Social Security Disability Beneficiaries Get Paid on Time After All
Americans relying on their Social Security disability benefits can rest easy for a while, now that the U.S. government has more borrowing power to pay its bills. Debt-ceiling legislation passed the House and Senate August 2 after a long and contentious give-and-take between two political parties with two different points of view on what will work best for the future of our country. In simplest terms, the battle rages over raising taxes and/or cutting federal programs such as Social Security and Medicare.
People relying on their Social Security disability benefits may be unsure as to why their monthly checks were at risk if the debt ceiling had not been approved. Here’s a simplified snapshot of a very complex situation:
Social Security payments come from trust funds that are managed by the U.S. Treasury.
The trust funds are called Old-Age and Survivors Insurance (OASI) and the Disability Insurance (DI) Trust Funds.
The trust funds are getting used up more quickly because more baby boomers are on disability or retirement.
Income to these trust funds, which comes from payroll taxes, is less than it used to be because there are less workers paying into Social Security.
Payroll tax receipts are received daily and must be invested daily into special issue bonds.
These special issue bonds hold the face value of cash and do not gain or lose value as do marketable securities.
The cash exchanged for these bonds is deposited into a general fund.
Only the U.S. Treasury can buy back these non-marketable bonds from the general fund.
Before the debt ceiling was raised, the U.S. Treasury did not have sufficient funds to redeem the special issue bonds for the cash needed to pay Social Security beneficiaries.
The debt cap has now been increased by $2.4 billion and will keep the government funded into 2013. The trade for the increase, according to the deal, is two rounds of cuts.
One is immediate and will cut 50 percent from defense and 50 percent from non-defense programs over 10 years to reach $900 billion in savings.
For the next few months, a bipartisan committee of six Republicans and six Democrats will be looking for ways to cut an additional $1.5 trillion from the federal budget. They have until November 23 to present their recommendations to Congress.
According to the debt-deal agreement, Congress has until December 23 to act on the committee’s recommendations for the second round of cuts.
If the committee or Congress fail to agree on how and where to cut the budget to find $1.5 trillion, they will have to accept automatic cuts of $1.2 trillion over 10 years. There will be no cuts to Social Security, Medicaid, or military pay and veterans benefits. But there could be changes made to Medicare that could impact doctors and their patients on Medicare who rely on their care.
In the coming months leading up to the holiday season, the so-called “super committee” will be playing hardball on the issues of tax reform, Social Security and other federal programs to decide how to scrape up the money the government needs to pay its bills.
No doubt, many Americans will be on-edge spectators waiting to see how the game plays out.
News Sources:NPR: Obama Signs Bill to Raise Debt Ceiling MSNBC: Debt Deal Puts Off Major Changes to the Future Social Security Administration Trust Funds FAQs White House Bipartisan Debt Deal Fact Sheet