US - The US government could default on $20bn of social security checks scheduled to go out on 3 August unless congress is able to come to terms on how to raise the $14trn debt limit, President Barack Obama said yesterday.
In an interview with CBS news replayed on their website, Obama (pictured) said: "This is not just a matter of social security checks. There are veterans' checks, there are folks on disability. There are 70 million checks that go out. I cannot guarantee that those checks will go out on August 3 if we haven't resolved this issue because there may simply not be the money in the coffers to do it."
The US bumped up against is $14trn borrowing limit in May and congress has until 2 August to come to an agreement on how to raise the legal limit.
Obama has proposed a $4trn fiscal reform package, but Republicans are calling for a smaller $2trn package.
Senate Republican Mitch McConnell has called Obama's proposals of spending cuts and tax increases a "false choice".
He said: "It was a debate about the kind of government we want. This was a debate between those who believe that Washington doesn't have enough money to spend, and those, like me, who believe that Washington has become too big, too expensive, and too burdensome already."
In May, Treasury Secretary Timothy Geithner said he had to suspend investments into two federal pension funds and redeem billions in assets in order to provide some wiggle room below the debt limit. The moves saved $215bn.
Geithner said debt issuances for the Civil Service Retirement and Disability Fund, which covers retired and disable federal employees, were suspended between 16 May and 2 August. He said the "Treasury Department will suspend additional investments of amounts credited to, and redeem a portion of the investments held by, the CSRDF, as authorized by law". (Global Pensions; 17 May 2011)
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