does the debt ceiling affect social security benefits

The Debt Ceiling Won't Affect Social Security Benefits, Unless Democrats are Lying by Merrill Matthews | In The News | Op/Ed Rare U.S. Treasury

Secretary Jack Lew has been telling the country two different stories about the government’s ability to pay Social Security benefits during the debt-ceiling crisis. So which one is true?

Full Answer

Why does Congress raise debt ceiling?

The debt ceiling, the official limit to the amount of money the United States can borrow to pay for authorized spending that exceeds tax revenues, is itself a product of political compromise. It was crafted in the wake of prolific spending to fund World War I as a way to placate anti-war and fiscally conservative members of Congress.

What is raising the debt ceiling?

The Debt Ceiling Reform Act ( S. 3654 )—introduced in both chambers this week—would allow the Treasury Department secretary to issue new debt, as long as the president notifies Congress of the need to do so. Lawmakers would retain the ability to vote to block the administration from raising the cap on debt.

What happens when the debt ceiling isn't raised?

The Debt Ceiling: What It is and Why It Matters

• Failing to increase the debt limit will cause the federal government to default on its debt payments.
• Default would cause rating agencies to downgrade U.S. ...
• Default would also likely lead to an economic crisis, according to financial experts.

Who raised the debt ceiling?

“After a near catastrophic default thanks to political games by our Republican colleagues, it’s time to put the debt ceiling in the hands of the Treasury Secretary,” said Senate Majority Whip Dick Durbin, D-Ill., who introduced the bill in his chamber.

Does money in the bank affect Social Security?

Although the money in your savings account doesn't affect your eligibility to receive Social Security retirement benefits, money you make after you begin receiving Social Security benefits might.

What president took money from the Social Security fund?

President Lyndon B. Johnson1.STATEMENT BY THE PRESIDENT UPON MAKING PUBLIC THE REPORT OF THE PRESIDENT'S COUNCIL ON AGING--FEBRUARY 9, 19647.STATEMENT BY THE PRESIDENT COMMENORATING THE 30TH ANNIVERSARY OF THE SIGNING OF THE SOCIAL SECURITY ACT -- AUGUST 15, 196515 more rows

Is Social Security included in total debt?

The single biggest creditor, in fact, is Social Security: The program's retirement and disability trust funds together held more than $2.9 trillion in special non-traded Treasury securities, or 13.3% of the total debt.

Does Social Security effect the deficit?

Conclusion. Social Security cannot add to long-term deficits because it is prohibited from borrowing. Even if we assume Congress could turn to general revenues to pay promised benefits when the trust fund runs out, this would only increase the 75-year budget deficit by 4-7% per year on average.

Has Congress borrowed from Social Security?

The federal government hasn't pilfered a dime from Social Security. The fact is that Congress, despite borrowing $2.9 trillion from Social Security, hasn't pilfered or misappropriated a red cent from the program. Regardless of whether Social Security was presented as a unified budget under Lyndon B.

At what age is Social Security no longer taxed?

At 65 to 67, depending on the year of your birth, you are at full retirement age and can get full Social Security retirement benefits tax-free.

Is Social Security protected from creditors?

Federal law provides that Social Security benefits, Veteran's benefits and SSI payments are all protected from seizure for debts owed to banks and other creditors.

Can Social Security be garnished for credit card debt?

But can a creditor take your Social Security if they're collecting on past-due debts? In general, the answer is no, creditors and debt collectors cannot seize your Social Security benefits.

What is the average Social Security benefit per month?

Table of ContentsType of beneficiaryBeneficiariesAverage monthly benefit (dollars)Number (thousands)Total65,5441,538.14Old-Age and Survivors Insurance56,3761,588.89Retirement benefits50,4741,619.6716 more rows

What is the relationship between Social Security and the federal deficit and debt?

By law, Social Security cannot contribute to the federal deficit, because it is required to pay benefits only from its trust funds. Those, in turn, are funded through a dedicated payroll tax of 12.4 percent of income, split evenly between employees and employers, levied on income (this year) up to $128,400.

How does Social Security affect debt?

It means that Social Security loans its surplus money to the federal government, and the federal government uses the money to pay off someone else it owes money to. Again, the key point to realize is that there is no effect on Social Security. Also, in this instance, there is no effect on the national debt.

Why is it difficult to cut Social Security?

Legal barriers and the structure of the Social Security Trust Fund make it nearly impossible to use cuts in benefits for deficit reduction. The fiscal case for attempting cuts is shaky at best. And there are powerful social and moral reasons to preserve and strengthen Social Security.

What is the debt ceiling?

The debt ceiling refers to the maximum legal amount of borrowing that the U.S. government may do (not unlike the credit limit on a credit card). First created in 1917 to regulate government spending and increase its fiscal accountability, the debt ceiling has been raised by Congress nearly 80 times since 1960 alone.

How are Social Security benefits funded?

Social Security benefits are funded through payroll deductions. Even if the debt ceiling isn’t increased, the trust funds for the program would continue to receive funding and pay out retirees.

Can the government borrow money?

Just like any regular consumer, the U.S. government can borrow money to fund its legal obligations. These include military salaries, tax refunds, and Medicare and Social Security benefits, among other things.

What would happen if the Social Security system defaulted?

A default could delay Social Security checks and veteran’s benefits, increase borrowing costs and trigger a market sell-off and economic downturn.

How many times has the debt ceiling been changed?

Congress and the White House have changed the debt ceiling almost 100 times since the end of World War II, according to the Committee for a Responsible Federal Budget. In the 1980s, the debt ceiling increased to nearly $3 trillion from less than $1 trillion. During the 1990s, it doubled to nearly $6 trillion, and doubled again in the 2000s to over $12 trillion.

What is federal debt?

The federal debt is the amount of money the government currently owes for spending on payments such as Social Security, Medicare, military salaries and tax refunds.

When will the debt limit be lifted?

In 2019, Congress voted to suspend the debt limit until July 31, 2021. Now, the Treasury is using temporary “emergency measures” to buy more time so the government can keep paying its obligations to bondholders, veterans and Social Security recipients.

Is Social Security self funded?

Social Security is self-funded yet the program is drawing down from its trust funds, which include Treasury bonds, to pay benefits.

Is Social Security a missed payment?

Social Security, which was created in 1935, has never missed a benefit payment. However, checks could be delayed for weeks, or even longer, if Congress fails to either raise or suspend the debt limit, the National Committee to Preserve Social Security and Medicare recently warned.

What would happen if the debt ceiling was reached?

Running into the Debt Ceiling would cause a huge disruption in the organization and smooth running on government operations like disbursing Social Security payments. All of this depends on whether the government can find a resolution to its debt solution and avoid a shutdown. There is a risk that Social Security benefits will be delayed for an unknown amount of time, as the government is forced to divert resources and attentions elsewhere. In any case, it’s unacceptable seniors’ hard-earned financial peace-of-mind is threatened.

What is the debt ceiling?

The Debt Ceiling works the same exact way; it’s a credit limit for the whole country, setting a limit on the amount of debt the United States can have at one time, currently at $28.4 trillion.

When do Social Security recipients get their birthdays?

On the second to the fourth Wednesdays of each month payments are made to Social Security recipients. Each week corresponds to a 10-day period of birthdays. Birthdays on the 1st and 10th of any given month are on the second Wednesday of each month, the following week the next 10-day period and the fourth Wednesday the remaining period including birthdays that fall on the 31st.

Is there any uncertainty about Social Security?

There is uncertainty about how Social Security benefits would be affected in either of the before-mentioned scenarios as payments are financed from a dedicated payroll tax. The Social Security Administration also has its own trust funds which could give it more wiggle room.

What is the debt ceiling?

What is the debt ceiling? The debt ceiling, also called the debt limit , is a cap on the total amount of money that the federal government is authorized to borrow via U.S. Treasury bills and savings bonds to fulfill its financial obligations. Because the U.S. runs budget deficits, it must borrow huge sums of money to pay its bills.

What would happen if the debt ceiling standoff was resolved?

Even after any debt-ceiling standoff were resolved, global investors would demand higher interest payments on U.S. Treasury bonds — so the government’s borrowing in the future could become more expensive.

What happens if you run into the federal borrowing limit?

Running into the federal borrowing limit could lead to a catastrophic default on the nation’s debt. Once the government reaches the ceiling — and exhausts all other measures to keep payments flowing — it will run out of funds for bills it has already promised to pay.

What would happen if the debt limit was hit?

What would happen if the debt limit was hit? Treasury Secretary Janet Yellen told Congress that inaction on raising the debt limit could lead to a self-inflicted economic recession and a financial crisis. She also said that failing to raise the debt ceiling could affect programs that help millions of Americans, including delays to Social Security payments.

What happens if you default on a loan?

A default may also make it more difficult for consumers to secure loans, and they would most likely pay more when they did .

Has the government defaulted on its obligations?

The government has never defaulted on its obligations, so what would happen is unclear. But the effects could be wide-ranging, covering programs as varied as Social Security benefits and school lunches.

Does Denmark have a debt limit?

Do other countries do it this way? Denmark also has a debt limit, but it is set so high that raising it is generally not an issue. Most other countries do not. In Poland, public debt cannot exceed 60 percent of gross domestic product.

Who is the Treasury Secretary who is telling the story of the debt ceiling crisis?

U.S. Treasury Secretary Jack Lew has been telling the country two different stories about the government’s ability to pay Social Security benefits during the debt-ceiling crisis. So which one is true?

What happens if the government doesn't have enough money to pay current benefits?

If the government doesn’t have enough money coming in to pay current benefits—which has happened recently because of the economic slowdown and the two-year “payroll tax holiday” that ended in December— it must draw from the trust fund. And that’s the problem.

Why does the government have to use accounting sleight of hand?

The reason the government must engage in this accounting sleight-of-hand is because it fills the trust fund with what it calls non-marketable securities. These are bonds that aren’t exposed to the market forces of supply and demand and thus have no real value – serving instead as accounting tools for the Treasury Department’s bean counters.

Why does the government have to redeem trust funds?

Because the government has borrowed the money in the trust fund and spent it, it must turn to general revenues to redeem the trust fund IOUs. And doing that actually would divert federal money away for other obligations the government could pay.

Is Social Security a pay as you go?

Social Security is a pay-as-you-go system. When the government collects more from the 12.4 percent payroll tax than it needs to pay current beneficiaries, it puts the balance into the trust fund, which has built up a $2.7 trillion positive balance over three decades—at least on paper.

Is Social Security self-financing?

Social Security benefits are entirely self-financing. They are paid for with payroll taxes collected from workers and their employers throughout their careers. These taxes are placed in a trust fund dedicated to paying benefits owed to current and future beneficiaries. … Even though Social Security began collecting less in taxes than it paid in benefits in 2010, the trust fund will continue to accrue interest and grow until 2025, and will have adequate resources to pay full benefits for the next 26 years.