Debt Ceiling Debate Raises Questions Over Social Security Checks

Congress faces an Oct. 18 deadline to raise the US debt ceiling.

If it is not increased by that date, the government will find itself in an “impossible situation,” Treasury Secretary Janet Yellen said in testimony in Congress Thursday.

“The Treasury has been instructed by Congress to pay all government bills, to use available tax revenue and otherwise to issue debt, and the debt ceiling will prevent us from doing that,” Yellen said.

It would be catastrophic for American families, she said.

“Nearly 50 million seniors could stop receiving Social Security payments or see them delayed,” Yellen said.

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The country’s debt limit is similar to an individual’s credit card limit. As the money owed increases, the government must increase the debt ceiling because it spends more than the amount that comes from taxes.

The problem facing the government today has been compared to 2011, when the debt ceiling was only raised at the last minute.

At that time, the question of whether or not the government could continue to make social security payments was also in question.

Just as they did then, some Social Security experts have sought to debunk the idea that the program will not have the funds available to pay for benefits.

Among them is Jason Fichtner, vice president and chief economist of the Bipartisan Policy Center, who has held several senior positions within the Social Security Administration.

Part of the reason Fichtner and others believe this is because of the way the US Treasury bonds used to pay Social Security benefits are managed.

Typically, these funds are invested in intergovernmental bonds and exchanged for government debt, then cash when the government has to issue checks to beneficiaries. All of this can happen without going over the debt limit, Fichtner said.

There are also dedicated trust funds that can only be used to pay out social security benefits that are independent of the debt ceiling.

“They can prioritize Social Security payments,” Fichtner said. “They can do it legally, and they will.”

However, exceeding the debt ceiling deadline could still have consequences for Social Security beneficiaries.

“If a debt ceiling and a shutdown were to occur at the same time, the benefit checks would still be issued,” Fichtner said. “They could be delayed, but the new requests could not be processed.”

Notably, the government anticipated this kind of scenario, which is evident in congressional testimony and Federal Reserve meetings, Fichtner said.

A 2011 House of Representatives report detailed how the government conducted “tabletop exercises” as part of its debt ceiling contingency plans to identify how government payments, including including social security and veterans benefits, could be prioritized.

However, some recent presidential administrations have perpetuated the idea that if you don’t increase the debt ceiling, Social Security checks won’t come out.

In this way, they are trying to “arm social security” and create leverage in the debt ceiling negotiations, Fichtner said.

“I’m not saying you shouldn’t raise the debt ceiling,” Fichtner said. “But let’s be honest about what’s going on.”

Yellen recently expressed support for removing the debt ceiling from congressional control.