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Is Social Security Obama's secret piggy bank?
Zero Hedge is reporting that Treasury has determine it will prioritize debt payments over other obligations in the event no deal is reached. That probably is the right thing to do. It does raise the question of what is going to happen to all of the other obligations the government has.
I thought it was interesting that this afternoon Social Security updated their web site and provided the details of the payments due in August.
Note the amount due is $60.7 billion. This amount is comprised of Old Age ($49.5b) and Disability ($11b). The President has mentioned a few times that the $49b of retirement payments may not be made. I have to assume that he was excluding the DI number. It’s possible that someone thinks that DI has a preference over OAI. But I doubt that. This an all or nothing deal.
So the question is, “Where’s $61b coming from?”. SS has no cash at all. They do receive cash every day. Tons of it. In the month of July they will take in ~$53b. All cash receipts at SS are immediately returned to Treasury. Treasury, in turn, issues SS a Special Issue Note.
At the beginning of the month payments to beneficiaries are made. Checks are issued and electronic banking transfers are sent out. SS must have cash in the bank(s) to honor this. They get the cash from Treasury. To accomplish that they redeem the Special Issue Notes. This happens every month.
This chart shows the components of the debt. Note how big SS (and other Trust Funds) are – Blue)
The following slide is the debt as of today. The two components, Debt to Public + Government Series Equal the Debt Subject to Limit. We can’t exceed the limit. But there is nothing in the laws that would prohibit the NORMAL monthly operations between Treasury and SS.
BUT.....
Where would Treasury get the cash? Easy! They would sell securities to the public. Just like they always do. Who would buy these short-term government notes? Easy! The big banks would do it. They would take the same paper back to the Fed who would Repo it with a 0% haircut. Just like they always do. Could this be done for $500b? Easy! Just like it's always done.
I am absolutely convinced that Geithner has called the Fed and the big shots at the money center banks. Everyone will play ball. I’m willing to bet that Obama has called Dimon over at JPM and put it on the line.
O: “Jamie, I may need you to sign up for $200b of low yielding paper, are you in?
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J: “Count on me. I’m good for up to 500 large if you need it. And put me on the short list for the T Sec.”
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O: “Okay, thanks. You’re on the top of the list.”
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.
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Add some more info:
-Treasury has being doing exactly this pattern of transaction with another Trust Fund for the past two months. They have been playing with the debt ceiling by running down the balance of FERS (Federal Employee Retirement – a clone of SS)
-It is not at all unusual for the SSTF to dip into its holdings of Treasury IOU’s. They do it nine months each year. The monthly shortfall ranges from 3 to 15 billion. There is absolutely no reason why this number could not be raised to 50 to 70 billion on a monthly basis.
What does this mean?
It means Obama misled us on the technical issue of whether SS checks can be sent in the event of default. He never said that they would not be made. He said they “might” not be made. So he was using the fear factor to sway opinion in his direction. In my view he had the money “in his pocket” when he said it was not available. (Didn't we once go to war over that fear factor thing? Are we doing this again?)
The entire FICA receipts ($52 billion a month) could be used by Treasury to make debt service and other payments. This would dramatically improve the liquidity picture. It could buy some time.
As of tonight we have a standoff. The House plan will be defeated in the Senate. The Senate plan will be defeated in the house. Obama has said that he would veto Boehner’s plan. To me, the possibility of a 'no deal' and a blown deadline is staring us in the face.
I’m just wondering if this is not the Obama script. Let the situation blowup. But have the consequences contained.
There would be tons of fallout. The markets would take it on the chin and the rating agencies would threaten action. My guess is that 500 federal parks might close, but the roof will not fall in.
In that scenario the White House would "look" good. They would be able to say that they were creative and avoided a crisis. They could blame the Republicans for the failure. It would strengthen Obama’s hand in the post August 2 debate. The end result would be that Obama gets a deal that takes him past the election. Which he wins.
A story like this is what gets people (re) elected to office. But if this is being orchestrated to that end, then it is a very sad story indeed. We’re being used.
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I'm thinking that all federal government employees, including the teleprompter, should go without salaries until the debt issue has a resolution.
Obama makes millions off of book sales. He is not in it for the salary. That is just his "change"
If you want to demote government employees, take away their power of unions and power of state assets. Then they will be ignored.
Good points, as always, but this was the script for Lehman and Bear too; and did the Major Houses swap good? No, they let them fail. And what if they (the Major Banks) pull out last minute? They (Majors) have done it before. Then SHTF and the banks are the only ones solvent, thanks to the fascist bailouts. Bye bye America, bye dollar, and hello One World Currencie. Will it happen all at once? Naw, it will take a few months for everyone to collect themselves and pick up the pieces. Maybe a year...maybe.
You should stop insinuating that Obama has an actual hand in the actual wheeling and dealing and making fiancial decisions. He was clearly chosen because he knows nothing about business or finance. You make him sound like a player. He's just a sock puppet. Get real.
Spot on!
The Federal Government employs over 2 million people and every single decision that Obomber signs off on (whether personally or by the autograph machine) has been developed by those around him. He must be "in the know" to not reject some of the more insane decisions, but he certainly doesn't sit around planning strategies ... he's too busy on the golf course!!
People need to be more careful with the language they use, else they'll start to believe that Obomber is actually planning their lives, and that the Democrats and Republicans are somehow different from each other. ;)
It's my understanding that the treasury securities are not marketable, and it would require action by Congress to change that.
The SI bonds SS holds are not negotiable. But they can be redemed by Treasury whenever SS needs money. Treasury can borrow that amount, as this does not increase the net debt subject to limit. Congress need not be involved.
Bruce, great article--I was wondering what you think about the rumors going around that they are going to nationalize IRA's and 401Ks, like the Argentinians did, turning them into a type of social security account based on treasuries, or some such thing. Do you think there is much substance to this? I feel like were getting pretty close to the wire and trying to figure out how to deal with this. Many of us are in plans where you can only withdraw a 10th of the balance each year, and that only if you quit your job (assuming you are at retirement age). So you can see that a lot is riding on this.
No truth to those rumors. This WILL NOT happen.
Bruce,
I mentioned exactly this monitarization of SS special securities (treasury IOUs, redeemdable, as you know, on demand, not just on maturity date) in a comment on another ZH article. And, for a hoot sent my liberal congress critters this simple solution of just redeeming more SS securities to cover any cash needs and asked them to respond to Obama's scare tactics in light of this easy solution to the SS check issue. The silence is deafening! Anyway, this is exactly how I thought it might play out as they've been running the government on Federal employee IOU monitarization ponzi for the last two months. As they've shown if QE1 doesn't work, try QE2 etc. They're not the sharpest tools in the shed. Why not more intergovernmental debt monitarization? Of course, if the MSM publisizes this raiding of the "lock box" I doubt whether this ends well for Obama and the dems-the great "protectors" of SS. So, my conclusions regarding the political ramifications this accounting gimmick is different than yours.
Thanks,JC, for this post,
Accordingly,
"Of course, if the MSM publisizes this raiding of the "lock box" I doubt whether this ends well for Obama and the dems-the great "protectors" of SS."
I doubt that there are very many of us recipients that will ever forget the callousness of each and everyone of the pols who have made public statements on the SS payments. We are not a bunch of 'old fogies' or idiots to the extent that we cannot see the electioneering going on; and we will not forget it either.
As for this oldman, he does not fear being cut off, but he is damned angry that these bourgeois bastards have the gall to play with the security of so many people dependent upon the meager sums paid out. After 40 years of working as veritable slaves in order to have a few years where this is no longer true. Old people have earned this monthly stipend by the sweat of their collective brow. And I don't mean sitting at a desk in an air-conditioed office with sick-leave, paid vacations, and paid 'legal holidays. Work used to be a four-letter word----and 40 years is a long time.
The pols have damaged any sense of good faith us old men and old women might have maintained in the 'system' by their indifference to our well-being and security.
I am writing this because it needs to be said on our behalf and 'our' includes our children and grandchildren who are now struggling as we have.
Thank you for stirring up the anger and frustration this oldman has regarding this stupid and unnecessary charade om
"barry X, the abandoned b a s t a r d of an illicit union between a deranged, teen aged, communist w h o r e and malcolm X, has his instructions from london to permanently destroy America and her economy via debt, euthanize the greatest generation, demoralize her military via homosexuality and exhaust it in a wild goose chase in the "graveyard of empires", and disarm it via fiat. He does hate America, especially White America, and does love his works of treason and destruction. It is through this that all his actions may be understood.
I hope the military honors their oaths, steps up and eliminates this a s s h o l e. This son of a w h o r e is the walking definition of a "domestic enemy" and we won't sit still anymore for his treason.
NEVER EVER forget the mainstream media that conspired to foist this muslim nation wrecking b a s t a r d on America is responsible. They intentionally sold us this traitor.
The democratic soviet is comprised of 22% of the population (blacks, jews, queers, illegals, transgenders, communists, and abortionists) An amalgam of misfits tied together by nothing more than malevolent envy and hate for Property Rights and Natural Law.
This man is actively destroying an America he was raised to hate, is supported by communists in the media and must be neutralized for the good of all.
It should be considered that barry soetoro is a communist or muslim plant groomed to completely destroy America from within."
-written three years ago (author unknown)
I didn't see this coming: Boehner is the one who must fall on his sword.
The only solution is compromise with the dems.
Poor Boehner. Now I know why he cries.
His career is finished.
As a politician.
So that the Teleprompter can be re-elected ... yes.
In fact, every word of the diatribe is true, but the language used to express it is regrettable. BTW, according to Google, the first appearance was in the Washington Post comment section in April last year. Ironic that Obama's true background should appear in the WaPo!
You left off his last paragraph, which is the most important of the whole diatribe:
Amen.
+1
Well said. I knew there was a reason why the Gubberment forced everyone to pay into the SS Fund....to Bailout Banks and Bonus Bankers...and move SS recipients to the end of the line....makes sense...makes me feel warm and cozy. When did you say are the next eelctions?
It seems politicians will only listen to those that give them lots of money. So, here is what we need to do: We, the tax payers, should offer each member of Congress $100k for every $10 Billion in cuts they make to the 2012 budget. So, for each $100 billion in cuts that the Congress gets passed into law a member would get $1 million. If $400 billion is cut then they would receive 4$ million each. The deal is doubled for the Senate. The funds could only be used for their next election campaign. Sounds far fetched but considering interest payments, we the taxed, would come out way ahead.
i live in a large populous urbane west coast state, and as a member of the democrat party, during the bush administration, my senator, think more liberal, kept sending me requests for donations, (the evil right wing nutcases want to run against me, cry cry sob sob) i said here you are BB, you offer a resolution to impeach the bastard george bush, and i will send you a hundred dollars, AND i said, i am sure there are a lot more behind me, who would also send $100 if you just offered this resolution, and of course voted YAH on the damn thing. (even though the Senate does not create the articles, i think she got the point) so evidently $100 isn't what it used to be. but you have the right idea. if only we could buy them.
How Much Would It Cost to Buy Congress Back...
http://seenoevilspeaknoevilhearnoevil.blogspot.com/2011/06/how-much-woul...
OT: Hilarious 2 Min Vid...
http://www.youtube.com/watch?v=W0Uju3tYS2s
Answer: Some simple legal action... Madoff time for the treasonous, worthless, corrupt political class and their ruling elite owners on Wall Street...
Madoff time? It would be better if they set time...as pendlums.
I think what Obama intends by means testing is that Steve Forbes publishes the list of Fortune 500. Obama gets on the phone with Steve Forbes.
Obama: Steve, updated that Fortune 500 list yet?
Steve Forbes: Almost.
Obama: When it's finished, a copy to Social Security minions and a copy to Medicare.
Steve Forbes: Right.
Obama: Remember, any family that's on that list, and any corporation name on the list, the top 500 executives and their immediate families get purged from the Social Security and Medicare rolls. They fund their own in perpuity.
Steve Forbes: Gosh. What a surprise.
Obama: It's easy.
Then Obama hangs up. His next call to place is to Rupert Murdoch and Roger Ailes. Rush Limbaugh uses his 3 hours every afternoon to tell Republicans and teabaggers to volunteer to give up Social Security and Medicare, just to conduct a poll. Republicans want small government, as long as it means depriving someone else. Let's turn the tables. Let's deprive Republicans first. I tell my Republican pals that if their Social Security checks stop, they need to send their complaints to Rush. Then they need to rely on their church, their family, and charity, just as they like to flap their jaws.
Heroic, I would glady give up ALL of my future social security benefits and medicare benefits for FREE if I could immediatley stop paying in.
I would take all the money and buy gold and silver. Would be WAAAAY money ahead.
Your scenario would not help the debt though, becuase those who want to pull their own weight and aren't using the SS pyramid scheme would be the first to opt out.
Interesting, Ron Paul is in favor of people being able to opt out of these coercive "protection" plans that are sold to us by our ever loving Federal Government.
Go Ron Paul!
Endurion,
Yeah, we said the same thing over and over since 1960.
I was only 20 that year, but even as a twenty-year old I believed that I could have done better than ending up with the $250 per month stipend of the time. Now, I'm not so certain because life is not always easy over a 40 year working life---a lot of sickness and injuries----things just get in the way of most of us. Anyway, no politician has ever responded to the question you pose with your statement above:
"Heroic, I would glady give up ALL of my future social security benefits and medicare benefits for FREE if I could immediatley stop paying in.
I would take all the money and buy gold and silver."
There are many equitable ways that you could pay in without giving up everything that you have paid in, but the point is that the pols need that those moneies go unfunded: it is a god-damned slush fund for war---doesn't anyone understand this? The money goes to the general fund and then is either paid or borrowed back in exchange for promises.
Brother/sister---if you can do any better than we did at getting control of the funds during the time of your contributions---you will go down as a true american hero. I'm on your side! Ron Paul knows this, too-----why hasn't he done something about it?
It is free money until it is paid out-----and death and destruction all over the planet is not always a patriotic act.
GO ENDURION!!!!
You're a thief. Gun to the head, steal a person's work, piss ant, thief.
And if I could opt the fuck out of SS, I would. Like I'll ever see a thin dime of what I've paid. Because they fucked it all away to their demopublican't butt buddies.
In fact I plan to opt out. Rescind all my contracts with the federal govt and tell them to go suck a DC shitdick.
Did you not read the article? SS can raise the cash to pay its obligations. Its Oman looking to pay politics with it.
I'm sure you would love tea partiers, the GOP, and business people to give up what they have been forced to pay for to buy more time for your socialist entitlement mentality to continue. Finally your slave state would be complete as the people most responsible for a productive economy are forced to contribute to a system that they are not allowed to share in.
and your plan is what exactly? spending money that doesn't exist? borrowing until there's nothing left? More debt? Do you really think the world will let the US borrow into infinity? That's not going to happen. If not today, tomorrow. Ten years. Whatever. Its going to end. When America is in the worst possible bind imaginable and desperate for money, that's when the hammer will fall. Cause that's how it works. Ask anyone getting foreclosed or has a floundering business. Better to end the culture of debt now on our own terms, then let it to the hands of fate to cut us off at the worst possible moment. Banks lend money to people who don't need it. Someone drowning in debt, don't bother asking.
I think what he was doing was laying out a Democratic strategy, not necessarily an ideology of his own. I read it as giving the Republicans and the talking heads what they seem to want, and then watch them choke on it. It's a decent ploy that could not be put past the Democratic leadership. It sure would be an interesting thing to watch. Going to Sam's tomorrow so I'll pick up the giant size popcorn.
FWIW: I entered no ratings on any of the related comments.
Can someone explain to me how borrowing from the Federal Pension Funds is not considered debt toward the limit? Is the deal that the government is simply not making required periodic payments (meaning they are not paying into the fund) or are they actually taking money already contributed out of the fund? If it's the latter, I don't understand how that's not borrowing and how it's not counted against the debt limit. Given the answer to that question, isn't failure to pay Social Security, a mandated expenditure, just another "borrowing" from people who are owed money, meaning it's a liability, meaning it's, for all intents and purposes, debt?
Am I wrong or is this not just a money printing scheme that further debases the dollar? Why not cut out the middle man and have Ben just give Treasury whatever they need?
You are correct from everything I can tell. This is stealth quantative easing that has been going on for years. Take in all the money from SS and tell everyone it's a lock box, and then loan it to the Treasury at a "special" rate.
Anyone in private industry that does this is in prison, think Enron and Worldcom.
Ridiculous to think a person would change their mind after being deceived.
Once you get POed you stay POed.
Every Polition running in 2012 Better Keep on Running
The closer this gets, the more you can absolutely forget about 2012 -- with the probable exception of a New Continental Congress post-COG.
Raiding the Social Security trust fund (in the same way that Obama has already raided various Federal employee pension funds) could certainly work. But I suspect that there is some law which prevents Obama from doing this. If not, then I am sure that he will do it.
Obama was trying to scare retirees with the -I might not be able to send Granny her check- line?
Knock me over with a feather...lol.
The funds are there every month via it coming out of my wages, as the Executive, its his job to prioritize them. He voted present again, with a twist.
Now that the last of last moments emerges with no deal and no bill I wonder:
Obama said he would not use the 14th Ammendment.
Clinton said he would ( in a heartbeat ).
The Dem leaders set-up a chorus to urge Obama to use the 14th.
The Senate does nothing.
The House passes (or doesn't) another bill.
Does the President plan to use/abuse the Constitution, make the pay-offs, and blame the Republicans ?
He has two choices:
The 14th Amendment, or prioritization, which probably ends in eventual martial law.
There are enough people who want to see the social safety net eradicated in this country that it probably will, otherwise, happen.
Great cheater analysis. Let's get that dollar down... TBT to the moon on the ratings slide, Alice. The TBTF will love the slide on the short side of the market - they're already in. This is great stuff... The main reason I come to ZH... Great cheater analysis!
Keep in mind, Medicare and Medicaid serve as corporate welfare for the medical-industrial complex, giving our for-profit healthcare system a way to socialize its losses. And the amount of lobbying clout that seniors have pales in comparison to the amount of lobbying clout that the healthcare industry has. This is why I predict that Social Security will be targeted for a lot more cuts than Medicare and Medicaid.
And if any of you didn't know, as many of you don't, Medicare dollars are used to cover the cost of training medical residents. So if the healthcare industry really wants to convince us that it's part of the lean-'n'-mean world of free-market capitalism, then at the very least the medical profession should pay out of its own pocket to train its medical residents to become full-fledged physicians, as it is done in all other professions, except for the ones in the military. Otherwise, the healthcare industry should fess up to the fact that it's virtually identical to the defense industry in being a fat and bloated recipient of the great American nanny state.
The healthcare industry is rapidly approaching the defense industry in terms of being wholly subsidized by the American taxpayer through taxes and inflation.
YES! SS can send the IOUs over to the banks, the banks trade them in to the Fed, and Fed puts $ on deposit for the banks which back up the SS checks. Just like treasuries. Of course, this is pure money printing on the part of the Fed.
In principle, SS could run like this for YEARS! The Fed ends up with 4.3T of IOUs on its balance sheet. Yipes!
Very creative thinking, Bruce. I doubt that this "solution" occurred to them, but now that you've laid it out, they just might use it.
'cunning in an animal way'....ha..what BS...more like an idiot in a community activist sit on his ass and never do anything way......
The agenda end game is already written folks. An ex-Constitutional bi-partisan congressional commission will hereinafter be charged with any debt/expenditure thingy going forward. The commision will only include those who are on speed dial with the FED and its master JPM. Everyone saves face; the theft goes on; must keep the status quo.
The agenda end game is already written folks. An ex-Constitutional bi-partisan congressional commission will hereinafter be charged with any debt/expenditure thingy going forward. The commision will only include those who are on speed dial with the FED and its master JPM. Everyone saves face; the theft goes on; must keep the status quo.
Obama is wounded and cornered, a wounded and cornered animal is twice as dangerous
I loathe the MF'ers who voted for him. McCain is as bad as he bashes the Tea Party. The Tea Party is just Americans sick of being ripped off and lied to by the govt. If the SHTF - I have memorized who had what yard signs in 2008.
$7OO billion for the big banks, no problem Obama had it for them overnight. $61 billion for Social Security, thats different. Throw granny under the bus.
No politician in the world could win an election on a program like that if the public got wise but watch the media roll over like puppy dogs and lick his boots.
Bush and Paulson gave the 700 Billion to the Banks. Get your facts straight. Obama had NOTHING to do with that.
That's why Paulson left the Crime scene. Bush said just leave.
Nonsense. Obama voted for TARP as a Senator, as did the majority of Democrats in Congress. Every penny of spending originates from Congress. TARP wouldn't have happened without Democrat support. That's not to absolve Bush, Paulson and Republicans -- they were the ones driving it all -- but to say Obama & the Dems had nothing to do with it is demonstrably false.