Treasury Secretary Janet Warned that if the United States defaults on its obligations amid a congressional impasse over raising the debt ceiling, Social Security payments could be interrupted.
“Treasury finds itself in the position where we’re unable to pay all of the bills that come due that day. And this would be really the first time in the history of America that we would fail to make payments that are due,” Yellen told ABC News earlier in the week. “And, you know, whether it’s defaulting on interest payments that are due on the debt or payments due for Social Security recipients or to Medicare providers, we would simply not have enough cash to meet all of our obligations.”
Recently, Yellen projected that the federal government will hit its debt limit by as early as June 1, coming months after “extraordinary measures” were implemented to stave off defaulting. If the government reaches its debt limit, the federal government wouldn’t be able to pay all of its obligations.
According to data provided by the Social Security Administration, the agency will make some $1 trillion in Social Security payments to about 67 million people, with the majority being retirees. Some 48.6 million recipients are retired, while 7.6 million are disabled, and another 9.8 million are survivors and dependents, the data reveals.
This week, President Joe Biden and House Speaker Kevin McCarthy (R-Calif.) held talks amid the debt ceiling impasse, but neither side has appeared to budge. On Wednesday, the House speaker accused the Biden administration of ignoring the “crisis” for “97 days” since the two last met, while Democrats like Senate Majority Leader Chuck Schumer (D-N.Y.) accused Republicans of pushing a “partisan bill” to raise the debt ceiling.
Republicans say they won’t raise the debt limit without federal spending cuts in return. But Democrats said that the ceiling should be raised without any preconditions, saying that negotiations over cutting spending should be separate.
July’s first Social Security payment is slated for July 11 for Americans with birthdays on the first through the tenth of the month. Subsequent payments for people born later in their respective months will get payments on July 18 and July 25, respectively, according to the payment schedule (pdf).
Unprecedented?
Because the United States has never defaulted, officials say it would be unprecedented. But top congressional leaders and Biden have said in recent days that the country won’t default on its obligations.
During a Senate Appropriations hearing in March, Yellen said her job as secretary of the Treasury is to make sure that bills are paid. She did not indicate what payments would be prioritized—including Social Security.
“Prioritization is default by another name,” she told members of a Senate panel. “Not paying any of our bills is default. When you think about the pain that it would cause to Social Security recipients, to food stamp recipients, to vendors who have supplied services, to the government who have their own payrolls to meet, to be told they are not going to be paid, the government is not going to honor those bills. That’s a default.”
The secretary said that payment systems are set up to pay all government bills when they are due, noting that they’re not set up “to divide payments into different types as a general matter.” And, she added, “for many agencies, payments of all different types are mixed together in ways that couldn’t be disentangled.”
Shai Akabas, the head of economic policy with the Bipartisan Policy Center, told a local media station that many questions remain if the federal government defaults.
“We have never been there as a country,” Akabas remarked to 10 News in San Diego. “What would occur, likely, is an economic downturn, which could affect pocketbooks of Americans in a number of different ways. First, we could see delayed payments that Americans are anticipating from the federal government in the form of programs and other assistance. We could see significant increases in interest rates.”
But one thing is for sure, according to Yellen, is that there would be widespread financial chaos if a default occurs.
“We would simply not have enough cash to meet all of our obligations,” she warned during the ABC News interview. “And it’s widely agreed that financial and economic chaos would ensue.”
The standoff has rattled investors, sending the cost of insuring exposure to U.S. government debt to record highs, as Wall Street grows more concerned about the risks of an unprecedented default.
Biden signaled an openness to Republicans’ demand to claw back some unused money for COVID-19 relief, which is less than $80 billion. Meanwhile, the White House reiterated its backing for legislation speeding government permitting of energy projects by setting maximum timelines.
A White House fact sheet distributed on Wednesday said the administration “supports the important reforms” contained in a bill by Sen. Joe Manchin (D-W.Va.). Republicans have not endorsed that bill but say permitting reforms would help the United States maintain its edge in oil and gas development. Democrats see it as boosting the development of “clean” power projects.
The last time the nation got this close to default was in 2011 when Democrat President Barack Obama was in office. Republicans led the House, and the Senate was controlled by Democrats.
I bet they will have enough for their salaries. Yup, threaten the retirees that worked their whole lives but make sure you get your money. S.S. should be paid first and if any is left, divide it up for our incompetant elected officials who caused this chaos.