This week the U.S. Treasury made the decision to "borrow" money from the federal employee pension fund. This is not the first time this has been done, but is it really a solution?
In order to steer clear of default , the U.S. Treasury has decided to tap into the federal employee pension fund ─ again. Treasury Secretary Timothy Geithner sent a letter to Congress that it must stop funding the pension plan (the G fund) to keep operations going without extending beyond the debt limit, according to the Washington Post.
According to Geithner, this decision to temporarily stop investing into the pension plan frees up $156 billion in borrowing ability while Congress debates increasing the current $16.4 debt limit. The Treasury Secretary said the funds will be replaced after the borrowing limit is raised.
Reportedly, monthly pension payments to retired federal employees will not be impacted.
But is this really the way to go? Wouldn't it make better sense to cut spending as opposed to dipping into funds as a temporary measure with the provision that more money needs to be borrowed in order to pay debt and cover expenses?
While it is true the government has borrowed against the fund several times in the past, the national debt continued to climb. The last two administrations have been on a large spending spree compounding the issue, and at this point, is there any light at the end of the proverbial tunnel?
In the past when the pension program was tapped, the money was always replaced, but in the meantime, overall debt is still growing.
As Money Morning notes, "an IOU from the federal government isn't very settling for those relying on the fund for retirement."
On the other hand, FedSmith points out the government makes "approximately 80 million payments per month", which include income tax refunds, Social Security; Supplemental Security Income; Medicare; Medicaid; national security needs, including military salaries, military retirement, veterans’ benefits, and defense contractor payments, to name a few. If these payments weren't made, this would have a ripple effect on the economic standing of millions of people.
However, it seems logical that some cuts could be likely made that wouldn't impact any of the above payments. What about taking a hard look at the government waste that occurs on a daily basis? Or not push creation of programs that stretch beyond budgetary constraints at this time?
The way it stands, the U.S. has reached its spending limit, "borrowing" from pension funds is perhaps putting a bandage on the immediate problem, but it's not fixing the overall issue.
FedSmith has published Geithner's letters in entirety to House Speaker John Boehner and an additional letter to several members of Congress.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com