The current debt-ceiling negotiations between the Democrats and Republicans could potentially disrupt several Federally funded government programs. The issue has become intense as the U.S. tries to avoid defaulting on its debts. According to the Department of Treasury, as of October 2022, the current debt ceiling is $31.4 trillion. CNBC reported that the U.S. unresolved debt hit its statutory limit on January 19.
The debt ceiling refers to the total amount of money the U.S. can borrow to meet its legal obligations. The legal obligations include Social Security, Medicare, military salaries, SNAP benefits, tax refunds, and other payments.
Democrats have endorsed increasing the debt ceiling, which the Republicans greatly oppose. House Speaker Kevin McCarthy, R-Calif., voted against lifting the debt ceiling as long as there are no significant federal spending reductions, as explained in Investopedia.
Treasury Secretary Janet Yellen warned House Speaker McCarthy in a January 13 letter of the possible “irreparable harm” to the U.S. economy and global financial stability if the problem goes unresolved. She urged Congress to act promptly to avoid defaulting on its debt.
Yellen said the Treasury Department could not estimate how long the government fund would last but has assured that the cash will last until June before it is exhausted.
Treasury Secretary Janet Yellen warns Congress on the possibility of defaulting on debt as the U.S. hits its statutory limit. (Photo: BBC)
Effects on Social Security and Medicare
If the country defaults on its debt, the distribution of Social Security and Medicare benefits would be disrupted, says Dan Adcock, the director of government relations and policy of the National Committee to Preserve Social Security and Medicare.
Jason Fichtner, the chief economist at the Bipartisan Policy Center, said that the Treasury Department might prioritize some payments, including Social Security; however, the distributions of payments would be delayed to ensure it has enough cash on hand.
Fichtner added that there could be a reduction in Medicare payments. At the same time, other areas, like food benefits through SNAP (Supplemental Nutrition Assistance Program), have a big chance of restriction or cessation.
Possible Effects of Cutting Government Spending
As several Republicans plan to curb government spending, several recipients of Social Security and Medicare are anxious about the possible decrease of the benefits or changes in some policies.
Republicans have also pitched raising Social Security’s full retirement from age 67 to 70 or Medicare eligibility from 65 to 67.
Adcock said that to make those changes; there should be enough support in the Senate with 60 votes. He said, “That’s a pretty high threshold. I don’t think there would be 60 votes in the Senate to do benefit cuts.”
Meanwhile, the White House has also indicated it is unwilling to negotiate.
White House press secretary Karine Jean-Pierre said, “As President Biden has made clear, Congress must deal with the debt limit and must do so without conditions.”
