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Could Social Security checks stop?

It seems unlikely, but here are some proposals that might keep that from happening if the US defaults -- and some things to do if it does.

By doubleace Jul 27, 2011 2:41PM

This post comes from Lynn Mucken at MSN Money.


In a nationally televised speech to the nation this week, President Barack Obama warned of dire consequences if Republicans and Democrats can't agree to raise the national debt ceiling by Aug. 2.


"If that happens and we default," Obama said, "we would not have enough money to pay all of our bills -- bills that include monthly Social Security checks, veterans' benefits and the government contracts we've signed with thousands of businesses."


Judging from their reaction, older Americans heard only two words: "Social Security."

Post continues after video.

This is no small matter: According to the Economic Policy Institute, Social Security checks make up more than four-fifths of the income in the poorest 40% of households of people older than 65, nearly two-thirds of the income in such middle-class households and more than two-fifths in such upper-middle-class homes.


Could those 56 million checks sent out each month -- most of them deposited automatically into individual checking accounts -- really stop coming?


Based on history alone, the payments will be made. In 1995-96, when a test of wills between President Bill Clinton and a Republican Congress shut down the government -- a full closure for six days and a partial one for 21 more -- no one missed a check, although the government said later that 112,000 new Social Security applicants were not processed and 212,000 new or replacement Social Security cards were not issued during the six-day closure.


That was accomplished with the passage of a bill that exempted SS payments from being counted against the national debt. 

However, that was 15 years ago, when fewer people were on Social Security, the nation's debt was much smaller and our political parties were a little less rigid. "Right now, we're talking about a massive shutdown and a massive disruption," Rep. John Mica, R-Fla., told USA Today. "The scope of this shutdown is so much greater than what happened in '95, you can't compare them."

Social Security Administration officials have not indicated how they would handle a shutdown today, and are unlikely to say anything as long as fear of losing Social Security payments remains such a powerful chip in the political bargaining process.

Scenarios and proposed solutions about Social Security are plentiful, however:

  • Sen. Bill Nelson, D-Fla., has proposed legislation similar to the one passed in 1995. And Treasury Secretary Tim Geithner has confirmed that Nelson's strategy would work. "The Treasury's general counsel, George Madison, has reviewed your draft legislation, and advises me that it would provide Treasury special borrowing authority to pay Social Security benefits (despite) the expiration of borrowing authority on August 2, 2011," Geithner wrote to Nelson, according to Florida Today.
  • A group of House and Senate Republicans has proposed legislation that would require paying Social Security recipients (as well as active-duty military and interest on the debt) by using $81 billion of the $172 billion the government would bring in in August. However, according to a story in USA Today, the Bipartisan Policy Center studied Treasury Department records for August 2009 and 2010 and found that the government likely would not have enough  to make the full $23 billion payment due Aug. 3 to Social Security recipients. 
  • The Bipartisan Policy Center also studied the possibility of maintaining the debt ceiling by continuing to pay interest on our bonds, thus avoiding a default on our debt obligations. "This is an option known as 'prioritization,'" wrote Ezra Klein on his Washington Post blog. "If (the government) chose, for instance, to fund Medicare, Medicaid, Social Security, supplies for the troops and interest on our bonds, it would have to stop funding every other part of the federal government. ... When coupled with the turmoil in the markets and the general financial uncertainty, (this) would undoubtedly throw the economy back into a recession."
  • Writing on The Huffington Post, Nancy Altman and Mark S. Scarberry insist that Obama is "needlessly scaring" Social Security recipients:
The truth is that checks can go out, in their full amount, without adding a penny to the federal government's total debt. They can be paid without subtracting more than a tiny fraction of a percent -- if anything -- from the funds currently being used for other government purposes -- a reduction so small that it could be considered a rounding error.
Social Security's Board of Trustees could and should exercise its right to redeem (cash in) as many of Social Security's bonds as needed to pay benefits. Every dollar of principal (though not accrued interest) that the federal government would be required to pay to redeem the bonds would reduce the total debt subject to the $14.3 trillion limit. That would make room under the debt ceiling and allow the government to borrow an additional dollar from the public to replace every dollar of principal paid by the government.

If nothing else, no one is absolutely sure what will happen Aug. 2. If no checks are coming, what should those on Social Security do? Here is a short version of some suggestions from "Roger D" on the Booman Tribune website.

Remember, you would be taking these steps only because you have limited options during the short time before the checks start coming again. 

If you have some assets:

  • Tap your rainy-day fund or IRA and 401k plans. But remember, the value of your investments could drop sharply due to a government default, so you might be selling at a loss.
  • Consider taking out a home equity loan. This is seldom a good idea, but these are hard times.
  • Cash out all or part of a life insurance policy.

If you have few tangible assets:

  • Cancel services -- cable, cellphones, Internet, newspaper, books -- that were necessities yesterday but now are a luxury.
  • No new clothes.
  • Eat at home, buy generic products at the cheapest grocery stores, and cook them yourself. Drink only water -- and from the tap.
  • Cut the utility bills by turning off the AC and as many lights as possible, taking fewer baths and showers and unplugging unused devices.
  • Drive as little as possible.
  • Sell some belongings. A yard sale might get you by for a couple of weeks.
  • Ask family and friends for help. These will be tough times, so don't be proud.

More on MSN Money:

Jul 28, 2011 11:28AM
It's our fricken money. We loaned it to the feds in good faith. Pay us back OUR money. This is not an entitlement. What the hell is wrong with these people in Washington. This country is heading down the tubes at a very rapid pace.
Jul 28, 2011 11:36AM
As someone that is on Social Security alone - and not having a raise for 2 years - I find it hard to believe that they would actually even consider cutting off my check.  I realize that the government is in trouble, however, they are talking about cutting spending,  but I have not heard one word about the so called Congressmen and Senators offering to take a pay cut in order to save some money.  In fact, I believe that if they want to run for office - they should do it for free because all of them have other incomes that they can rely on, we don't.  And don't even say that we seniors can go out and work part-time to supplement our income.  Have you looked lately?  There aren't even jobs for the young and, believe it or not, companies are NOT hiring the "elderly".  And what about "age discrimination".  It is still going on. They are sitting up there in Washington, getting paid, playing with our funds,  while all along they are taking the money "their" money they  are being paid to "represent" the citizens of this country.  Do they really think that stopping Social Security checks will balance the budget?  There are already homeless people out on the streets because they have lost their jobs.  Now they are talking about putting more people on the streets by  threatening to stop Military pay and Social Security.  It is obvious that they have never had to live on a fixed budget, try and pay rent, buy food to stay alive, seek medical treatment for illnesses that doctors won't treat for free, pay even the necessary bills (electricity-phone-water).  Where will it all end?  When all the Congressmen and Senators see the United States broke and in ruin?  It is also obvious that they don't have brains in their heads to make the right decisions.   All of you Congressmen and Senators, take a pay cut, stop paying for "stupid research", stop running your mouths and start thinking and looking at all the useless spending going on.  Stop giving the rich tax breaks, stop giving big corporations that are making millions tax breaks.  I paid my taxes willingly over the years only to be subjected to the possibility of being put out on the streets.  Thank you very much for nothing.
Jul 28, 2011 8:42AM
I see they are stopping S.S check but they have not said they are stopping there checks from coming in. If we cant pay people on S.S. then we should not pay any Government employee then. They are no better then the people that worked all there life for the S.S checks.
Jul 28, 2011 10:55AM

Did you REALLY just advise the senior group to turn off their AC during the frickin summer and heat waves???


People, when our seniors start dying from heat complications, MSN money will be the one you are looking to sue.

Jul 28, 2011 10:57AM
This is just sickening! What about those seniors that have no savings and can barley afford there medications as it is.  What about the disabled who have nothing and are handicapped or single disabled mothers with children to feed that have absolutely nothing to begin with.  Come up with some ideas for them there is no option because they are month to month. they have nothing left after they pay rent how are they going to live.  They will be out on the street.  It would be utter chaos.  This country would go to pieces worse than it is now!
Jul 28, 2011 9:46AM
Isn't not getting SS kind of like your bank telling you we are sorry but you can't withdraw any funds we needed it to run the bank we exceeded our debit limit.
Jul 28, 2011 2:15PM
They sent my Census form back! AGAIN!!!
In response to the question: "Do you have any dependents?"
I replied - "12 million illegal immigrants; 3 million crack heads; 42
million unemployable people, 2 million people in over 243 prisons; Half of Mexico; and 535 more in the U.S. House and Senate
Jul 28, 2011 8:53AM
I'm sorry, but I thought Social Security was money everyone paid into the system and that money was invested to increase the supply. Mr. Obama and congress seem to talk like it comes from income taxes. I noticed that every week my deductions read federal taxes withheld and then it said Social security withheld I believe they were separate deductions.
Jul 28, 2011 2:47PM
Why not stop the politicians pay checks instead....
Jul 28, 2011 10:49AM
Failure of the administration to pay the military, veterans benefits and social security could be considered to be an impeachable offense, essentially a high crime and misdemeanor. It certainly would be grounds for being defeated in the next election on grounds of incompetence.
Jul 27, 2011 3:47PM
Geeeezzz!!!! a great article to scare the SS recipients out out of their skin.  Cut back, garage sale, luxury items, expensive cars, eating out, newspapers, cable tv and even electricity.  Generally speaking , folks on SS primarily can not cut back on anything, they have nothing to cut back on.  Normal expenses,medical, prescriptions and food have all gone up and affect everybody. Sad to say the greater majority of our elderly literally live hand to mouth.  All we want is to live what is left of our lives with dignity and not to be held hostage to a government that caused the problem, has no guts to make the right choices to right the wrongs and makes it out that the elderly caused these issues. We did not. It is our politicians who think they are entitled, they are not.  We the elderly are entitled and it is the government who is reneging on it's responsibility to the elderly.  When the politicians do their jobs working together not against each other they will succeed.  Until this happens we will live in chaos and fear.
Jul 28, 2011 9:22AM
Purplesky I'm not pointing fingers just stating a fact, also they took money out of social security funds to fund other projects and never put it back. guess they figured everyone would die before they could use up what they put in.
Jul 27, 2011 3:43PM
Simon Cowbell:  Why do you blame it all on the boomers?  It wasn't OUR fault we were born between a certain period of time?   You might want to talk with our parents about that....oh, they've passed away already....sorry.   We haven't sucked this country dry....we've been paying into Social Security and Medicare for all the years we've been working, and THAT money has gone to pay the older generation's Social Security and not ours.   Now, when we become of age to start collecting "OUR" Social Security, it's been spent by our politicians who have borrowed and borrowed from it to pay for their "pork" projects, etc., and have decimated OUR money.    AND, because our current politicians (both Republican & Democrat) have chosen to cut jobs and money; which has, in turn, caused fewer people to be working and paying into Social Security, there isn't enough now to pay us back for the years that we paid into the fund!  Don't blame the baby's not US who have sucked this country dry!!
Jul 28, 2011 3:00PM
One last note, if I don't get my social security check I certainly would expect that none of the Senators, Congressmen/women, and all Washington employees would receive a paycheck either.
Jul 28, 2011 10:04AM
Raising the debit limit is kind of like you going out and getting more credit cards so you can live up to the lifestyle you live. Stop spending trillions on wars they will go back to fighting after we leave anyways. Then they could afford to pay the bills that are necessary.
Jul 28, 2011 12:42PM
Yes, cut Social Security to all the illegals that never paid into it! However, if the Government refuses to pay us what we paid into, then now is the time to rise up in force and stop paying any taxes to the Government! It would at that point be time to rise up and fire Obama and every congressman and start over. It couldn't be any less dysfunctional than what we have now!
Jul 28, 2011 1:00PM
Wow!.  So, if I turn off my internet access, ac, spend even less money on food, and engage in poor hygiene practices I might make it through the month.  If any one of the idiots trying to decide what to do will swap places with me for the next month or so, I'll do just that.  I live 10 miles from the nearest town, or friend, it's hotter than hell and I've reduced my spending on food from $150 a MONTH, to $110 a month, internet access is my only real connection to the world (to keep the internet I have to keep a home phone and satellite service, we really live in the woods)  I do not have nor want a cell phone, I don't go anywhere except to the doctor, and I go to the store and pharmacy on the same day to keep from spending any money on gas.  This is BS.  The easiest solution is to quit giving money to anyone outside of this country.   Screw Iraq, Iran, Africa, Asia, the rest of this freaking' world and take care of your own FIRST.
Jul 27, 2011 3:39PM
What pi$$es me off is we've paid that money in all our lives and the government hasn't been able to keep its hands off it. Now they have used it up, OUR MONEY, but lo and behold they dont give a damn they have they're own federally guaranteed retirement fund.
Jul 28, 2011 2:49PM
I did not have an option on my pay checks for over 40 to not pay into SS. The government got there share every week and now that I am disabled and need it I don't think they should have an option either. For those of you fortunate enough to not need SS I hope you never do. The real problem with SS is "The CRAZY check" abusers who have NEVER paid a dime into the system but are bleeding it dry. Why is the 21 year old living next door, who has never worked a day in his life getting the same amount of SS as me, because someone told him if he told them he heard voices he could get a check. Just more government waste. WE THE PEOPLE need to take our country back.

Jul 27, 2011 5:09PM

Get this into your heads.  Social Security is NOT welfare.  It is a government controlled insurance policy that anyone that has ever worked paid into with every withheld dollar for FICA and Medicare they ever paid.


Food stamps, medicaid, are welfare, it was not earned, it's a helping hand.  Some make it a career, concentrate on stopping THAT.


Not screwing people out of the program the government forced us to participate in our whole careers and now want to call entitlement.......

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