Thursday, July 28, 2011

NYT: Treasury has enough money through Aug. 9 w/o ceiling lift, but big Soc. Sec. payment on Aug 10 could be in trouble; should benefits be recalculated after missed payments?; Also Trust Fund IOU's count under ceiling

The New York Times and MSNBC are reporting that the federal treasury will be able to pay all bills as demanded through Aug. 9, including Social Security payments due Aug. 3.

But there would then be a problem Aug. 10 (the day of mine).

The government can reborrow money as it pays it back, but this can become more difficult each day.
What happens if it is missed for a few weeks, and we come around into September (13) and are still unable to pay?  Or what if there is a partial payment (50%)?

One idea to make it easier to make huge cuts quickly would be, after a deal finally is struck, is, for anyone under age 70-1/2, to recalculate the benefits as if retirement had occurred later, but not repay.   When the benefits resume, they are larger for life. But the person has to live long enough to come out ahead, and the government is on the hook for a larger liability, eventually.

But then another idea would be to encourage seniors capable to doing so to return their benefits and not restart until age 70-1/2, with a larger amount. Again, only seniors with sufficient longevity benefit. Social Security ended that opportunity earlier this year, but renewing it certainly should be considered as part of the solution to the current mess.

The link for Binyamin Applebaum’s story is here.

Also, CNN has a story tonight explaining that the Social Security Trust Fund IOU's are already counted against the debt limit, so this is why it may be possible to borrow for them, but the technical legality is tricky. The link is here.  Most likely, the courts would permit it, or Congress could pass a quick emergency bill to allow it. 

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