How Will the Debt Debate Affect Social Security Benefits?
There has been a lot of talk coming out of Washington lately regarding how the debate over raising the nation’s debt limit could affect Social Security benefits if an agreement isn’t reached. For millions of Americans who depend on Social Security benefits, including many of the nation’s poor and middle class citizens, this rhetoric is causing a great deal of anxiety. What will people who depend on Social Security benefits do if checks can’t continue to be issued on the 3rd of the month?
Is it possible that the government will default on its Social Security obligations if lawmakers fail to reach some sort of a compromise? Anything’s possible. But if history is any indication, all of the talk about the government not sending out Social Security checks (and military pay, and Medicaid, and Medicare, etc.) will come to nothing.
It’s nothing new to hear politicians crying that the sky is falling. It’s usually intended to scare people so that fear can be used as leverage against political opponents. It is unlikely, however, that either political party will seriously allow millions of Americans to go without their Social Security checks. Both parties realize that whoever gets blamed for something like that would be committing political suicide. Besides the disabled persons receiving Social Security disability benefits, there are millions of senior citizens (who represent the largest voting bloc in the country which actually votes) who would be affected by anything which caused Social Security checks to be late.
Just because we don’t think that anyone will miss their check, though, doesn’t mean that all of this political saber rattling won’t affect Social Security beneficiaries. Quite likely it will.
One of the items on the negotiating table has to do with curbing increases in government spending by changing the way cost of living increases are calculated for Social Security recipients. If the proposed formulas are adopted, the cost of living allowances would no longer be calculated using the Consumer Price Index directly. Instead, cost of living would be calculated using a formula which assumes that consumers make choices which will keep their cost of living lower even if the items they are accustomed to buying become more expensive (such as eating burger more often if steak becomes too expensive).
It is doubtful that Democrats and Republicans will come to agreement on the debt ceiling, or about what the best ways to reduce spending and increase revenue are. It is, however, entirely likely that they will reach some kind of an eleventh hour compromise before anything becomes so drastic that it will affect Social Security benefit checks from going out. Even if they do reach an agreement, it is entirely possible that decreases in Social Security programs could cause you to feel the pinch down the road, either in actual benefit reductions or in a failure to add cost of living raises on a level which keeps pace with the actual rise in cost of living.
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