Debt ceiling deal postpones questions about government payments – Community News
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Debt ceiling deal postpones questions about government payments

Two women sit in the Capitol Reflecting Pool in Washington, DC, on September 26, 2021.

Samuel Corum | Getty Images

Congress is working hard on a deal to prevent the US administration from defaulting on its debt this month.

But the short-term deal, passed by the Senate and expected to go to the House for a vote next week, will only postpone the situation until December.

Major questions, such as whether the social security checks will still go out on time, have therefore only been resolved temporarily.

“Seniors can rest assured that they will receive their Social Security benefits on time and in full at least in October and November,” said Maria Freese, senior social security policy advisor at the National Committee for the Preservation of Social Security and Medicare.

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“However, they just postponed the issue until December,” she said.

What could happen next is difficult to predict.

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

The deal with the Senate authorizes a $480 billion increase to the debt limit. The US Treasury Department estimates that the government can pay its bills until December 3.

Still, there’s a lot of uncertainty about 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 coming months, we are in danger of not meeting all our obligations,” Akabas said.

The Washington, DC-based think tank has drawn up its own scenarios about what could happen if the US hits that so-called X-date.

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

At some point in the coming months, we risk not meeting all of our obligations.

Shai Akabas

director of economic policy at the Bipartisan Policy Center

“Exceeding the debt limit X-date would be completely unprecedented in modern history,” Akabas said.

The Bipartisan Policy Center has put together illustrative scenarios for how the government might prioritize payments at the time.

In a 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 may not pay $265 billion for programs like Supplemental Security Income, monthly child tax credits, or unemployment benefits.

However, because of the lumpiness of how much money is coming in and going out, it’s impossible to predict how such a situation would turn 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 in that it uses separate trust funds. However, it is questionable whether those payments can be disbursed while the government stops making other payments, Akabas said.

At the very least, beneficiaries could see delays.

AARP, a group representing Americans 50 and older, sent a letter to congressional leaders this week, urging them to strike a deal to protect Social Security and health care beneficiaries.