Social Security benefits for oldest and poorest could be first at risk in debt default, expert says

President Joe Biden and House Speaker Kevin McCarthy, R-Calif., meet in the Oval Office on May 22, 2023.

Saul Loeb | AFP | Getty Images

As President Joe Biden and House Speaker Kevin McCarthy, R-Calif., continue to negotiate forward of a June debt ceiling deadline, consultants are warning that Social Security checks could be at risk if there’s a default.

Based on the cost schedule for these month-to-month funds, the oldest and poorest beneficiaries could be the first who could have their funds affected, in response to Kathleen Romig, director of Social Security and incapacity coverage at the Center on Budget and Policy Priorities.

“That would be devastating for these folks, as a result of they depend on their benefits a lot,” Romig mentioned.

If lawmakers fail to achieve an settlement, U.S. could default on its debt as soon as June 1, in response to Treasury Secretary Janet Yellen. That, in flip, would intervene with the Social Security benefits slated to exit the first week of June, Romig mentioned.

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Beneficiaries scheduled to obtain funds that week embody those that began receiving Social Security earlier than May 1997 who’re age 88 or older, famous Romig.

In addition, Supplemental Security Income benefits are paid that week for those that obtain benefits both completely by way of that program or in mixture with Social Security. Supplemental Security Income, or SSI, supplies month-to-month checks to adults and youngsters with disabilities or blindness, in addition to folks age 65 and up with restricted monetary sources. To qualify for SSI, beneficiaries typically will need to have earnings and sources beneath sure thresholds.

Because SSI beneficiaries face a $2,000 asset limit together with all their monetary sources, they don’t have a cushion to fall again on if they don’t obtain their checks, Romig famous.

“They are essentially the most instantly at risk in a default state of affairs,” Romig mentioned. “They actually do not have a fallback.”

Other beneficiaries’ checks could be affected if the scenario continues. Benefit payments are scheduled for the second, third and fourth Wednesday for different Social Security beneficiaries based mostly on their start dates.

Some consultants say it is unlikely the debt-ceiling debate will attain that time.

“If there’s a state of affairs the place seniors aren’t getting their Social Security checks, there would be a close to speedy decision of this battle,” Ed Mills, Washington coverage analyst at Raymond James, beforehand advised

The National Committee to Preserve Social Security and Medicare has warned that Social Security, Medicare, Medicaid and different funds “could not be made on time and in full” and not using a debt restrict enhance.

If there’s a state of affairs the place seniors aren’t getting their Social Security checks, there would be a close to speedy decision of this battle.

Ed Mills

analyst at Raymond James

“Even if all we’re speaking about is a delay, you could find yourself with important hardship on numerous folks,” mentioned Maria Freese, senior legislative consultant at the National Committee to Preserve Social Security and Medicare.

‘Best educated guesses’ on what could occur

The debt ceiling is the utmost amount of cash the U.S. authorities can borrow to pay its payments. While Washington has been up in opposition to the debt ceiling earlier than, it has by no means defaulted on its monetary obligations.

“There will not be a highway map for a default,” Romig mentioned.

There is, subsequently, a lot debate as to what could occur with Social Security benefits and different federal funds that Americans depend on, together with whether or not Washington would be capable of prioritize sure classes.

“We’re all taking our greatest educated guesses based mostly on what the legal guidelines say and what we all know Treasury is able to doing,” Romig mentioned.

The authorities depends on payroll taxes and Social Security’s belief funds, which embody $2.8 trillion in Treasury bonds, to pay benefits.

If the U.S. have been to default, that would come with these authorities bonds, Romig mentioned.

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