Personal finance

Debt ceiling deal postpones questions on Social Security, other government payments

Two women sit at the Capitol Reflecting Pool in Washington, D.C. on Sept. 26, 2021.
Samuel Corum | Getty Images

Congress is hard at work on a deal to keep the U.S. government from defaulting on its debt this month.

But the short-term agreement, which was passed by the Senate and is expected to go before the House of Representatives for a vote in the coming week, only postpones the situation to December.

Consequently, big questions like whether Social Security checks will still go out on time have only been temporarily resolved.

“Seniors can be reassured that at least in October and November, they’re going to get their Social Security on time and in full,” said Maria Freese, senior policy advisor on Social Security at the National Committee to Preserve Social Security and Medicare.

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“However, they did just postpone the problem till December,” she said.

What could happen then is difficult to predict.

The government borrows to make up for a shortfall between how much it spends and how much it collects in taxes. As the money owed increases, the government must raise its debt limit in order to continue making payments.

The Senate deal authorizes a $480 billion increase to the debt limit. The U.S. Department of the Treasury estimates that will allow the government to pay its bills until Dec. 3.

Still, there’s a lot of uncertainty as to exactly how long the proposed $480 billion could last, according to Shai Akabas, director of economic policy at the Bipartisan Policy Center.

“At some point in the next several months, we will be in danger of not meeting all of our obligations,” Akabas said.

The Washington, D.C.-based think tank has been running its own scenarios about what could happen if the U.S. reaches that so-called X date.

The X date, as defined by the Bipartisan Policy Center, is “the first day Treasury has exhausted its borrowing authority and no longer has sufficient funds to pay all of its bills in full and on time.”

At some point in the next several months, we will be in danger of not meeting all of our obligations.
Shai Akabas
director of economic policy at the Bipartisan Policy Center

“Getting past the debt limit X date would be entirely unprecedented in modern history,” Akabas said.

The Bipartisan Policy Center has put together illustrative scenarios on how the government could prioritize payments at that point.

In one hypothetical example, the Treasury Department could make $401 billion in payments including for programs like Medicare and Medicaid, Social Security and veterans benefits. At the same time, it might not pay $265 billion for programs like Supplemental Security Income, monthly child tax credit payments or unemployment insurance benefits.

However, due to the lumpiness of how much money comes in to the government and goes out, it is impossible to predict how such a situation would play out, Akabas said.

“Even if you wanted to prioritize those programs, it would be very difficult to operationalize that,” Akabas said.

Social Security is unique because it uses separate trust funds. However, there is a question as to whether those payments could go out while the government stops making other payments, Akabas said.

At the very least, beneficiaries could see delays.

AARP, a group representing Americans ages 50 and up, sent a letter to congressional leaders this week, pressing them to come up with a deal in order to protect Social Security and Medicare beneficiaries.

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