The budget news of the day has been that the president said that if a debt extension deal is not reached by the August 2nd deadline he “cannot” guarantee that social security checks will go out on the third. But in fact he can. If SS benefits are cut off it will mean that Obama has deliberately decided that there are more important items in the budge to spend the money on. In order to avoid default the president will have to reallocate the budget and establish priorities in order to pay interest on the debt and avoid default. When he says that Social Security checks might not go out he is making a threat to seniors; namely that if he doesn’t get his way he will decide not to make social security a high priority budgetary item. The money is there, his decision will be to spend it on other things– the EPA, or the pork barrel projects funded by the Department of Commerce, or the foreign aid, or any number of other areas. Yes, if there is no agreement by the second and SS checks do not go out on the third it will be entirely the president’s cynical and vindictive choice.
by Dr. Roy Cordato
Senior Economist Emeritus