If the United States defaults on its financial obligations, millions of Americans may also not be able to pay their bills.
As Social Security and other government benefits come under threat amid a political standoff over the government’s debt ceiling, experts and older Americans tell ABC News the fallout from the standoff in Washington could be disastrous, including for older Americans who need money to pay basic expenses. needs such as food, housing or health costs.
A quarter of Americans over 65 rely on Social Security to provide at least 90% of their household income, according to the Social Security Administration.
Fred Gurner, 86, of New York City, told ABC News he uses his Social Security payment for his $800 rent. But now there is a real risk his payment won’t arrive on time in June – when the Treasury Department says the government may not be able to send him the money he’s counting on.
“It’s very stressful, it gives me a heart attack,” Gurner said of the politicization of the issue.
How are Social Security payments affected by the debt ceiling?
Since 2001, the United States has spent more money than it has collected in revenue overall.
To cover the difference, the US Treasury issues debt securities, according to Olivia Mitchell, a professor at the Wharton School of Business at the University of Pennsylvania. Supported by the United States, these securities are willingly bought by investors who see in them a sure guarantee that they will be reimbursed with interest.
However, the United States and Denmark are the only two countries that limit the amount of debt the government can issue, known as the debt ceiling, Mitchell noted.
Lawmakers can pass new laws that require public spending, but the debt ceiling will remain in place until lawmakers vote to raise it. This has happened 78 times in the United States since 1960.
If that debt ceiling doesn’t rise by June 1, Treasury Secretary Janet Yellen has warned House Speaker Kevin McCarthy that the country won’t be able to meet all of its obligations. financial.
In addition to not being able to pay interest and principal on government securities – which economists say would rattle the stock market and could hurt the United States’ credit rating – the Treasury would not be able to issue new debt to cover expenses such as Social Security, according to Mitchell.
The government plans to spend about $100 billion on Social Security in June, according to the Bipartisan Policy Center.
“It’s going to be pretty tight for people for a while unless Congress and the president can come together on this issue,” Mitchell said.
When would Social Security payments be delayed?
The Social Security Administration plans to send contributions to beneficiaries on four dates next month, June 2, 14, 21 and 28. Those checks would be the first at risk of being delayed, according to Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare.
“Millions upon millions of Social Security recipients worry about having the income to pay their basic bills,” he noted.
Lynda Fisher, 80, told ABC News that her budget depends on her monthly Social Security check and that a delay would complicate her essential expenses, frustrating the 80-year-old who has spent her life contributing to the system.
“I paid into Social Security and I paid into Medicare,” she said. “And now they’re trying to take it away. It’s not their money, it’s my money that I paid.”
Richtman is now actively encouraging older residents to save money in anticipation of a late Social Security payment, fearing the negotiations could reach a compromise in time to avoid a default.
On NBC’s “Meet the Press” Sunday, Yellen indicated that certain bills could be prioritized, including interest payments, Social Security and military contractor payments. However, Richtman expressed doubts that such a prioritization is legally possible.
What does this mean for the future of Social Security?
Some Republican lawmakers have called the fight against the debt ceiling necessary to slow government spending; however, some economists, including Mitchell, see it as a “manufactured crisis” that threatens essential services, retirement savings and the economy as a whole.
“Each time one of these crises occurs, it signals to the rest of the world and to American investors that US Treasuries are not as safe as we thought,” said Laurence Kotlikoff, an economics professor at the University. Boston University.
Kotlikoff further expressed concern that the Social Security system will have more than $65.9 trillion in unfunded financial obligations over an indefinite horizon, based on the entity’s own report.
However, the debt ceiling debate seems unlikely to produce a meaningful solution to the broader Social Security deficit, according to Kotlikoff, Mitchell and Richtman.
When will retirees receive their payments?
Mitchell and Richtman remained optimistic that Social Security recipients would eventually receive their checks once the deal is reached, albeit with some delay.
“I’m pretty confident the payments would be made,” Richtman said. “It’s not very comforting for people who won’t be able to pay for groceries, utilities or rent while waiting to receive a refund.”
The Social Security Administration plans to send contributions to beneficiaries on four dates next month, June 2, 14, 21 and 28. Those checks would be the first at risk of being delayed, according to Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare.
“Millions upon millions of Social Security recipients worry about having the income to pay their basic bills,” he noted.
Lynda Fisher, 80, told ABC News that her budget depends on her monthly Social Security check and that a delay would complicate her essential expenses, frustrating the 80-year-old who has spent her life contributing to the system.
“I paid into Social Security and I paid into Medicare,” she said. “And now they’re trying to take it away. It’s not their money, it’s my money that I paid.”
Richtman is now actively encouraging older residents to save money in anticipation of a late Social Security payment, fearing the negotiations could reach a compromise in time to avoid a default.
On NBC’s “Meet the Press” Sunday, Yellen indicated that certain bills could be prioritized, including interest payments, Social Security and military contractor payments. However, Richtman expressed doubts that such a prioritization is legally possible.
What does this mean for the future of Social Security?
Some Republican lawmakers have called the fight against the debt ceiling necessary to slow government spending; however, some economists, including Mitchell, see it as a “manufactured crisis” that threatens essential services, retirement savings and the economy as a whole.
“Each time one of these crises occurs, it signals to the rest of the world and to American investors that US Treasuries are not as safe as we thought,” said Laurence Kotlikoff, an economics professor at the University. ‘Boston University.
Kotlikoff further expressed concern that the Social Security system will have more than $65.9 trillion in unfunded financial obligations over an indefinite horizon, based on the entity’s own report.
However, the debt ceiling debate seems unlikely to produce a meaningful solution to the broader Social Security deficit, according to Kotlikoff, Mitchell and Richtman.
When will retirees receive their payments?
Mitchell and Richtman remained optimistic that Social Security recipients would eventually receive their checks once the deal is reached, albeit with some delay.
“I’m pretty confident the payments would be made,” Richtman said. “It’s not very comforting for people who won’t be able to pay for groceries, utilities or rent while waiting to receive a refund.”