Inconsistent chatter from a Sacramento-based 'Sconi attorney.

Friday, April 22, 2011

What happens the day after we hit the debt ceiling?

Apocalypse later: what happens the day after we hit the debt ceiling | Conn Carroll | Columnists | Washington Examiner

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.

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