The debt ceiling returns for another season. It promises to be a drama, as another deadline – December 15 – looms for Congress to raise the debt limit or risk the livelihoods of millions of Americans.
Lawmakers reached a last-minute deal in October to raise the debt limit by $480 billion to $28.88 trillion. Senate Leader Mitch McConnell vowed that Republican lawmakers would not help Democratic legislators, who control the House and Senate, to raise the debt limit again because they can do so on their own through a process known as reconciliation.
At the time, Treasury Secretary Janet Yellen said the $480 billion debt limit hike would ensure key government programs would remain funded through Dec. 3. extended that deadline to December 15.
The current debt limit is set at $28.88 trillion, but the amount of debt the government has taken on fluctuates very narrow underneath.
In October Yellen warned that the US economy would be plunged into another recession if lawmakers didn’t raise the debt ceiling, which would prevent the federal government from accessing external financing.
If lawmakers don’t act, “the Treasury will have to do something unprecedented,” such as cutting early austerity measures if the debt cap isn’t raised, said Paul Van de Water, senior fellow at the Center on Budget and Policy Priorities, an impartial think tank.
That will leave the Treasury “between rock and a hard place,” Van de Water said.
It would be up to Treasury and White House officials to determine the legal guidelines about which government bills — if any — could be paid, and in what order, said Mark W. Everson, a former IRS. -Commissioner.
Here’s what’s at stake for Americans if lawmakers fail to raise the debt ceiling in time:
Social Security payments
Although Social Security benefits going to some 65 million Americans are funded primarily through payroll taxes and trust funds, that doesn’t protect the average monthly benefit of $1,563 for retirees and $1,282 average monthly benefit for the disabled, Van de Water said.
“Retirees received an average of $1,563 in Social Security benefits last month, while the disabled received an average of $1,282 ”
“Even a brief delay in the payment of Social Security benefits would be a burden on the millions of Americans who depend on their benefits earned to pay for out-of-pocket expenses for health care, food, rent and utilities,” the National Committee said. Preserve Social Security and Medicare, a liberal-oriented advocacy group, said in an online after.
The Social Security Administration did not respond to MarketWatch’s request for comment regarding the potential impact on Social Security beneficiaries.
Access to medical care through Medicare and Medicaid
More than 60 million Americans receive health insurance through Medicare and about 75 million are enrolled in Medicaid, according to estimates published by the Kaiser Family Foundation, a nonprofit health advocacy group.
“More than 60 million Americans receive health insurance through Medicare and approximately 75 million are enrolled in Medicaid”
If lawmakers don’t raise the debt cap and inactivity continues for weeks or months, “patients could lose access to medical care as doctors struggled to cope with delayed Medicaid and Medicare reimbursements,” Whitney Tucker, the deputy director of research for the State Fiscal Policy Team at CBPP, said in a Sept after.
Tax refunds and child discounts
Last month, Yellen said that “any family that receives a child discount” is affected by a possible inability to raise the debt limit in time. Like some Social Security recipients, low-income parents receive the monthly payments up to $300 per child may have to choose between rent or groceries without it.
“The October IRS round of child tax credits totaled about $15 billion, to about 36 million families”
Judging by what Yellen said last month, people waiting for the payment of the child tax credit and tax refunds should continue to wait, Everson, now vice chairman at alliantgroup, a tax consultancy, told MarketWatch.
“The secretary has drawn a very clear line. She leaves no wiggle room to pay,” Everson said. And that prospect “would be an abrupt and difficult change of circumstances for millions.”
The October IRS round of child tax credits totaled about $15 billion, to about 36 million families, the agency said.
This story was originally published on October 6, 2021 and was updated on November 17, 2021.