Karl Denninger at the Market Ticker has an interesting take on this. For decades Social Security run a surplus. The government poached the surplus for the general treasury and issued IOUs to the Social Security fund (the intragovernmental holdings he mentions below). How does that play out with regards to the debt ceiling?
Market Ticker – Social Security is NOT At Risk On Debt Ceiling:
That total debt number is the amount subject to the limit, more or less. But the “Intragovernmental Holdings” is the amount that the Social Security and Medicare trust funds are “owed” by the general fund.
The Treasury can redeem those by selling new bonds into the market in a 1:1 ratio and if they do so they now have dollars in an exactly equal amount.
That’s $4.6 trillion dollars. How much is Social Security and Medicare every year? That’s easy – we can look at the Trustee report, which says that in 2010 the total expenditures were $1.235 trillion. Note that these funds also receive tax monies and in 2010 they took in $1.267 trillion.
Wait a second…… they took in more than they spent? Indeed, which means that the only reason the Treasury has a problem in the present tense is that they have been stealing the tax revenues and replacing them with yet more IOUs.
Though in this case the insane IO
myself U situation may work to the government’s advantage to let them get around the debt limit.