The Treasury is, according to Tim Geithner, supposed to run out of emergency measures and hit the "real" debt ceiling on August 2nd. President Obama has suggested that failing to raise the ceiling by then could result in Social Security payments being withheld, which statement the GOP denounced as a scare tactic.
Who's right? First of all, it's not clear that Geithner doesn't have a few tricks left up his sleeve to create even more time. By the same token, though, it's possible that the Treasury would run into logistical trouble trying to prioritize payments such as Social Security deposits after August 2nd -- Reuters reports that, in order to do so, it "would need to re-program government computers that generate automatic payments as they fall due -- a massive and difficult undertaking. Treasury makes about 3 million payments each day." And it's certain that the administration and Congress will run into increasing political pressure to avoid the possibility of withholding payments from key constituents.
But, assuming the debt limit is reached and the Treasury has the power to privilege certain bills over others, there's no doubt that it's within it's power to pay Social Security recipients. The federal government will take in about $172 billion in August, and owe roughly $307 billion. It will have no problem paying the interest on the debt (about $30 billion) and Social Security recipients (about $50 billion).
Bloomberg Businessweek has created a debt ceiling prioritization calculator, using figures from the Bipartisan Policy Center. Using broad categories, it shows which items the government could continue to fund past the deadline while avoiding a default on the debt. By BPC's calculations, it would be possible to continue paying not only for Social Security and the interest on the debt, but also Medicare, Medicaid, unemployment insurance, active duty military pay, TANF, food stamps, and Homeland Security emergency preparation and response, with billions left over just in case.
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