Social Security update: How debt ceiling could affect monthly benefit payments
Misty Severi
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Experts are warning that there could be a delay or pause to Social Security checks if the United States fails to raise its debt ceiling before June.
Treasury Secretary Janet Yellen warned that if the U.S. defaults on its loans, that could cause an “economic catastrophe” for the public, including senior citizens and disabled people who require Social Security funds in order to pay for food or bills.
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“We are already seeing the impacts of brinksmanship: investors have become more reluctant to hold government debt that matures in early June,” Yellen said at a press conference on Tuesday. “The impasse has already increased the debt burden to American taxpayers. Every single day that Congress does not act, we are experiencing increased economic costs that could slow down the U.S. economy.”
The U.S. has never defaulted on its loans before, so it is not clear what exactly would happen if lawmakers fail to raise the debt ceiling. Policy experts claimed that it could lead to either a government shutdown or a default.
If a shutdown occurs, portions of the Social Security Administration would close, but checks would likely be automated and still go out. If a default occurs, then there would be no money to fund the checks and they would completely stop. However, Ed Mills, a Washington policy analyst at Raymond James, told CNBC that if there is a default, it would be remedied quickly.
“If there is a scenario where seniors are not getting their Social Security checks, there would be a near immediate resolution of this fight,” Mills said.
Social Security benefits are paid through two sources: payroll taxes and bonds that the Treasury Department redeems from Social Security trust funds.
Another possibility is the default causing a delay in the disbursements or resulting in a smaller check than usual, though how long the delay would last or how much of a cut recipients could see is not clear.
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“Even if all we’re talking about is a delay, you could end up with significant hardship on a large number of people,” Maria Freese, senior legislative representative at the National Committee to Preserve Social Security and Medicare, said.
The United States reached its debt limit in January, and the country will need to raise the debt ceiling or come up with an alternate solution by June in order to avoid a default.