The US could default on its debt in a matter of days — and retirees will be the among the first to experience the consequences.
Treasury Secretary Janet Yellen warned Speaker of the House Kevin McCarthy on Friday that it’s highly likely the government could run out of money to pay its bills by June 5. If McCarthy cannot reach an agreement with President Joe Biden to raise the debt ceiling — and get that agreement passed through Congress and signed into law — before that deadline, the aftermath could be catastrophic for millions of Americans.
Moody’s Analytics, for example, has previously estimated that even a short default could cause Americans to lose millions of jobs, and a Joint Economic Committee analysis found that a failure to raise the debt ceiling could cause mortgage and private student-loan payments to surge, along with costing workers $20,000 in retirement savings.
And while a default is unprecedented, meaning it’s impossible to predict exactly what could happen, the think-tank Bipartisan Policy Center released an analysis illustrating which federal programs could be the first to go unpaid in the event of a default, based on daily Treasury statements. At the top of the list are Social Security, Medicare, Medicaid, and SNAP, along with Supplemental Security Income (SSI) payments — all programs that retirees heavily rely upon.
Missed payments from those programs could quickly lead to hardship for retirees. “The maximum from SSI that you can get is $914 a month. It will be really hard to get through a month with that much money, and then those who are able to get Social Security as well get a few hundred more dollars on average. It’s really hard to stretch that money through a month. So at the end of the month, people are already often struggling to get by,” Kathleen Romig, the Center on Budget and Policy Priority’s director of Social Security and disability policy, told Insider.
“They may be putting off going grocery shopping, putting off picking up their prescriptions, waiting for that check to come the third of the month, and if it doesn’t come, we’re going to see real hardship,” Romig continued. “We’re going to see people foregoing medical care, we’re going to see people not being able to buy food, not being able to pay the rent. They are truly living from check to check. And then something like this would be extraordinarily disruptive and harmful for this particular group of people.”
Social Security is the biggest federal program, with over 67 million Americans relying on payments. And, as Romig noted, oftentimes older Social Security recipients are not only relying on benefits from that specific program — they’re relying on Medicare, SSI, and Medicaid, which are all programs that keep low-income seniors afloat and ensure they can afford healthcare, nutrition benefits, and other day-to-day expenses.
“They’re going to really suffer without those benefits,” Romig said. “And if the stock market and bond market are roiling even before we hit default, then that means their retirement savings are also going to be declining. So even if it is possible to prioritize Social Security benefits, we can’t insulate Social Security beneficiaries from some serious harm.”
‘They’re worried about how they’re going to make ends meet’
Even going into Memorial Day weekend without a debt-ceiling agreement, McCarthy indicated he still thinks it’s possible to reach a deal.
“Whenever you’re able to get to an agreement, you got to make sure you print it, post it, then you got three days before you vote,” McCarthy told reporters on Thursday. “We’ve got time, we’re going to get this done.”
But lawmakers on both sides of the aisle aren’t thrilled with the reports coming out of negotiations between McCarthy and the White House. GOP Rep. Garrett Graves, one of McCarthy’s top negotiators, told reporters on Thursday that progress is “slow,” and that “the White House continues to prioritize paying people to not work over paying Social Security benefits and Medicare benefits,” referring to Democrats’ unwillingness to bolster work requirements on federal programs.
Meanwhile, the conservative House Freedom Caucus released a memo on Monday urging McCarthy to hold the line on GOP demands, like banning student-loan forgiveness and strengthening work requirements on federal programs — provisions Biden and Democrats are highly unlikely to accept.
Still, every day without an agreement is a day closer to a default on the nation’s debt — and older Americans could be the first to suffer the consequences. Yellen wrote in her Friday letter that “we will make more than $130 billion of scheduled payments in the first two days of June, including payments to veterans and Social Security and Medicare recipients.” But after that, “our projected resources would be inadequate to satisfy all of these obligations.”
“They’re worried about how they’re going to make ends meet. I think there’s just a lot of anxiety out there,” Romig said. “A lot of people don’t have emergency savings, an those people are going to feel this very acutely.”
