Treasury Secretary Janet Yellen testifies during a Senate Committee on Banking, Housing, and Urban Affairs hearing on the CARES Act, at the Senate Hart office building in Washington, DC, USA, September 28, 2021.
Matt McClain | Reuters
Congress faces an October 18 deadline to raise the US debt ceiling.
If it is not increased by then, the government will find itself in an “impossible situation,” Treasury Secretary Janet Yellen said during her testimony before Congress on Thursday.
“Congress has directed the Treasury to pay all government bills, to use available and undrawn tax revenues to issue debt, and the debt ceiling will prevent us from doing so,” Yellen said.
That would be catastrophic for American families, he said.
“Nearly 50 million seniors could stop receiving Social Security payments or see them delayed,” Yellen said.
The country’s debt ceiling is similar to an individual’s credit card limit. As the money owed increases, the government must increase the debt limit, due to the fact that it is spending more than the amount that comes from taxes.
The problem facing the government now has been compared to 2011, when the debt ceiling was not raised until the last minute.
At the time, it was also questioned whether the government could continue to make Social Security payments.
As they did then, certain Social Security experts have tried to discredit the idea that the program will not have the funds available to pay benefits.
Among them is Jason Fichtner, vice president and chief economist of the Bipartisan Policy Center, who has held various senior positions in the Social Security Administration.
The reason Fichtner and others believe that is due, in part, to the way that US Treasuries are handled to pay for Social Security benefits.
These funds are generally invested in intergovernmental bonds and exchanged for public debt and then cash when the government needs to write checks to beneficiaries. All of that can happen without exceeding the debt limit, Fichtner said.
There are also dedicated trust funds that can only be used to pay Social Security benefits that are independent of the debt limit.
“They can prioritize Social Security payments,” Fichtner said. “They can do it legally and they will.”
However, meeting the debt limit deadline could still have consequences for Social Security recipients.
“If a debt ceiling and a closure occurred at the same time, benefit checks would still be issued,” Fichtner said. “They may be delayed, but no new claims could be processed.”
In particular, the government has been anticipating this type of scenario, which is evident in congressional testimony and Federal Reserve meetings, Fichtner said.
TO 2011 House of Representatives Report He detailed how the government has conducted so-called “tabletop exercises” as part of its debt ceiling contingency plans to identify how government payments, including Social Security and veterans benefits, could be prioritized.
However, some recent presidential administrations have perpetuated the idea that if the debt ceiling is not increased, Social Security checks will not be issued.
In that way, they are trying to “weaponize Social Security” and create leverage in the debt ceiling negotiations, Fichtner said.
“I’m not saying you shouldn’t increase the debt ceiling,” Fichtner said. “But let’s be honest about what happens.”
Yellen recently expressed support for removing the debt ceiling from congressional control.