Jul. 29th, 2011

I hope this is more trustworthy than the beginning of the article, which has numerous small pockets of snake oil.


The Social Security trust funds include $2.7 trillion in government bonds, which are due and payable when needed to pay Social Security benefits. As I also show in my book, those bonds do not represent any real savings and investment. They involve only a statement of the legal authority Social Security has to draw from general revenues, on top of payroll tax revenues. But in dealing with a crisis over the debt limit, that legal authority can be the critical factor.

While those bonds are explicitly not transferable, and so cannot be sold to the public to raise money, under prior practice they would be cashed out by selling new government bonds to the public. Since the Social Security trust fund bonds are included in the national debt subject to the debt limit, they can be replaced by such new public bonds without the total debt going over the limit.

Moreover, those Social Security trust fund bonds are explicitly backed by the full faith and credit of the U.S. That means Obama is constitutionally required to pay them when needed to pay Social Security benefits. In addition, there is more than enough general revenue coming in to just cash out the trust fund bonds as necessary in any event, even without issuing any new public bonds.

As a result, Obama is constitutionally required to pay Social Security benefits, under his constitutional duty to take care that the laws be faithfully executed. That means failing to pay those benefits would be an impeachable offense.




August 2012

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