As the Biden administration pushes Congress to raise the debt ceiling, Treasury Secretary Janet Yellen warned that millions of Americans might not see their full Social Security payments if lawmakers don’t raise the U.S. debt limit.
Yellen has projected that the federal government will reach its debt limit by as early as June 1. Once the government reaches its debt limit, the U.S. would not be able to payout all of its obligations fully.
The effect of the U.S. not being able to pay its commitments fully could have wide-ranging impacts.
“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’s "This 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."
Yellen and the Biden administration would have to decide what payments it can make. The administration could opt to pay Social Security benefits fully but opt not to pay for other programs. Another option is only to send out partial Social Security and Medicare payments.
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According to data from the Social Security Administration, the agency will make over $1 trillion in payments this year to nearly 67 million Americans. That includes 48.6 million retirees and 7.6 million disabled workers. Dependents and survivors account for 9.8 million recipients.
Shai Akabas, director of economic policy with the Bipartisan Policy Center, said there are still many questions about the impact on average Americans if the U.S. reaches the debt ceiling.
“We have never been there as a country,” Akabas said. “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.”
The Bipartisan Policy Center noted that quarterly tax payments are due June 15. If the U.S. can reach that point without reaching the debt ceiling, it likely will also make it to another critical date of June 30 when nearly $145 billion in extraordinary measures funds can become available. The organization noted that this would potentially allow the U.S. to pay its obligations into July.
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