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 16 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 on 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? 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 30 years. 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. Medicare, Medicaid, and Social Security payments were all made. No interest payments were missed.
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 1995-96 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.
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 associate editorial page editor of The Washington Examiner.