While few doubt there would be severe consequences if the U.S. defaults on its loan obligations, President Obama made a number of claims Monday about government payouts that dont reflect the full picture. NBC Bay Area's Sam Brock reports in this Reality Check.
In his first press conference of the year that very closely resembled a territorial stakeout, President Obama addressed a national audience Monday speaking largely to an impending debt ceiling crisis.
“America cannot afford another debate with this Congress about whether or not they should pay the bills that they’ve already racked up,” Obama declared.
If Congress fails to raise the debt ceiling, the president warned the consequences could be dire-delayed social security checks and veterans’ benefits, for starters.
President Obama also mentioned potential disruptions to compensation for troops and small business owners, and even “food inspectors, air traffic controllers and specialists who track down loose nuclear materials.”
Further examination of a potential fallout, however, reveals that many of these fears may be unfounded.
The Bipartisan Policy Center, in a recent report on the debt ceiling, finds that it would be next-to- impossible to predict which programs would be affected under a default. That’s because the U.S. government literally has more than 100 million different payment obligations, and since the country has never failed to meet its obligations before, there isn’t a known prioritization plan.
Here’s what we do know for sure:
-Without further action, the U.S. will default on its loans sometime between February 15 and March 1
-Pending default, the only money the government can use to meet obligations is daily cash inflows, or revenue
-Those revenues will not cover about 40 percent of the government’s debt obligations
-The Treasury will have to pick and choose which programs it deems most important to fund
The president’s assertion that “specialists who track down loose nuclear materials wouldn’t get their paychecks” is untrue, because nobody knows who will be impacted under a default scenario.
Another questionable claim made in Monday’s address is that social security checks will be delayed for millions of recipients.
According to Nancy Altman, co-chair of the Strengthen Social Security campaign, and Mark Scarberry, law professor at Pepperdine University, the government can actually supply funding for Social Security without touching the national debt.
Social Security has its own dedicated income stream, explain Altman and Scarberry, as well as a reserve of trillions of dollars invested in treasury bonds.
Those bonds are technically counted as part of the federal debt, meaning if the Social Security Trust decides to redeem a certain percentage to pay out benefits, it would actually lower the U.S. debt obligation.
The government, in turn, could raise newly-freed money on the bond market, shifting its obligations from inter-government to private investors.
Confused? All you need to know is that if the government chooses, it can prevent a disruption in social security checks.