In an interview with CBS News, the President has issued some stark predictions of what will happen should Congress fail to extend the debt ceiling.
“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.”
For those who have been following entitlements, this seems hard to reconcile with the assurances issued by OMB Director Jacob Lew a mere four months ago.
“According to the most recent report of the independent Social Security Trustees, the trust fund is currently in surplus and growing. Even though Social Security began collecting less in taxes than it paid in benefits in 2010, the trust fund will continue to accrue interest and grow until 2025, and will have adequate resources to pay full benefits for the next 26 years.”
Of course, Lew’s views of the trust fund have changed overtime. When he was working as President Clinton’s OMB Director, he was a bit less sanguine:
“These [trust fund] balances are available to finance future benefit payments and other trust fund expenditures—but only in a bookkeeping sense. These funds are not set up to be pension funds, like the funds of private pension plans. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large trust fund balances, therefore, does not, by itself, have any impact on the Government’s ability to pay benefits.”
See Peter Suderman (Reason) on the shifting interpretation of the trust fund.
The President’s recent warnings about the cessation of Social Security payments post August 2—while undoubtedly overblown–would suggest that he takes Lew (2000) more seriously than Lew (2011). Stated another way, that the assurances of earlier this year were a less than accurate portrayal of our entitlement crisis that may not be sustainable in the full light of day (like Social Security).