The debt ceiling is returning for a new season. It promises to be full of drama as yet another deadline — Dec. 15 — looms for Congress to raise the debt limit or put millions of Americans’ livelihoods at stake.
Lawmakers reached a last-minute October agreement to raise the debt limit by $480 billion to $28.88 trillion. Senate Minority Leader Mitch McConnell vowed that Republican lawmakers would not help Democratic lawmakers, who control the House and the Senate, to raise the debt limit again because they can do so on their own through a process known as reconciliation.
At that time, Treasury Secretary Janet Yellen said that the $480 billion debt limit increase would keep key government programs financed through Dec. 3. But on Tuesday she extended that deadline to Dec. 15.
The current debt limit is set at $28.88 trillion but the amount of debt the government has taken on hovers very narrowly below that.
In October Yellen warned that the U.S. economy would fall into another recession if lawmakers didn’t increase the debt ceiling, which would leave the federal government without access to outside funding.
If lawmakers don’t act, “the Treasury will have to do something unprecedented” such as make untimely spending cuts if the debt limit isn’t raised, said Paul Van de Water, a senior fellow at the Center on Budget and Policy Priorities, a nonpartisan think-tank.
That will leave the Treasury “between rock and a hard place,” Van de Water said.
It would fall on Treasury and White House officials to determine the legal guidance on which of the governments’ bills — if any — could be paid, and in which order, said Mark W. Everson, a former IRS Commissioner.
Here is what’s hanging on the line for Americans if lawmakers fail to raise the debt ceiling in time:
Social Security payments
Even though Social Security payments that go out to some 65 million Americans are financed primarily through payroll taxes and trust funds, that doesn’t protect the $1,563 average monthly benefit for retirees and $1,282 average monthly benefit for disabled people, Van de Water said.
“Retirees received $1,563 payments on average last month in Social Security benefits while disabled people received $1,282 on average ”
“Even a short delay in the payment of Social Security benefits would be a burden for the millions of Americans who rely on their earned benefits to pay for out-of-pocket health care expenses, food, rent and utilities,” the National Committee to Preserve Social Security and Medicare, a liberal-leaning advocacy group, said in an online post.
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 coverage through Medicare and some 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 coverage through Medicare and some 75 million are enrolled in Medicaid”
— Kaiser Family Foundation
If lawmakers don’t raise the debt limit and inaction persists over 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 on the State Fiscal Policy team at CBPP, said in a September post.
Tax refunds and child tax credits
Last month, Yellen said “every family receiving a child tax credit” would be impacted by a potential failure to raise the debt limit in time. Like some Social Security recipients, low-income parents receiving the monthly payments of up to $300 per child might have to choose between rent or groceries without it.
“The IRS’ October round of child tax credit payments totaled approximately $15 billion, going to around 36 million families”
Judging by what Yellen said last month, people waiting for the child tax credit payments and tax refunds would have to keep waiting, Everson, now vice chairman at alliantgroup, a tax consulting firm, told MarketWatch.
“The secretary has drawn a very bright line. She is not leaving wiggle room to pay,” Everson said. And that prospect “would be an abrupt and difficult change of circumstances for millions.”
The IRS’ October round of child tax credit payments totaled approximately $15 billion, going to around 36 million families, the agency said.
This story was originally published on Oct. 6, 2021 and was updated on Nov. 17, 2021.