Last month, more than 66 million people received a Social Security check, 49.3 million of whom are retired workers. Based on annual surveys conducted by national pollster Gallup since 2002, the checks these seniors receive each month are vital to making ends meet.
Unfortunately, the looming uncertainty regarding the U.S. debt ceiling is creating a wall of worry for the program’s tens of millions of beneficiaries. Will they continue to receive their monthly checks if the U.S. Treasury runs out of cash?
The answer to this question offers both good and bad news for Social Security and its recipients.
What is the U.S. debt ceiling and why is it so important?
Before digging into the meat and potatoes of what could happen to Social Security if the U.S. goes off the proverbial debt-ceiling cliff, it pays to understand what the debt ceiling is and why it’s so important.
Put simply, the debt ceiling is the authorized borrowing capacity for the federal government. It accounts for all existing spending and projects currently on the docket but doesn’t include any new financial obligations.
Since 1960, Congress has acted, in some capacity, to increase the debt limit on 78 separate occasions. This has happened under Republican and Democratic presidents, meaning debt-limit increases haven’t been specific to any particular party. At no point has the U.S. Treasury defaulted on its financial obligations.
In January 2023, the U.S. hit its technical borrowing capacity of $31.4 trillion . Since then, extraordinary measures have been used by the U.S. Treasury to buy lawmakers time to come to a deal. That time has nearly run out , as of the writing of this article on May 25.
In a letter addressed to House Speaker Kevin McCarthy (R-Calif.) from Treasury Secretary Janet Yellen on May 22, Yellen had this to say:
In my May 15 letter, I noted that our best estimate was that Treasury would be unable to continue to satisfy all of the government’s obligations by early June if Congress does not raise or suspend the debt limit before that time… With an additional week of information now available, I’m writing to note that we estimate that it is highly likely that Treasury will no longer be able to satisfy all of the government’s obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1.
If the lawmakers were to fail for the first time in 79 attempts to find common ground to raise or suspend our nation’s borrowing capacity, certain financial obligations wouldn’t be paid. To add, we’d likely see a cascade of higher interest rates on everything from mortgages to credit cards, as well as a heightened likelihood of the U.S. falling into a recession. In other words, nothing good comes from a debt default .
