to create.

    • revenuer says:

      Mr Diggs,

      You have misquoted what I wrote. I suggest you read my post again and show me where I said that Obama is responsible for what Bush did. He is not. No one can undo the past.

      However, Obama is responsible for not attempting to keep the promises he made while campaigning. He is responsible for not beginning to find solutions to this nations problems now that he is in office. He has done neither.

      Let me remind you that when Obama was elected he had a Democratic house and senate. He had a huge popular mandate based on his campaign rhetoric. There was no need for him to give in to the Republicans on every issue. He was elected because people wanted a Democrat not more conservative failures. Instead of giving us a Democrat he gave us a Republican front man. I was astonished and disappointed by what I saw happening, and have watched continuing for the last two years. It has been over all, a sellout.. The GOP took control of congress in 2010 when many people were so angry at Obama’s lack of any fixative action at all, his widening of the wars he had inherited from George Bush and promised to stop and the fact that he did not let the Bush Tax Cuts lapse that they voted the Republicans into office as a referendum on Obama’s lack of leadership.

      I agree that the rich should pay their fair share. I believe that larger corporations should have windfall profit taxes applied to their earnings. That law is already on the books, but the Obama government will not use it or enact other legislation to shift the burden of raising revenue from the rich who can afford it. Instead they shift thr burden to the poor who cannot. There are also anti monopoly laws which currently exist which could bust up the bank chains, big pharma, the oil companies and even supermarket chains to bring competitive pricing back into the market place. Obama will not use them. A law could be passed to impose a negative tax credit on the businesses who outsource all of our jobs. Obama won’t attempt to pass one. I also know talented and educated people who are out of work or unable to work to their capacity. On man has a Phd but spends his waking hours on a loading dock lifting reams of paper which are too heavy for him. The company he works for gives him just enough hours to be able to call him “part time” so they can avoid paying him a living wage and granting him health benefits. A relative with a master’s degree has to take at least one week of unpaid furlough time a year and work never knowing if she will be laid off. She is an adult who has to live with her parents in order to be able to afford to live at all. She is in management. No health benefits there either. She has to pay a fortune to buy an inadequate policy through her alumni association. This started when Obama took office and began his dance with the conservatives.

      If you admire Obama and think he is a great president, that is your privilege. I think he is one of the worst presidents we have ever had, and I voted for him. That is my opinion and my privilege. So on that we must agree to disagree.

      However, you may not put words in my mouth or misrepresent what I say as you have in this post. At this blog we need to treat each other with respect even if we do think differently. I would like you to read the comment moderation section. You will see that being polite and respectful to other posters is required. Misrepresenting someone’s words or point of view simply to continue an argument is not polite or respectful. Please remember that.

      I am a great believer in personal responsibility. If you and I were in someone else’s house and knocked over a lamp and broke it, we would both be liable for replacing it, not just one of us. It is the same thing with Obama. Bush is responsible for what he did and always will be. Bush and the advisers who helped him. Obama is responsible for what happened and did not happen during his time in office and he always will be.

      I used to participate in a large Democratic forum where events devolved to the point that anyone who disliked or criticized Obama in any way was thrown off. When I realized what was happening, I wrote the owner a message telling him what I thought of his censorship and his methods for enforcing it and left. I have not gone back. I believe he was left with mostly people we called “Obamabots” there. Those for whom the “master” could do no wrong even if he was behaving in a way they would have gone after another office holder like a swarm of bees if that office holder were behaving similarly.

      I will not have that here. This is not a place for conservative talking points which shed much heat and little light, or Obamabots who only see what they want to see and who do nothing but slam other posters who think differently. I am not saying that you are doing that, but I don’t want it to start. You have stated your opinion. I have stated mine. Time to move on and see what each of us can contribute in our own way toward helping make this a better country. Thank you for your input and please keep coming.

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