Sunday, January 20, 2013

GOP agrees to debt ceiling increase for now; don't forget that Social Security payments collect Medicare premiums

It was widely reported Saturday that GOP leaders have agreed to a three-month extension of the debt ceiling, while a budget is negotiated.  The White House has yet to react and indicate if its “1914-style” ultimatum was violated. The proposal seems to have developed at a Republican retreat in Williamsburg (rather like a church retreat), where the snowstorm originally headed for Washington nosedived (almost completely missing DC) and made Williamsburg the jackptk, even with thundersnow, burying the Republicans.  

The most complete story now may be in the weekend Wall Street Journal, by Janet Hook, here

There has been quite a debate on how a debt ceiling breach could affect recipients of Social Security, with some of the rhetoric (including mine), dire, until some accounting and legal professionals asserted that the Treasury would almost certainly have to give the Social Security Trust Fund the same priority as any bondholder.  That sounds probable, but it is still a “theory”.

One point that has been overlooked is that, when Social Security make payments, it usually takes out Medicare premiums which put revenue (or cash flow) back into the system. That point is often missued, but readily apparent on the W-2 that just came from Social Security yesterday.

Another point is that people who started Social Security early (at 62) might wind up with less effect than those who waited, again not a desired outcome of any policy change. 

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