President Bush used the word ‘bankruptcy’ four times in one day when discussing Social Security, and President Obama has repeatedly said that Social Security is ‘broken.’ Both are wrong. The U.S. bankruptcy does not apply to a government that spends its own currency, and Social Security checks written by the U.S. Government won’t ever ‘bounce.’

In fact, the only reason that can ever stop Social Security payments from being made on a timely basis is instructions from Congress not to make the payments. Financial markets and trust fund balances have no say in the matter of the U.S. Government making any payment it wants to.

As President, I would have the US Government reaffirm its legal obligation to meet all social security checks in a timely manner, regardless of the status of the trust funds. This will address the concerns of those who are frightened about government solvency, and remove the pressure on Congress to voting for debilitating ‘fiscal responsibility’ measures that reduce growthand cause high unemployment.

Here’s how the payments system actually works. When a senior citizen receives a social security payment, it is either directly credited to his bank account or he is sent a check that, when deposited, also results in a credit to his bank account.

If, for example, he had $2,000 in his account, and the new payment is $1,000, all that happens is the Fed changes the balance in his bank’s account at the Fed, which at the same time changes the senior’s bank account balance from $2,000 to $3,000.

Payment consists of the Fed changing a number.

Operationally, there are no constraints (other than self imposed constraints) to this process. The Fed can just as easily credit $1,000, $10,000, or $10,000,000 regardless of federal tax collections or borrowings. This process is not constrained by revenue.

That’s why government checks never ‘bounce,’ and why there is NO solvency issue.

So in the future, should some such government ‘reserve fund run out’ social security checks will not bounce. Yes, there may be an increase in ‘inflation’ but that is a totally separate issue. All federal payments will always be met when due.

No one should be frightened by those fear mongers telling us the government is bankrupt or insolvent, or that the money won’t be there when we retire.

And when you hear terms like ‘printing money,’ ‘money finance,’ debt finance,’ and ‘monetization’ as well as ’sterilized vs. unsterilized intervention’ and all the rest of that type of talk, rest assured that these have NO APPLICATION WHATSOEVER. They are throwbacks to the days of gold standards and do NOT apply to the US today.