While investors have voiced their concerns over the impact of breaching the debt limit, an entirely different body of Americans remains especially vulnerable: Social Security recipients. Indeed, if the country defaults on its debt, millions of retired Americans may stop receiving the social security checks they depend on.
A government default effectively means the country is unable to summon the cash necessary to pay its bills. At the same time, this would mean everything from total government department shutdowns to the closures of parks and government facilities. However, the impact on Social Security recipients would likely be far graver.
The Debt Ceiling and Social Security
There are more than 65 million retirees and disabled workers in the entitlement program, many of whom have been receiving their social security checks since 1997. In many cases, these Americans essentially depend on the government stipend for basic things like groceries or paying bills.
For roughly 40% of Social Security beneficiaries, the government payments represent 90% or more of their income. The repercussions of a default would be especially brutal for these Americans.
Unfortunately, Social Security checks may be woefully delayed if the debt ceiling fails to be raised before the estimated June 1 default date. Other payments potentially affected would include government workers and military service members.
“A lot of people in Washington are not that in tune with what this could mean,” said Max Richtman, Chief Executive of the National Committee to Preserve Social Security and Medicare. “If you depend on your Social Security for most of your living expenses, you’re not going to be able to pay your rent, buy your food, pay your utilities, the basics … pay out-of-pocket health care costs that may come up.”
Social Security Recipients Wary of Debt Limit Crisis Ahead of ‘X-Date’
Interestingly, it seems older Americans are more concerned over the possibility of a government default this time around, compared with the last major debt limit standoff. According to Mary Johnson, a Social Security and Medicare policy analyst for the Senior Citizens League, many elderly Americans are not only worried about a default’s impact on Social Security but also the impact on the stock market.
Reasonably so, White House economists estimate stocks could drop 45% should the U.S. breach its debt limit for a sustained period of time.
House Speaker Kevin McCarthy continues to deliberate with President Joe Biden on the debt ceiling crisis, so far, to no avail. Although recent reports claim the two are only about $70 billion apart on the multi-trillion-dollar deal.
“We worked well past midnight last night,” McCarthy told reporters on Thursday. “There’s still some outstanding issues and I’ve directed our teams to work 24/7 to try to solve this problem.”
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
