If you have spent any great deal of time on this planet and in the United States in particular you have heard people say that social security won’t be around in a few decades. But how true is this statement?
Recently, the federal government was a very close to defaulting on its national debt. One of the warnings given by the politicians is that if we default on national debt then Social Security payments will be in trouble.
The simple fact is all entitlement programs would be in trouble if the government defaulted on its debt. Would they stop paying them out entirely? Or would they cut the amount that they were paying people?
Maria Freese, senior legislative representative at the National Committee to Preserve Social Security and Medicare was asked what would happen if the U.S defaulted on its debt. She answered: “We don’t know what the implications are of a default because we’ve never had one. Even if all we’re talking about is a delay, you could end up with significant hardship on a large number of people.”
There is no doubt that her words are accurate. Currently Advocates like Miss Freeze and Social Security disability attorneys in Brevard County for instance are fighting for recipients of benefits from these programs. When it comes to guaranteeing people their payments, they will take all the help they can get.
“For Social Security, the implications are very, very different in those two outcomes,” said Freese.Parts of the Social Security Administration will stop during a government shutdown, but checks will continue to be issued for the most part due to automation, she added.
Freese warned that in the event of a default, there might not be sufficient funds to issue the checks.
Payroll taxes and bonds that are redeemed from the Social Security trust funds by the U.S. Department of the Treasury are the two sources used to pay benefits. While payroll taxes will continue to be collected, it is uncertain if the government will have enough money to redeem the bonds and issue the checks, she said.
It would need the United States crossing the “x date” — the moment at which it can no longer meet its obligations without raising or lowering the debt ceiling — before it could stop issuing Social Security benefits.
Markets will respond before that happens, according to Ed Mills, Washington policy analyst at Raymond James.Market pressure has historically been another way that D.C. has reacted, according to Mills.The risk of Social Security checks not being issued as a result is “exceptionally low,” he continued.However, it’s “what could happen if no resolution is ever met,” according to Mills.However, according to Mills, it is the duty of Congressmen to outline the possible repercussions of inaction.
There is no telling if it will become a regular event that the federal government threatens to cut social security and disability every year as they approach a debt ceiling. I am sure I speak for many when I say that it is not very fair for them to do this when these folks and their family members have paid into these programs for decades.