July 15,2011

Press Contact:

Julia Lawless, Antonia Ferrier, 202.224.4515

The Facts: Treasury Has the Authority, Resources for Seniors’ Benefits

Analysis by Senate Finance Committee Staff

The President recently tried to scare our nation’s seniors by saying that he could not guarantee that there will be enough cash at the Department of Treasury on August 3 to pay Social Security benefits if an agreement is not reached to cut the nation’s debt.  But an analysis by Senate Finance Committee Staff finds Treasury has the funds and authority to ensure seniors’ benefits aren’t sacrificed. 

Treasury can easily pay Social Security benefits and here’s why:

• Around $50 billion of Social Security payments are due during August.

• Recent estimates put cash inflows into Treasury at between $170 billion and over $200 billion in August from various tax receipts and other sources. 

• That alone is more than enough to pay $50 billion in Social Security payments, with cash left over for the $30 billion due on our debt in August and more.

• Yet even if all $50 billion of Social Security payments came due on August 3, which is not true, Treasury can easily get its hands on cash to pay those benefits.

• According to the Daily Treasury Statement put out Friday, Treasury has $5 billion sitting idle at the Federal Reserve in a so-called “Supplementary Financing Account” that Treasury set up in the financial crisis to allegedly help the Fed manage the ballooning size of its balance sheet.

• Treasury can get that $5 billion from the Fed right now, since it serves no monetary policy purpose.

• Treasury has close to $100 billion in mortgage-backed securities that it bought in the financial crisis to bail out housing markets.  It sold $10.6 billion just last month.  Treasury can go out and sell more next week for Social Security checks to seniors. 

Social Security payments directly influence the debt limit:

• When Treasury uses $50 billion in cash to pay Social Security benefits in August, it extinguishes $50 billion of debt that had previously been issued to the Social Security Trust Funds over the past few decades when the government was tapping Social Security payroll tax receipts, using them to fund growth in general government spending, and replacing the cash with IOUs.

• When the $50 billion of debt in the Social Security Trust Funds is extinguished, it opens up $50 billion of headroom under the debt ceiling since Treasury debt held in the Trust Funds counts against the statutory debt limit.

• This means that after extinguishing that debt, Treasury can go out and borrow $50 billion by issuing public debt, get $50 billion in cash, and still not breach the debt ceiling.