Social Security, the Debt Ceiling, and Obama

I recently came across an interesting piece, going into some detail on the accounting status of the Social Security Trust fund and its relation to the debt ceiling. If it is correct, Obama's claim that running into the debt ceiling could prevent the payment of Social Security checks is either a deliberate falsehood or evidence of striking ignorance. It is not a subject on which I have any expertise, however, and I would be interested in comments from any reader who knows more about it than I do.

The argument is quite simple. Social Security's past surpluses were borrowed and spent by the federal government, creating a federal debt to the Social Security administration in the form of Social Security Trust Fund special bonds, a  liability that counts as part of the national debt. 

Suppose that next month's Social Security revenue is less than Social Security obligations by, say, $20 billion, the number Obama used to CBS Evening News anchor Scott Pelley. The SSA cashes in $20 billion of special bonds, which under current law the treasury is required to redeem, and uses the money to send out social security checks. Cashing in those checks lowers the national debt by $20 billion, so the treasury is now free to borrow $20 billion without exceeding the debt limit, leaving it with the same amount of money to pay other obligations that it would have if the SSA had not needed the money.

If that account is correct, it looks very much as though the President was deliberately misrepresenting the situation, taking advantage of the ignorance of his audience to frighten seniors into supporting whatever policies he proposes to solve the current debt limit problem.