Don't believe Barack Obama when he leaves you with any thought that there is even the slightest risk that seniors may not get their current Social Security checks. He couldn't stop them if he wanted to. The risk checks may not go out is absolutely zero and I'll tell you why.
First of all, the Social Security program is a source of net income to the government, not an expense. The income is from the payroll tax, not income tax. Current receipts from the payroll tax have always been more than needed to pay the current retirees. On a cash flow basis, the Social Security program runs at a surplus. The surplus finds its way into the general fund and helps to pay for all the other government programs.
Social Security is at long term risk precisely because the Treasury Department takes the current cash flow surplus as income rather than setting that money aside to fund payments in the future when the surplus is forecast to turn negative.
Secondly, the payroll receipts go directly into the Social Security Trust Fund. The money is there and the trustees have the responsibility and the power to see to it that retiree payments go out when they are due. The President has no power to stop them or delay them.
Nevertheless, in his Friday night prime time media event, the President Obama spread the notion that he might be forced to delay the August payments. He spoke specifically of Social Security seven times. Each time it was in terms of threat, never in terms of assurance.
Jessica Yellin was one of the pre-selected White House reporters to set the President up with a friendly question.
Standing here tonight, Mr. President, can you assure the American people that they will get their Social Security checks on August 3rd? And if not, who's to blame?
With that question, Obama launched into a long discourse inferring that Social Security and more were in fact at risk and the Republican House of Representatives was to blame. You can read the entire transcript courtesy of the Wall Street Journal here. This is how Obama began.
Well, when it comes to all the checks, not just Social Security - veterans, people with disabilities - about 70 million checks are sent out each month - if we default then we're going to have to make adjustments. And I'm already consulting with Secretary Geithner in terms of what the consequences would be.
Later the President added,
We were consistent in saying that it was going to be important for us to have at least enough revenue that we could protect current beneficiaries of Social Security, for example, or current beneficiaries of Medicare; that we weren't slashing Medicaid so sharply that states suddenly were going to have to throw people off the health care rolls.
As much as the President might like to stop the Social Security checks from going out on time for political purposes, he has no power to do so. It's a hollow and disingenuous threat. He would have done better, had he done just the opposite. It was an opportunity for Obama to gain favor with seniors by assuring them that the checks would indeed go out on time no matter how the debt ceiling issue played out. Community organizers work their agenda by instilling anger aimed at opponents, not by comforting assurances of fulfillment. Old habits don't die easily.
Polls show that public sentiment favors the GOP position but taxpayers are angry on both sides of the issue. Republicans and conservatives are angry over the level of government spending and debt; Democrats and liberals are angry at Republicans and conservatives because they are Republicans and conservatives. Everyone is fed up with the process in general. Graffiti is appearing in stalls across the nation reading- Please flush twice. It's a long, long way to Washington.
Republican negotiators say Obama agrees on points before he disagrees on them. He gives a point and gets a point then reneges on the point he gave. The President says no, he has not been raising the bar. Those of us outside the negotiating room have no way to know who is right on this he-said-she-said question. The Republicans have presented their plan and it was passed in the House. The specifics are there to read. But there is no written plan from Obama by which to judge and compare.
Some bill will be passed. On time or past the deadline we don't' know, but some bill will be passed. Wall Street knows that, that's why the markets have not panicked. Cut, Cap and Balance will improve our balance sheet and reduce the risk of downgrades by the credit rating agencies. Missing the deadline by more than a few days will cause concern. However, if we have a presidential veto signed on top of a missed deadline, then there will be a severe reaction in the markets.
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