Social Security Payments Could Be Disrupted If Debt Ceiling Isn’t Raised, Says Yellen
While Republicans and Democrats barter over what to do about the debt ceiling crisis, U.S. Treasury Secretary Janet Yellen issued a grim warning this week that failing to raise the ceiling would trigger an “economic catastrophe” and potentially impact Social Security payments.
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Yellen’s remarks were part of a prepared speech she was scheduled to deliver on April 25 in Washington, D.C. to a group of California business executives, Reuters reported. A default on the nation’s debt would result in a long list of problems for Americans, she said, ranging from job losses to higher payments on mortgages, auto loans and credit cards.
“A default on our debt would produce an economic and financial catastrophe,” Yellen said. “A default would raise the cost of borrowing into perpetuity. Future investments would become substantially more costly.”
She also repeated earlier warnings that if the debt ceiling is not raised, the government will likely be unable to issue payments to military families and seniors who depend on Social Security to pay their bills.
Those statements echoed earlier warnings Yellen issued back in February, when she said it’s “unlikely that the federal government would be able to issue payments to millions of Americans, including our military families and seniors who rely on Social Security.”
Yellen joins many leading lawmakers and senior advocates in warning about the threat a default would pose to Social Security. Although the program is supposed to be protected in the event of a default by the Social Security “escape clause,” some experts say that clause won’t necessarily protect benefits for everyone.
“There’s a good chance that benefits for retirees and people with disabilities and survivors would be disrupted,” the National Committee to Preserve Social Security and Medicare’s Dan Adcock told CNBC in January after the debt ceiling was reached.
Recently, U.S. House Speaker Kevin McCarthy (R-Calif.) unveiled the GOP’s plan to resolve the debt ceiling crisis. He claimed the plan would save taxpayers $4.5 trillion via spending cuts while also raising the federal borrowing limit by $1.5 trillion, thus helping avert a default. The proposed cuts do not include Social Security.
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However, the Democrat-controlled Senate is likely to reject McCarthy’s plan, which means further negotiations will need to take place over the next month to avert a default. As Reuters noted, Yellen told lawmakers in January that the government could pay its bills only through early June without increasing the limit.
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