Treasury Secretary Timothy Geithner likely scared millions of senior Americans recently when he claimed the government would have to stop sending Social Security checks if Congress fails to raise the national debt limit.
In fact, not once did the government fail to issue Social Security checks on time during the three previous occasions Congress did not raise the debt limit before Treasury’s deadline.
When a debt ceiling is reached, the Treasury Department is forbidden from issuing additional Treasury securities in order to pay the nation’s financial obligations. Geithner sent a letter to Congress earlier this month identifying May 16th as the probable date that the Treasury Department would have to start choosing which bills it would pay since it could not issue more debt. Asked by ABC News last Sunday what happens if the debt limit is reached, Geithner responded:
What will happen is that we’d have to stop making payments to our seniors — Medicare, Medicaid, Social Security. We’d have to stop paying veterans’ benefits. We’d have to stop paying all the other payments on all the other things the government does.
And then we would risk default on our interest payments. If we did that, we’d tip the U.S. economy and the world economy back into recession, depression. I think it would make the last crisis look like a tame, modest crisis. It would be much more dramatic. The cost of borrowing would go up for everybody, and it would have a permanent devastating damage on our credit rating as a country.
Is any of this true? Will seniors not get their June Social Security checks? Will doctors be stiffed for the health care they provided Medicare patients? Will the Pentagon be unable to buy fuel for missions in Afghanistan? If history is any guide, the answer to all of these questions is ‘no’.
The United States has reached its debt limit three times in the past thirty years and not only did economic Armageddon never materialize, but not a single Social Security check was late. First in 1985, then in 1995, and then again in 2002, Congress failed to raise the debt ceiling for months after the limit was reached. Contra Geithner, Medicare, Medicaid, and Social Security payments were all made. No interest payments were missed. The world economy did not collapse. Nothing that Geithner warned about came true.
That is not to say that none of those things could happen. In August 1996, the Government Accountability Office produced a report on the legality of steps taken by then Treasury Secretary Robert Rubin during the 1995-1996 debt ceiling showdown.
Among other actions, Rubin delayed reinvesting interest payments from government employee trust funds into new Treasury securities, redeemed some pension trust fund bonds early, and even recalled cash balances Treasury had parked at some large banks. The GAO found that all of these actions were perfectly legal.
The GAO reports highlights the tremendous discretion Secretary Geithner has over how and when the federal government pays what bills. So the only reason June Social Security checks might not go out, as Geithner warned they might not, is if Geithner chose not to send them.
Conn Carroll is a senior editorial writer for The Washington Examiner.
