Misery All Around: Social Security And The Debt Ceiling (2024)

It’s never a good thing when politicians use the full faith and credit of the United States as a bargaining chip. But for the one in five Americans who receive a monthly check from Social Security, the current political standoff in our nation’s capital is nothing short of ominous.

While Social Security has weathered countless government shutdowns, the current debt ceiling crisis is a much more serious challenge. It’s unclear exactly what could happen to this key program if congressional Republicans and the Biden administration are unable to reach a deal.

I worked for the Social Security Administration (SSA) for years, and I weathered my share of government shutdowns. To understand what’s at stake in the current crisis, I spoke with contacts who are still employed by the SSA to get their perspective on just how bad things could get.

This is not the first time Washington, D.C., has gambled with the debt ceiling. The hope is that even if a deal is not reached in time to prevent a U.S. debt default, there may be an arrangement that enables the U.S. Treasury to keep sending Social Security payments to beneficiaries.

But deal or no deal, one SSA field office manager I spoke with said there could be a big mess either way.

What Happens to Social Security Payments if the Debt Ceiling Isn’t Raised?

If you are one of the nearly 40% of retirees who depend on monthly Social Security checks for more than 50% of your income, please don’t panic. The most likely scenario is that the politicians will reach a last-minute deal to raise the debt ceiling.

If a compromise is not reached in time, one SSA management analyst I spoke with said it’s tough to know exactly what could happen to Social Security payments. That’s because Congress has never not raised the debt ceiling.

In the analyst’s opinion, Social Security benefit payments would most likely continue, and SSA would keep processing applications for benefits. Appeals are easier to process than claims, so they would likely continue as well.

My sources said it’s possible that SSA would continue providing limited services in a similar fashion to what happens during government shutdowns. In those cases, SSA keeps processing everything except benefit verification letters and Social Security card applications.

What’s the Worst-Case Scenario?

It’s important to understand that the funds for your Social Security checks are not at risk in a potential debt ceiling crisis. The issue is who sends out your payments.

The U.S. Treasury is tasked with dispatching Social Security payments to beneficiaries. Under normal conditions, the Treasury sends Social Security payments one month in arrears. That means the check you receive in June covers your benefits for the month of May.

If the debt ceiling isn’t raised, the Social Security payments due to be sent to beneficiaries in June would most likely still go out.

But if the debt ceiling still hasn’t been raised by the end of June, the Treasury may not have the staff available to make the July Social Security payments. In fact, the department might be entirely shut down.

It is highly unlikely that congressional Republicans and the Biden administration would fail to reach a debt ceiling compromise by the end of June. Nevertheless, beneficiaries should consider preparing for a worst-case scenario where July payments are delayed.

What Happens to Supplemental Security Income (SSI) Payments if the Debt Ceiling Isn’t Raised?

Supplemental Security Income (SSI) is a needs-based federal welfare program for low-income, low-resource individuals who do not have the required work history to qualify for full Social Security benefits.

The Social Security Administration administers SSI. While Social Security benefits are funded by the Social Security trust fund, SSI benefits are funded by federal tax revenue.

If you’re unsure which type of payment you receive, the easiest way is to look at your monthly payment amount. If you receive less than $934 a month, you’re likely receiving SSI payments. You can also check which type of payment you receive by examining your Social Security check or logging in to your SSA account.

I have bad news for SSI beneficiaries: This program does not pay in arrears. Payments for a given month are sent out on the first of the month.

Estimates of the exact date when the federal government hits the debt ceiling vary, but let’s say it’s June 2. In that case, your June SSI payment would have already been released. If the impasse was not resolved by July 1, your July SSI payment would most likely not be sent on time.

Even if a compromise is reached before July 1, there will probably be a delayed payment that month. SSI payments are handled in a different way than Social Security payments; according to my own experience as a former SSI claims specialist, as well as comments from a technical expert I spoke to, there’s a possibility that administrators would have to manually handle payments for some recipients after a potential shutdown.

If the limit is raised before the end of June and you don’t receive your July payment in a timely fashion, contact your local SSA office regarding your payments.

Bottom Line

Social Security checks are vital not only for the people receiving them, but also for the economy as a whole. An average 67 million Americans will receive a monthly Social Security benefit in 2023, totaling over $1 trillion in benefits paid throughout the year.

If the debt ceiling impasse is not resolved, it’s going to be misery all around for people who depend on Social Security benefits, the people who send out those payments and the economy as a whole.

If you depend on Social Security benefits, or you’re concerned about the well-being of the economy, call your elected representatives and encourage them to work toward a speedy resolution of this issue. They need to hear that citizens value the continued functioning of government programs more than political gamesmanship.