; Democrats and Their Friends Stand to Gain the Most

Summary

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There has been much discussion about whether the Democrats or Republicans gain a political advantage from the debt-ceiling- increase mess. An equally interesting and, perhaps, more important question is who has a vested interest in this financial chaos. First, a few facts: *It is estimated that between Aug. 3 and 31, the U.S. government will receive revenues of approximately $172 billion and have expenses of $307 billion, leaving a deficit for those days of about $135 billion. The revenues will be sufficient to pay Social Security and interest on the debt, but not many of the other obligations.

* The 12.4 percent Social Security payroll tax paid by employers and employees goes to buy special-purpose government bonds that are held by the Social Security Trust Fund. As Social Security expert Thomas Saving wrote in the Wall Street Journal last week, "By law the Treasury is bound to redeem any bonds presented to it by the Social Security Administration. And when the Treasury does, total government debt subject to the debt limit falls by the amount of the redemption - thus freeing up the Treasury's ability to issue bonds equal in amount to the redeemed Trust Fund bonds." The Trust Fund holds about $2.4 trillion in these bonds, so it would be many years before they are exhausted. The only way there would not be enough revenue to cover the Social Security checks is if President Obama decided to spend the money on something else.

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Extract

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; Democrats and Their Friends Stand to Gain the Most

* The U.S. government holds gold worth about $400 billion at present market prices. The president has the legal authority to sell the gold plus many other government assets. So even if Congres...

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