![]() Even a slight delay in benefits would hurt the millions of Social Security recipients who rely on their checks for the majority of their income. Van de Water, senior fellow at the Center on Budget and Policy Priorities, wrote in Sept. “You can’t insulate any one group of people in a default, as much as people would like it to be true,” said Kathleen Romig, director of Social Security and disability policy at the Center on Budget and Policy Priorities.Īlthough Social Security has its own trust fund, financed largely by payroll taxes, the Treasury’s inability to prioritize payments could prevent benefits from going out on time, Paul N. For example, even if the desire were there, the government couldn’t prioritize paying Social Security recipients over bondholders or vice versa. In that scenario, the Treasury department does not have the ability to prioritize one type of payment over the other, Yellen has said. can’t borrow money, it would have to slash spending. “Default is a low-probability event, but the odds are uncomfortably higher than they typically are,” Gardner said. All Americans would be affected in some way or another, with older adults among the most vulnerable to even a short-lived default scenario.Įxperts say default can’t be dismissed as a possibility, given the gridlock in Washington. has never entered into default, so there’s no playbook on what exactly would happen if it comes to that. If the discussions break down, however, all bets are off. An Unlikely (But Not Unthinkable) Scenario The upshot is that while there may be chatter about Social Security cuts, the negotiations pose “zero actual risk,” to the program, said Chris Krueger, Washington strategist at Cowen. ![]() Raising the debt ceiling involves Congress passing legislation that Biden must sign into law, and such cuts would likely be a non-starter with his administration. Some more conservative members of the Republican party-including the 20 or so who initially held out on McCarthy’s bid to become speaker-don’t wield enough influence to sway the entire party on benefit reductions, Gardner added.Įven if Republican leadership were to push cuts to Social Security, they would run into an obstacle in the White House. “The vast majority of Republican lawmakers recognize it’s a losing political issue, and they won’t go near it,” said Brian Gardner, Stifel’s chief Washington policy strategist. Yet McCarthy appeared on “Face the Nation” over the weekend and said that Social Security and Medicare were off the negotiating table. A conservative Republican group, the Republican Study Committee, has called for raising Social Security’s full retirement age and the Medicare eligibility age, among other measures. Even so, it’s a difficult vote for Republicans politically, and they will likely try to enact concessions from Democrats in the process, strategists say. Raising the debt limit doesn’t authorize new spending it simply ensures the government can meet its existing obligations.
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