Treasury Department began to take “Unusual Actions” Thursday after the debt ceiling was breached.
Lawmakers continue to oppose raising the federal borrowing limit, or debt ceiling, on the grounds that it would allow the U.S. government to properly meet its financial obligations. That ceiling, or the amount the government can borrow, is $31.4 trillion.
Treasury Secretary Janet Yellen at A Letter to legislators “The duration of extraordinary measures is the most uncertain.” At this point the Treasury would have to pay the bill late and the United States could default on its debt – something that never happened.
So far, the Treasury Department’s unusual actions have included freezing new investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefit Fund and withdrawing funds.
Moreover, it may be the final blow that plunges the weak economy into recession, Yellen once said. letter last week.
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Explanation of Debt Ceiling:- The US Treasury Department is set to take ‘extraordinary measures’ as the government approaches the debt ceiling.
A long delay in raising the debt ceiling would put many government programs at risk.
Here’s what’s at stake:
Will the debt ceiling affect Social Security?
Even if the debt limit is lifted over time, Social Security may be affected. That’s because some Republican lawmakers won’t raise the debt limit unless it comes with funding for Social Security and other spending cuts.
Not all Republican lawmakers are on board for Social Security cuts, and Democrats have indicated they are unwilling to negotiate on that front.
But if the government defaults on the debt, there could be a loss of $90 billion in monthly Social Security payments to 65 million recipients, according to the National Committee to Protect Social Security and Medicare.
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“The Treasury may not have sufficient revenue to make those payments,” the committee said in an online posting, referring to the bonds the Social Security Trust Fund invests in. Social Security beneficiaries are more likely to feel the full impact of a default than in the past,” the article said.
The committee said Medicare and Medicaid payments could be delayed if no agreement is reached. This could affect the care that Medicare and Medicaid policyholders receive, as medical centers are unable to meet current costs.
The Internal Revenue Service will begin accepting and processing tax returns on January 23rd. The IRS says that those who file their returns electronically should be eligible for one within 21 days.
But if the debt ceiling is not raised, it could take a long time, Yellen hinted in her letter.
Tax Filing Deadlines 2023: January 23rd is the first day you can file your taxes.
If the debt ceiling is raised and a timely solution is not provided, it may cause instability in the financial markets.
After the breach, markets were relatively flat on Thursday.
Long-term investors shouldn’t stay the course and let short-term events dictate their investment decisions, says Michael Sheldon, managing director at Hightower investment adviser RDM Financial Group.
“Like most crises in Washington over the past several years, a calmer head prevails at the last minute,” Sheldon said. “For long-term investors who are putting money aside for retirement, this may be short-lived, so you’ll want to continue to focus on your long-term investment goals.”
Contributed by: Jessica Menton
This article originally appeared on USA TODAY: What happens to Social Security if we hit the debt ceiling?
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