For the majority of Social Security recipients, monthly checks are essential to their financial well-being. After 20 years of annual polls, Gallup found that over 80% of retirees rely on some form of Social Security benefit to cover their monthly expenses.
But as the US debt ceiling ruling date looms, more than 66 million beneficiaries are wondering whether Social Security checks will be the chopping block.
US debt ceiling looms large
The debt ceiling represents the federally approved borrowing limit.remember this won’t Includes borrowing for new expenditures/projects. Rather, it is meant to cover the federal government’s existing financial obligations. Never in American history has the federal government failed in its legal and financial obligations. So the current debt limit deadlock between Democrats and Republicans on the Capitol is in the spotlight.
Forecasts by last week indicated that it would probably take a few months for the federal government to agree to legislation to raise or suspend the debt ceiling to allow the federal government to meet its financial obligations. It was done. But Treasury Secretary and former Federal Reserve Chairman Janet Yellen changed that view in a letter to House Speaker Kevin McCarthy (R-California).
Yellen’s letter made it abundantly clear that the U.S. debt limit problem could be worse than initially feared. Mr Yellen said:
In a letter dated January 13, it noted that it was unlikely that cash and temporary measures would be exhausted by early June. After reviewing recent federal tax receipts, our best estimate is that the government will meet all of its obligations by early June, if Congress doesn’t raise or suspend the debt ceiling by then. It means it can no longer continue and could be completed by June 1 at the earliest. .
In other words, if lawmakers don’t act, the US Treasury could fail to meet the nation’s existing debt on June 1st.
The big question is whether this includes nonpayment of Social Security benefits.
Will Social Security checks stop by June 1st?
If you’re one of the more than 49 million people receiving monthly retiree benefits, the debt ceiling debate might scare you, but there’s good news.
Thanks to a law passed by Congress in 1996 (Section 1145, “Protection of the Social Security and Medicare Trust Fund”), even if the U.S. government begins neglecting its other existing financial obligations by June, the Security checks will continue to flow. 1. This Act allows, in effect, requires Secretary Yellen to avoid the debt ceiling by decoupling Social Security asset reserves from investments to cover benefits.
Since the inception of Social Security, the program has collected more income than it is paid out for benefits and other administrative expenses. are required to invest in special issue bonds with As of March 31, 2023, the Old Age and Survivors Insurance Trust (OASI) and the Disability Insurance Trust (DI) together have asset reserves of $2.814 trillion.
Under the terms of the 1996 law, Yellen has the authority to ensure that monthly benefits are paid out of this $2.814 trillion. Theoretically, the Social Security asset reserve could, hypothetically (emphasis on “hypothetical”), be: No debt ceiling agreement was reached.
Additional silver lining for seniors
While it doesn’t take away the severity of a potential debt ceiling crisis for the U.S. government, it should give Social Security recipients peace of mind knowing they can expect their checks to arrive as normal no matter what happens. But there is an additional silver lining for seniors who rely on Social Security for their livelihoods.
First of all, lawmakers are hitting 1.000 when it comes to making sure the Treasury Department can pay America’s bills. yes, lawmakers have a history of waiting until the 11th hour to pass legislation to raise or suspend debt limits. Since 1960, Congress has raised, temporarily extended, or even amended the definition of the debt ceiling on 78 separate occasions. This is 78/78 without defaults.
Moreover, these negotiations took place under Democratic and Republican presidents. No matter how ideologically distant her two parties in America were at one point, they could always work together when it mattered most to address the US debt limit. In short, there is a pretty good precedent that something has been done and that Social Security’s asset reserves don’t have to be invested less.
As a small digression, I should also point out that the Social Security system cannot fail or become insolvent. The program derives approximately 90% of its income from 12.4% payroll tax (wages and salaries, excluding investment income). Simply put, as long as Americans keep working and paying taxes, Social Security will always have money to pay eligible beneficiaries.
The amount of that expenditure is up for debate, but the important point is whether you are retired and receiving benefits at this moment, or whether it has only been 50 years since you received social security contributions, or whether Social Security is paying for you. It means that it is in First retirement check.