Tuesday, August 27, 2013
Debt ceiling debate is back; Social Security trust fund is on the priority list (as a bondholder)
The debt ceiling debate, like my drain fly colony, is back, as the Treasury department now says that accounting tricks can keep going only until mid October, 2013. Zachary Goldfarb has the story in the Washington Post today here
As “we” argued last winter, some daily federal income would continue, and the Social Security Trust Fund, according to the best legal information, would have as legally valid a “first claim” as any bond holder. So the threat to existing Social Security recipients, in the short term, may have been overblown. But there is nothing “constitutionally relevant” to stop Congress from implementing means testing, even for current recipients, according to Flemming v. Nestor, as we have covered. There is only political clout.
Retirees could also be affected by economic instability – rising interest rates affecting bond portfolios, and possibly lower corporate earnings and future stock prices because of the pressures from Obamacare, which, however, also has many economic benefits (spreading pressure on health care costs, and many more I.T jobs). Curiously, markets are skittish today over fears over a Syria strike, and that doesn’t sound rational.