Several Republicans have poo-pooed the need to raise the debt ceiling when the nation hits its legal borrowing limit sometime around Aug. 2. “I doubt that it would be disruptive to the economy,” said Sen. Pat Toomey (R-PA). Republican National Committee Chairman Reince Priebus said yesterday that Americans will say “well, good” if the U.S. defaults on some obligations.
Depending on how long the stalemate lasts, hitting the nation’s debt ceiling could do real damage to the nation’s economic growth, harm the fragile housing market, and even reignite the financial crisis. And as a new report from the Bipartisan Policy Center found, seniors may be among the first harmed if the debt ceiling isn’t raised because the country almost immediately wouldn’t be able to pay all Social Security benefits:
The Bipartisan Policy Center studied Treasury Department receipts and expenditures for August 2009 and 2010 and determined that the government likely would not have enough revenue to pay the full $23 billion payment to Social Security recipients due on Aug. 3.
On that day, according to the analysis, the government would take in about $12 billion in taxes and other revenue but would owe $32 billion, creating a $20 billion shortfall. It happens to be the first Wednesday of the month — the day a majority of Social Security recipients get their checks.
That Social Security would take such a heavy hit right away is a quirk of the calendar (in that payments are due literally the day after Treasury estimates that the ceiling will be hit), but the point is that an immediate 44 percent cut in government spending, which is what would be necessary if the debt ceiling isn’t raised, is going to adversely affect large and important government programs. As the BPC wrote, if the debt limit isn’t increased, “handling all payments for important and popular programs (e.g., Social Security, Medicare, Medicaid, Defense, active duty pay) will quickly become impossible.”
At the moment, the GOP has blown up negotiations over raising the debt ceiling in order to protect the rich and oil companies from tax increases, and to preserve corporate tax accounting gimmicks. And it seems that seniors will be the first ones to face the consequences of that decision.