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During an interview with with CBS News President Obama said he couldn’t guarantee that Social Security checks will go out after August 3rd. Clearly the move is a scare tactic to force Congress into reaching a deal, but what Obama is threatening is both illegal, unconstitutional and financially illogical. There is no reason Social Security checks shouldn’t go out and no reason to frighten seniors on a fixed income with this nonsense.
What Obama indicated is wrong on multiple levels.
First, it is unconstitutional. The section 4 of the 14th amendment says:
Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.
Clearly Social Security is a pension. Simply refusing to pay it is unconstitutional and “questioning the validity of the public debt.” Not paying Social Security benefits would be effectively defaulting on the trillions of public debt held by the Social Security trust fund.
Second, not sending out the Social Security check is illegal. Current law requires the President to send them. There are ways around the debt ceiling, like minting a trillion dollar coin, so the Social Security checks can still be paid.
Lets say though, that the administration refuse to use any possible work around and believes the debt ceiling is Constitutional. This would still mean due to an inherent mathematics conflict the administration would be force to break some laws. He would either break the law by going beyond the debt ceiling or break law by paying the monies required by law. The only way Obama can guarantee the Social Security checks go out is if in this situation he choose to make the irrational decision to break the Social Security law instead of the debt ceiling law, which is constitutionally suspect.
Finally, it defies financial logic. The Social Security Trust Fund currently holds $2.5 trillion in assets. The program doesn’t need new tax revenue or new general government borrowing to have enough funds to keep paying out benefits in the short term.
Going back to the constitutional issue. If for some reasons the government is unable to make good on the debt it has already incurred to the Social Security trust fund, causing the stopping of payments to a pension, that would be beyond any doubt a violation of the 14th amendment.
Obama is fully capable of guaranteeing Social Security checks go out on August 3rd. All he needs to do is send them out like he is currently required by law to do. The only reason Social Security checks can’t be guaranteed to go out is if Obama personally chooses to both break current law and violate the constitution by not sending out the checks.
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He thinks that the GOP would get the blame. The wingnuts aren’t fooled that easily.
In the age of the Imperial Presidency, that’s all it takes — Obama deciding to do it.
Glad you’re recognizing and beginning to blog about the jumbo coin seigniorage method of preventing an overdraft in the Treasury General Account at the Fed, and ensuring that Treasury will be able to to spend all Congressional Appropriations without exceeding the debt. I’m glad that you linked to Scott Fullwiler’s treatment of coin seigniorage a few days ago. FYI however, Scott’s post also appeared here: http://my.firedoglake.com/letsgetitdone/2011/07/09/scott-fullwiler-qe3-treasury-style%e2%80%94go-around-not-over-the-debt-ceiling-limit/
As important as this post is for the current crisis only 4 people commented on it here at the Lake. Here is some background on this solution:
I’ve written a lot about jumbo coin seigniorage as a way of getting around the debt ceiling problem over the past 7 months, and others here, here, here, here, here, and here, apart from beowulf and I, have been joining the fight.
Recently, I posted two pieces here making the point that the debt ceiling isn’t unconstitutional, because Congress has given the Executive the authority to create jumbo coins without issuing or incurring public debt; so the President can and should use it to prevent a default. The first piece is here:
http://my.firedoglake.com/letsgetitdone/2011/07/07/the-debt-ceiling-is-not-unconstitutional-right-now/
and the second which tightens the argument is here: http://my.firedoglake.com/letsgetitdone/2011/07/11/coin-seigniorage-the-debt-limit-and-the-presidents-duty/
It’s conclusion is that:
I ask that you look at these pieces carefully, and, if you agree, begin to blog about the President’s duty to use jumbo coin seigniorage, if default is imminent. In addition, it would be even better if the President had the mint create Trillions of USD worth of jumbo platinum coins right now, deposited them at the Fed, and proceeded to ignore the whole debt ceiling issue while he gradually paid all debts that came due, and also spent other Congressional appropriations. This would make clear to all that the US doesn’t have to issue debt, can pay off all its old debts, can get along perfectly well without the bond markets, and has no solvency problems.
Perhaps then we can begin talking about jobs again.
Excellent post Jon, thanks pointing out that minting a trillion dollar coin would be way to not break ANY laws.
Obama is duty bound to obey the law, even if he doesn’t like the minting idea, what legal alternative does he have? Like you point out, Obama’s stated alternative is ILLEGAL.