If you're a news-watcher, you're probably already aware of the dual financial issues currently facing the U.S. Congress. The federal government is fast approaching critical deadlines for approving funding for government operations and for hitting the limit on the government's spending ability (the "debt ceiling"). Congress must act quickly to avert crises on both fronts. But if it doesn't, fortunately, the effects of the possible government shutdown and debt ceiling crisis on the Social Security Administration are not expected to be severe.
The federal government's fiscal calendar runs from October 1 to September 30 each year. For the government to continue to operate past September 30 each year, Congress must pass "appropriations" (spending) bills. The spending bills provide the money to each government department to pay their employees and for the services they provide.
It's not uncommon for Congress to fail to pass its annual spending bills on time to provide funding for the next year. When that happens, Congress will generally pass what's called "continuing resolutions," which allow the government to continue to spend at the same level as the previous year—for either a few weeks or a few months, while Congress continues to work on the new spending bills.
The Social Security Administration is in a different position than other parts of the federal government, because Social Security spending is considered "mandatory" and Social Security doesn't rely on an annual appropriations bill for its funding. What this means is that Social Security benefits, and the processing of applications for Social Security benefits, will continue even in the event of a government shutdown.
The looming threat involving the federal government's debt ceiling is different from the yearly appropriations struggle that can lead to government shutdowns. The federal debt, currently reported to be at about $28.4 trillion, is the amount of money that the government owes for spending on payments such as Medicare, Medicaid, Social Security, military salaries, veterans' benefits, public education, and tax credits.
The "debt ceiling," or debt limit, is what allows the government to borrow money to finance those spending obligations. The debt ceiling has been changed almost 100 times since the end of World War II, most recently in 2019 when the limit was suspended until August 1, 2021. Since the beginning of August, the government has been funding itself by taking emergency cash-saving steps.
If the government is unable to borrow any more money at this point, it could default on its debt payments, and it would not be able to pay its employees, including members of the military, or pay out benefits, such as SNAP (food stamps) or Child Tax Credit payments. A government default could also have a severe effect on the stock market and on private lending.
The good news for Social Security beneficiaries is that the government can pay benefits out of the Social Security Trust Fund, which is completely separate from the government's general operating fund. Even if the debt ceiling is not raised, funds from individuals' payroll taxes should continue to go into the Trust Fund and be used to pay out benefits. Social Security is expected to be able to continue paying out benefits with the help of the Trust Fund through at least 2034.
The Social Security Administration has released a plan to temporarily stop certain services during a pause in funding, including many services having to do with customer service functions. The Administration would stop providing the following:
The agency would also stop processing or responding to:
All other mission-critical work, such as sending monthly payments, processing applications for Social Security retirement or disability benefits, handling disability appeals, conducting ALJ hearings, deciding cases, and issuing new and replacement Social Security cards would continue.
SSI, or Supplemental Security Income, is a safety-net program that helps people who are disabled and meet strict income requirements. Families who have a child with a disability may also be able to collect SSI benefits to help with the care of that child.
Unlike Social Security benefits, which are funded by payroll taxes, SSI is paid for by general funds of the U.S. Treasury. Though funded differently, SSI benefits are still considered mandatory spending and would not be affected if Congress fails to pass a spending bill.
However, not everyone agrees on what the consequences for the SSI program would be if the government fails to increase the debt ceiling. Some members of Congress have called for prioritizing certain types of payments, starting with principal and interest on debt owed to the public, then Social Security payments, military pay, and veterans' benefits. But the feasibility of carrying out such a plan without a new debt ceiling remains in question. What is known is that more than $4 billion dollars in SSI disability payments are due to go out November 1; if those checks don't go out on time, many of the almost 6 million people who rely on those checks will struggle to put food on their tables.