Right-wing media have attacked Treasury Secretary Timothy Geithner for using federal workers' pension funds to ensure that the government meets its obligations for the short-term while lawmakers and the White House try to reach a deal on raising the debt ceiling. In fact, Geithner's actions are in line with those of the Treasury Department under former Presidents Bush and Clinton, the government is legally required to reimburse the program once the debt limit is increased, and economic disaster could have occurred had Geithner not taken these measures.
Right-Wing Media Attack Geithner For Supposedly "Steal[ing] Money From Pension Funds"
Carlson: Geithner Is "Going To Steal Money From The Pension Funds Of Federal Workers." During the May 17 edition of Fox News' Fox & Friends, Gretchen Carlson claimed that Geithner is "going to steal money from the pension funds of federal workers." From Fox & Friends:
GRETCHEN CARLSON (co-host): Remember, yesterday we officially met that limit, but because the government has a way of fudging the numbers for us -- you gotta wonder how they can fudge so easily right? -- now we've got until August 2nd. And what they're doing is they are actually going to steal money from the pension funds of federal workers to pay off the next couple of months, so that Congress can continue to try and figure out what the hell to do.
BRIAN KILMEADE (co-host): Taking a page from Wall Street. [Fox News, Fox & Friends, 5/17/11]
Fox Nation: "Turbo Tim Raids Pension Plans." In a May 16 Fox Nation post, a headline read, "Turbo Tim Raids Pension Plans":
[Fox Nation, 5/16/11]
Napolitano: "To Fund The Government They Are Raiding The Pension Funds Of Federal Employees." From the May 16 edition of Fox Business' Freedom Watch With Judge Napolitano:
NAPOLITANO: What did you think of the announcement that Secretary Geithner made today? We did reach the debt ceiling, the sky didn't fall -- he didn't say that part -- I added that part. But he said in order to fund the government they are raiding the pension funds of federal employees. That would be you as well as the many, many other hundreds of thousands of federal employees. The money is put there in trust for you and the government's now raiding it.
He doesn't literally raid the pension funds, he just declines to make contributions to them, so he takes money that comes in from the taxpayers which was dedicated to those pension funds and instead of sending them there he either pays the debt service or he sends a check to the Pentagon or he funds the other parts of the government. So at one point he's doing what you are I would go to jail if we did, if we owned a company and raided the pension funds we'd go to jail. On the other hand he does demonstrate your point that he doesn't have to go out into the financial markets in order to keep the lights and the heat on. [Fox Business, Freedom Watch with Judge Napolitano, 5/16/11]
Ace Of Spades: "America Hits Debt Ceiling; Treasury Raids Federal Pensions Funds." A May 16 post on the conservative blog Ace of Spades claimed that "[i]t's so liberal" of Geithner and other Democrats to "raid the pension funds." The post further claimed that Democrats plan to "[j]ust keep borrowing and spending and taking money from one federal account to spend it for other purposes." From the post titled, "America Hits Debt Ceiling; Treasury Raids Federal Pensions Funds":
Hoh boy. We should have seen this coming. I didn't. I didn't read anyone predicting it.
The best solution, for conservatives and America, is to just spend less, of course.
But Democrats will never, ever do that.
So the first thing they do is raid the pension funds, because that's not current spending, and they figure that will be replaced.
Should have seen it coming. It's so liberal. Just keep borrowing and spending and taking money from one federal account to spend it for other purposes. [Ace Of Spades, 5/16/11]
RedState: "Obama And Geithner Will Start Raiding Pension Funds Of Federal Retirees." From a May 16 RedState post:
Rather than find somewhere to cut spending, Obama and Geithner will start raiding pension funds of federal retirees. No doubt they feel that this will cause the seniors and unions to start pressuring the GOP to cave on allowing increased borrowing from China to replace increased borrowing domestically.
Sure, for this and the Social Security IOUs the government can just print enough money to cover the debt. The money might only be worth 25 cents on the dollar to what it was the day before, but hey that's just a technicality.
Funny, it seems like Obama's going away party for Osama is being used as an excuse that Obama should be given anything he wants, including a "clean" debt ceiling vote. So he can tie OBL to it, but the GOP shouldn't tie anything like oh let's say cutting spending to it.
I hope a significant percentage of average Americans can see through this nonsense. [RedState, 5/16/11, emphasis original]
Jim Hoft: "Obama Administration Raids Pension Plans To Pay Off Debt." In a May 16 post on his Gateway Pundit blog titled, "Obama Administration Raids Pension Plans to Pay Off Debt," Jim Hoft attacked Obama and Democrats for "add[ing] over One Trillion Dollars to the Federal Budget in the last 4 years," which, he explained, is "at least a 30% increase in federal spending in just 3 years." Hoft further wrote that the "Obama Administration will raid federal retiree programs to help pay for government programs." [Gateway Pundit, 5/16/11]
Newsmax: Geithner's "Moves Could Instead Be Seen As The First Step Toward ... Outright Seizure Of Private Savings In Tax-Favored Retirement Plans." In a May 21 Newsmax article headlined, "Watch Out! Feds Could Seize Your Private Retirement Savings," Greg Brown wrote:
How long before Uncle Sam hits private pensions to balance the public budget? It's quickly becoming a reasonable question to ask.
As Congress squares off over a debt ceiling vote, Treasury is scrambling to find cash in the couch cushions. One of the ways it will scare up extra money is by putting off saving for the retirements of federal workers -- in effect, short-term "borrowing" from public pension funds.
By suspending investments into the civil service retirement and disability fund, as well as putting off reinvestments into another big retirement bucket known as the G-Fund, Treasury could "claw back" up to $202 billion, estimates Reuters. That sounds like a lot, but it's just 10 percent of the $2 trillion the agency says it needs to stay afloat until after Election Day 2012, and it will have to be put back.
Holding off public pension payments could be cast as prudent short-term scrambling to avoid a serious problem with U.S. Treasury holders. Taken another way, such moves could instead be seen as the first step toward an eventual tax or outright seizure of private savings in tax-favored retirement plans. [Newsmax, 5/21/11]
- Fox Nation: "Watch Out! Feds Could Seize Your Private Retirement Savings." On May 23, Fox Nation featured the headline, "Watch Out! Feds Could Seize Your Private Retirement Savings," and linked to Brown's Newsmax article with the same headline. From the Fox Nation:
[Fox Nation, 5/23/11]
In Fact, Treasury Department Used Pension Funds To Meet Obligations And Avoid Default Under Bush, Clinton
U.S. Treasury Department Has Suspended Government Employee Pension Funds During Previous Debt Limit Impasses. From a May 16 blog post by the U.S. Treasury Department addressing many of the frequently asked questions about the Civil Service Retirement and Disability Fund (CSRDF) and the Government Securities Investment Fund (G-Fund) in regards to the debt limit crisis:
Question: Has Treasury ever redeemed existing investments and suspended new investments in the CSRDF before?
Answer: Yes, in the past 20 years, Treasury used these extraordinary measures during previous debt limit impasses in 1996, 2002, 2003, 2004 and 2006.
Question: Has Treasury ever suspended reinvestment of all or part of the G Fund before?
Answer: Yes, in the past 20 years, Treasury used this extraordinary measure during previous debt limit impasses in 1996, 2002, 2003, 2004 and 2006. [U.S. Treasury Department, 5/16/11]
Bush Treasury Secretary Used Government Pension Fund To Keep From Hitting $8 Trillion Debt Limit And To Ensure Government Met Obligations. The Associated Press reported:
The Bush administration told Congress on Thursday it had begun to use a government pension fund to keep from hitting the $8 trillion debt limit.
Treasury Secretary John Snow warned in a letter to congressional leaders that he would run out of room to make such maneuvers in about four weeks, meaning the government would lose the ability to meet its obligations unless Congress had raised the borrowing limit by then.
In his letter, Snow said Treasury would begin taking investments out of a $65.3 billion government employee pension fund called the G-fund.
By withdrawing investments, Treasury is making room on the government's books for increased borrowing.
Snow said he is utilizing a maneuver that has been employed by other Treasury secretaries during times when the government's borrowing levels were approaching the debt limit. Without the action, the debt limit would have been reached on Thursday, said Treasury spokeswoman Brookly McLaughlin.
Snow said once the debt limit was raised, he would make the employee pension fund whole, putting back the investments that had been withdrawn and making up any lost interest payments. The fund's formal title is the Government Securities Investment Fund of the Federal Employees Retirement System. [Associated Press, 2/16/06, via Nexis]
Clinton Treasury Secretary "Dip[ped] Into Two Trust Funds For Civil Service Employee Pensions" To Avoid Default. The Los Angeles Times reported:
Wednesday was a big day in the credit markets. Mid-November is when interest payments are made on many Treasury securities, and the government owed $25 billion in interest on Treasury bills, notes and bonds.
The trouble was that the government didn't have the $25 billion. And it couldn't borrow it. Congress had limited government debt to $4.9 trillion, and the government reached that limit Wednesday. President Clinton last week vetoed a bill to raise the debt ceiling because he objected to other provisions of the bill.
So Treasury Secretary Robert E. Rubin resorted to his authority under a 10-year-old law to dip into two trust funds for civil service employee pensions.
"This is no way for a great nation to manage its financial affairs," Rubin admitted. But the alternative, he said, was unthinkable: Default.
Sooner or later, the government will have to make good on its $29 billion worth of IOUs to the pension funds. According to law, it will have to pay the funds back with interest. (If Treasury had simply been able to borrow the $29 billion the usual way, it would also have had to pay interest, and so the maneuver executed by Rubin on Wednesday imposed no substantial new cost on the government.) [Los Angeles Times, 11/16/95]
Treasury Is Legally Required To Reimburse The Program Once Debt Limit Is Increased
Geithner: "By Law [Pension] Funds Will Be Made Whole Once The Debt Limit Is Increased." From a letter from Treasury Secretary Timothy Geithner to Congress detailing the "extraordinary measures" taken by the Treasury to continue funding government obligations while the White House and lawmakers attempt to reach a deal for raising the debt limit:
I am writing to notify you, as required under 5 U.S.C. § 8348(l)(2), of my determination that, by reason of the statutory debt limit, I will be unable to invest fully the portion of the Civil Service Retirement and Disability Fund ("CSRDF") not immediately required to pay beneficiaries. For purposes of this statute, I have determined that a "debt issuance suspension period" will begin today, May 16, 2011, and last until August 2, 2011, when the Department of the Treasury projects that the borrowing authority of the United States will be exhausted. During this "debt issuance suspension period," 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.
In addition, I am notifying you, as required under 5 U.S.C. § 8438(h)(2), of my determination that, by reason of the statutory debt limit, I will be unable to invest fully the Government Securities Investment Fund ("G Fund") of the Federal Employees' Retirement System in interest-bearing securities of the United States, beginning today, May 16, 2011. The statute governing G Fund investments expressly authorizes the Secretary of the Treasury to suspend investment of the G Fund to avoid breaching the statutory debt limit.
Each of these actions has been taken in the past by my predecessors during previous debt limit impasses. By law, the CSRDF and G Funds will be made whole once the debt limit is increased. Federal retirees and employees will be unaffected by these actions. [U.S. Treasury Department, 5/16/11]
Former Bush Administration Assistant Treasury Secretary: "No Retiree Will Lose A Penny" Using The Treasury's "Lawful Tools To Free Up Borrowing Capacity." From an April 28 Wall Street Journal op-ed by Emil Henry, former assistant secretary of the Treasury under Bush, describing the various "myths and facts" emerging during the current debate over the debt ceiling:
The Treasury will raid pension funds to avoid exceeding the debt ceiling. When the ceiling is reached but not exceeded, the Treasury has lawful tools to free up borrowing capacity and prolong the time until the ceiling's technical breaching. The Treasury correctly calls the tools "extraordinary" since they are out of the ordinary course of business, but in reality they are neither extreme nor dangerous.
Still, if Treasury deploys these tools, expect Democrats to claim that Republican intransigence is forcing the administration to take drastic measures. Such demagoguery can yield political fruit because Treasury's tools include postponing transfers of U.S. Treasurys that would otherwise go to pension funds such as the Civil Service Retirement and Disability Fund.
But Treasury would be required to restore these funds upon any budget agreement: No retiree will lose a penny by virtue of the Treasury's technical use of its time-tested tools. [The Wall Street Journal, 4/28/11]
Economic Catastrophe Could Have Occurred Had Geithner Not Taken These Measures
Geithner Took Measures To "Avoid Catastrophic Economic Consequences For Citizens." From Geithner's May 16 letter to Congress:
Each of these actions has been taken in the past by my predecessors during previous debt limit impasses. By law, the CSRDF and G Funds will be made whole once the debt limit is increased. Federal retirees and employees will be unaffected by these actions.
I have written to Congress on previous occasions regarding the importance of timely action to increase the debt limit in order to protect the full faith and credit of the United States and avoid catastrophic economic consequences for citizens. I again urge Congress to act to increase the statutory debt limit as soon as possible. [U.S. Treasury Department, 5/16/11]
- In its May 16 article on Geithner's decision to suspend payments to federal pension funds, FoxNews.com reported that Geithner, in his letter to Congressional leaders, explained that he took those measures to "avoid catastrophic economic consequences." [FoxNews.com, 5/16/11]
CNNMoney: Default Is "A Nightmare Event That Would ... In All Likelihood, Precipitate Another Global Financial Meltdown." From CNNMoney.com:
The feds are on track to reach their $14.29 trillion borrowing limit in mid-May, and the Obama administration says juggling accounts can only buy time until July 8. After that date, the government will default on its debt -- a nightmare event that would gut investor confidence in U.S. bonds, send our borrowing costs soaring, and in all likelihood, precipitate another global financial meltdown.
For months, the White House has been working behind the scenes to avert that outcome by lobbying for a simple, so-called "clean" hike of the debt ceiling. But Congressional Republicans are intent on demanding that any raise come with at least some of their deficit-cutting priorities. With market watchers nervously tracking the face-off as the clock winds down, it's worth taking a look back at the last time a political fight nearly ended in default. [CNNMoney.com, 4/25/11]
Former Treasury Official: Default "Would Make the Lehman Brothers Bankruptcy Look Like A Walk In A Park On A Sunny Day." From The Huffington Post:
If Congress doesn't raise the $14.3 trillion debt limit by mid-May, the U.S. government will have to resort to emergency measures to avoid default. One missed payment, which could happen as soon as July if the ceiling is not raised, would likely set off a widespread global panic, causing borrowing costs to skyrocket and severely crippling the nation's economy.
But Republican lawmakers have said they will use the debt limit as a means of enforcing fiscal austerity, insisting they won't raise it without winning concessions from Democrats.
Meanwhile, Jim Millstein, the former restructuring officer at Treasury, who helped reorganize AIG, outlined how disastrous the consequences of default would likely be. Speaking on CNBC on Tuesday, he said that a Treasury default would affect investors of all sorts, and he criticized those who downplay the consequences.
"This would make the Lehman Brothers bankruptcy look like a walk in a park on a sunny day," he told CNBC's David Faber. "They're really playing with fire." [Huffington Post, 4/13/11]