Your Social Security Checks Could Be Impacted Soon: Here’s Why

Blank Social Security checks are run through a printer at the U.S. Treasury printing facility in Philadelphia, Pa., on Feb. 11, 2005. William Thomas Cain/Getty Images

Treasury Secretary Janet Yellen is warning that Social Security payments could be affected if lawmakers don’t raise the U.S. debt limit and the government runs out of funds to pay its bills.

“Treasury [could find] itself in the position where we’re unable to pay all of the bills that come due that day. And this would be really the first time in the history of America that we would fail to make payments that are due,” Yellen told ABC News this week. “And, you know, whether it’s defaulting on interest payments that are due on the debt or payments due for Social Security recipients or to Medicare providers, we would simply not have enough cash to meet all of our obligations.”

Recently, Yellen projected that the federal government will hit its debt limit by as early as June 1, coming months after “extraordinary measures” were implemented to stave off defaulting. If the government reaches its debt limit, the federal government wouldn’t be able to pay all of its obligations.

According to data provided by the Social Security Administration, the agency makes some $1 trillion in benefits payments during the year to about 67 million people, with the majority being retirees. Some 48.6 million recipients are retired, while 7.6 million are disabled, and another 9.8 million are survivors and dependents, the data reveals.

This week, President Joe Biden and House Speaker Kevin McCarthy (R-Calif.) held talks amid the debt ceiling impasse, but neither side has appeared to budge. On May 10, the House speaker accused the Biden administration of ignoring the “crisis” for “97 days” since the two last met, while Democrats such as Senate Majority Leader Chuck Schumer (D-N.Y.) accused Republicans of pushing a “partisan bill” to raise the debt ceiling.

Republicans say they won’t raise the debt limit without federal spending cuts in return; Democrats counter that the ceiling should be raised without any preconditions, saying that negotiations over spending cuts should be separate.

If the debt ceiling isn’t raised by the projected default date in June, July Social Security benefits might be at risk.

July’s first Social Security payment is slated for July 11 for Americans with birthdays on the first through the 10th of the month. Subsequent payments for people born later in their respective months will get payments on July 18 and July 25, respectively, according to the payment schedule (pdf).

Unprecedented?

Because the United States has never defaulted, officials say it would be unprecedented; top congressional leaders and Biden have said in recent days that the country won’t default on its obligations.

During a Senate Appropriations hearing in March, Yellen said her job as secretary of the Treasury is to make sure that bills are paid. She didn’t indicate what payments would be prioritized—including Social Security.

Vice President Kamala Harris and Speaker of the House Kevin McCarthy (R-Calif.) listen as President Joe Biden delivers the State of the Union address in the House Chamber of the U.S. Capitol on Feb. 7, 2023. Saul Loeb/AFP via Getty Images

“Prioritization is default by another name,” she told members of a Senate panel. “Not paying any of our bills is default. When you think about the pain that it would cause to Social Security recipients, to food stamp recipients, to vendors who have supplied services, to the government who have their own payrolls to meet, to be told they are not going to be paid, the government is not going to honor those bills. That’s a default.”

Yellen said that payment systems are set up to pay all government bills when they are due, noting that they aren’t set up “to divide payments into different types as a general matter.”

“For many agencies, payments of all different types are mixed together in ways that couldn’t be disentangled.”

Shai Akabas, the head of economic policy with the Bipartisan Policy Center, told a local media station that many questions remain if the federal government defaults.

“We have never been there as a country,” Akabas told 10 News in San Diego. “What would occur, likely, is an economic downturn, which could affect the pocketbooks of Americans in a number of different ways. First, we could see delayed payments that Americans are anticipating from the federal government in the form of programs and other assistance. We could see significant increases in interest rates.”

Yellen says there would be widespread financial chaos if a default occurs.

“We would simply not have enough cash to meet all of our obligations,” she warned during the ABC News interview. “And it’s widely agreed that financial and economic chaos would ensue.”

The standoff has rattled investors, sending the cost of insuring exposure to U.S. government debt to record highs, as Wall Street grows more concerned about the risks of an unprecedented default.

Biden signaled an openness to Republicans’ demand to claw back some unused money for COVID-19 relief, which is less than $80 billion. Meanwhile, the White House reiterated its backing for legislation speeding government permitting of energy projects by setting maximum timelines.

A White House fact sheet distributed on May 10 said the administration “supports the important reforms” included in a bill by Sen. Joe Manchin (D-W.Va.). Republicans haven’t endorsed that measure but say permitting reforms would help the United States maintain its edge in oil and gas development. Democrats see it as boosting the development of “clean” power projects.

The last time the nation got this close to default was in 2011 when Democrat President Barack Obama was in office. Republicans led the House, and the Senate was controlled by Democrats.

Reuters contributed to this report.