US Government Debt Different - Finance Department - University of ...

64 The 2011 Debt Ceiling Impasse Revisitedof these securities coupled with the issuance of an identical amountof new government securities into the public markets does not implicatethe debt ceiling because government debt held by the TrustFunds and publicly held debt both count towards the debt ceiling.If the Secretary were to invoke his discretion to liquidate Trust Fundsecurities in this way, that might allow the government to stay currenton Social Security obligations while treating other expenditureson a FIFO basis and possibly make similar adjustments from theMedicare trust funds, which are also covered by this provision. 104. Discretionary PrioritizationAn alternative approach would be for the Executive to make paymentson a fully or largely discretionary basis, picking and choosing(a) In general. No officer or employee of the United States shall--(1) delay the deposit of any amount into (or delay the credit of any amount to)any Federal fund or otherwise vary from the normal terms, procedures, or timingfor making such deposits or credits,(2) refrain from the investment in public debt obligations of amounts in anyFederal fund, or(3) redeem prior to maturity amounts in any Federal fund which are invested inpublic debt obligations for any purpose other than the payment of benefits oradministrative expenses from such Federal fund.(b) “Public debt obligation” defined. For purposes of this section, the term “publicdebt obligation” means any obligation subject to the public debt limit establishedunder section 3101 of Title 31.(c) “Federal fund” defined. For purposes of this section, the term “Federal fund”means--(1) the Federal Old-Age and Survivors Insurance Trust Fund;(2) the Federal Disability Insurance Trust Fund;(3) the Federal Hospital Insurance Trust Fund; and(4) the Federal Supplementary Medical Insurance Trust Fund.42 U.S.C. § 1320B–15. The provision is only arguably of relevance because the texttakes the form of a limitation in subsection (a)(3) on how the proceeds of redeemedsecurities from the trust funds may be deployed. It is not, on its face, an authorizationto redeem securities for this purpose, much less a mandate to do so in the caseof a Phase Two Debt Crisis.10 Exactly how such transactions would affect other government spending dependson how the transactions were structured. If the government were to redeem onlyenough securities to prevent any delay in entitlement payments, the benefit to otherpayees would be less than if the government redeemed enough securities to cover thefull amount of entitlement spending.