Redeeming the IOUs will not increase the overall federal debt, but the real question is a legal one, i.e., can the federal government borrow money to redeem the IOUs thereby momentarily going beyond the debt ceiling. I have read/heard conflicting opinions on this. If it can be done, then there is absolutely no problem in paying SS benefits until the entire $2.6 trillion SSTF runs out despite the debt ceiling. If not, then revenue from the general fund must be prioritized to make up the shortfall. I am not equipped to answer the leagal question.
As long as the Treasury has cash in the bank it wouldn’t be a problem, and the Treasury will have cash in the bank since receipts roll in daily.
All they need to do is cash out the IOU’s (as you seem so wont to call the non-public U.S. Treasury Debt Issues held as an asset by the Trust Funds) first, and then issue the debt later the same day, thereby restoring their own cash balance. During the interim, the debt outstanding would actually drop below the debt ceiling by the amount cashed in.
I’m happy to see, however, that you’ve come around to agreeing that the assets of the Trust Fund are real enough that they can be converted to cash so that benefits can be paid.
Now I just wish someone would actually debate the merits of what I’m proposing...so far, absolutely no takers...
Which is too bad, because I think we’d all really enjoy watching this Administration deal with cutting federal spending $600 billion between now and election day, at a rate of $40 bn a month or just over $1 bn a day. I think that’s easily doable, and would love to see the process begin in early August.
To implement it, all the House has to do is sit on its hands, while explaining the procedure to the rest of the country.