According to my wife, Nancy Altman, who is a Social Security expert,
the $2.7 trillion held in the Old Age, Survivors, and Disability trust
funds (ie, the Social Security trust funds) are a part of the $14.3
trillion in government obligations subject to limit.  The law permits
Social Security to hold marketable treasuries, and indeed in the past
it has.  If the administration wanted, it could issue marketable
securities to Social Security in exchange for the special issues that
SS now holds, which Social Security could then sell on the open
market.  There may, of course, be economic reasons for not wanting to
do so, in addition to what appears to be the political reason for
raising questions about whether SS benefits will be paid on Aug. 3 if
the debt limit is not increased.  Obama is trying to put pressure on
the Republicans by making that threat that benefits will not be paid.

On Thursday, July 14, 2011, Bert Buzan <bbuzan@gmai...> wrote:
> I thought the securities were non-marketable by statue, so that retirees would not read about principal fluctuations in the business section.
>
> Bert BuzanEmeritus, CSU Fullerton
>
> On Thu, Jul 14, 2011 at 1:05 AM, Scarberry, Mark <Mark.Scarberry@pepp...> wrote:
>
> To add one point:
>
> In a footnote in his testimony (at http://www.democraticleader.gov/pdf/BartlettSP7711.pdf, as linked by Jack), Bartlett cites to this CRS report:
>
> Congressional Research Service, "Reaching the Debt Limit: Background and Potential Effects on Government Operations," Report No. R41633 [http://www.fas.org/sgp/crs/misc/R41633.pdf] (June 3, 2011), p. 22.
>
> It may answer my questions, but I haven't gotten all the way through it and probably won't in the next couple of days.
>
> The report does include this statement, at page 4:
>
> "In September 1985, the Treasury Department informed Congress that it had reached the statutory
> debt limit. As a result, Treasury had to take extraordinary measures to meet the government's cash
> requirements. Treasury used various internal transactions involving the Federal Financing Bank
> (FFB) and delayed public auctions of government debt. It also was unable to issue, or had to
> delay issuing, new short-term government securities to the Civil Service Retirement and
> Disability Trust Fund, the Social Security Trust Funds, and several smaller trust funds. In
> particular, new Treasury obligations could not be issued to the trust funds because doing so would
> have exceeded the debt limit."
>
> If issuance of bonds to the SSA trust fund would have increased the public debt so as potentially to breach the debt ceiling, as this quote says, then selling SSA-held bonds to investors would not increase the public debt; the amount of the bonds issued to the SSA trust fund must already be included in the total debt. The funds raised by the sales could then be used to fund government payments, such as social security payments.
>
> Imagine actually using the bonds in the Social Security trust fund to provide funding for social security payments!!!!!
>
> This quote from page 3 of the report suggests that the government has sold SSA trust fund bonds at times; the report uses the term "disinvest," which I take to mean "sell":
>
> "Past Treasury Secretaries, when faced with a nearly binding debt ceiling, have used special
> strategies to handle cash and debt management responsibilities.[fn 12] Since 1985, these measures
> have included:
> * suspending sales of nonmarketable debt (savings bonds, state and local
> government series, and other nonmarketable debt);
> * trimming or delaying auctions of marketable securities;
> * under-investing or disinvesting certain government funds (Social Security,
> Government Securities Investment Fund of the Federal Thrift Savings Plan, the
> Civil Service Retirement and Disability Trust Fund, Exchange Stabilization
> Fund); and
> * exchanging Treasury securities for non-Treasury securities held by the Federal
> Financing Bank (FFB)."
> ------
> Fn. 12: "For example, see archived CRS Report 95-1109, Authority to Tap Trust Funds and Establish Payment Priorities if
> the Debt Limit is not Increased, by Thomas J. Nicola and Morton Rosenberg (available from CRS upon request)."
>
>
>
> I suppose that CRS Report 95-1109 might answer the question more authoritatively. I couldn't find it on line, not even on the Open CRS website.
>
> Mark
>
> Mark S. Scarberry
> Professor of Law
> Pepperdine Univ. School of Law
> Malibu, CA 90263
> (310) 506-4667
>
>
> -----Original Message-----
> From: Scarberry, Mark
> Sent: Thursday, July 14, 2011 12:35 AM
> To: conlawprof@list...
> Subject: Possible US Debt Default Issue
>
> On the question whether the current budget impasse might lead to a default that, whether justiciable or not could be seen as violating section 4 of the 14th Amendment, Jack Balkin quotes Bruce Bartlett's testimony:
>
> "Finally, on Social Security, I have heard it said that the payment of benefits is never a problem as long as there are sufficient assets in the Social Security trust fund to pay them. The problem is that the Treasury securities in the trust fund are not marketable. If the Treasury lacks the cash to redeem the securities itself there is no practical way of obtaining the cash to pay benefits in the event that the debt limit becomes severely binding. That is why back in 1996 Treasury in

--
Ira C. Lupu
F. Elwood & Eleanor Davis Professor of Law
George Washington University Law School
2000 H St., NW
Washington, DC 20052
(202)994-7053
My SSRN papers are here:
http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=181272#reg
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