The 2021 Debt Ceiling Explained
United States lawmakers are currently in a dispute over whether or not they should raise the debt ceiling. There are many conflicting voices about what could occur if Congress does not raise the debt ceiling, and how this choice could impact Americans.
What is the Debt Ceiling
The debt ceiling, or debt limit, is the amount of money the United States Government is able to borrow.
The money that lawmakers borrow is not to finance any new expenses. The intent of the loans are to allow the government to pay its existing legal obligations, such as military expenses and Social Security benefits.
The government can also use the borrowed money to pay interest on debts they have from previous loans.
If lawmakers cannot resolve the issue with the debt ceiling, they will default on their bills.
The Current Situation
As of last week, the debt limit was granted a temporary increase. This increase will only be in place until December 3rd.
The clock has already begun counting down the days that lawmakers have to resolve the issue. If there is no solution by December, the country will default on their debts. Those who depend on monthly income from the government fear that they will lose their benefits if that occurs.
And unfortunately, these fears are not completely unfounded.
The answer to the question “Will I stop receiving benefits if the debt ceiling is not resolved?” Is not a simple yes or no, because the US has never defaulted before.
The Debt Ceiling and Social Security Benefits
The United States government defaulting on their debt is an unprecedented situation. However, it is not the first time Americans have felt impacts due to conflicts within Congress.
During the most recent government shutdown of 2018/ 2019, Social Security benefits did not stop.
The last time the country came this close to a default was 1996. During that period Congress passed a bill stating Social Security payments temporarily would not count against the debt limit.
Aside from these past actions taken by Congress, there are a few other reasons why Social Security may be safe if the government defaults.
Social Security's Funding
One reason that benefits may be safe is because Social Security is among the mandatory spending that isn’t subject to annual appropriations from Congress.
Social Security is sui generis, a legal term that refers to when something is in its own category. Meaning that Social Security benefits are different from other government expenses. Part of this difference is because of where the funding for Social Security comes from.
Social Security benefits come from trust funds, rather than the government’s general operating fund. The Social Security trust funds are solely for paying Social Security benefits payments.
Social Security's Beneficiaries
Another reason Social Security benefits may be safe is because the SSA is typically prioritized. Social Security has not missed a payment since 1935.
70 million Americans rely on their benefits. Out of the 70 million, 28 million of those Americans count on their benefits for 90% of their income. The government understands that beneficiaries depend on their income.
Based on the funding and high priority of Social Security beneficiaries, the SSA benefits may not be impacted by a default. But this is not a guarantee.
Since the situation is unprecedented, there is no definitive answer as to what will happen if the country defaults. Some government officials and financial experts are not confident that Social Security benefits will continue.
The National Committee to Preserve Social Security and Medicare stated they were unsure if Social Security benefits would continue if Congress did not raise the debt ceiling. Janet Yellen, the United States Secretary of the Treasury, also warned of a delay in Social Security checks if a default occurs.
The Bottom Line
If social security payments do stop due to a default, the money would eventually come. Beneficiaries would expect to receive delayed payment.
There is hope that lawmakers will come to a solution for the debt ceiling before December 3rd. A default would create a dire financial situation that would impact millions of Americans as well as lawmakers themselves.
