An important milestone takes place on Thursday: The U.S. government hits its statutory debt ceiling. And it could kick off a battle between the nation's two main political parties -- a fight that retirees might find concerning.
Some Republicans want to put changes to entitlement programs on the table before agreeing to increase the federal debt limit. New House Speaker Kevin McCarthy (R-Calif.) has stated previously that he wouldn't rule out this possibility. Because of this threat, House Minority Whip Katherine Clark (D-Mass.) recently told CNN that she expects some GOP "extremists" to target Social Security and Medicare.
But you don't have to worry about Social Security cuts in 2023. Here's why.
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Political math
First of all, it's unlikely that any proposals to cut Social Security in exchange for raising the debt ceiling would gain enough votes to pass in the U.S. House of Representatives. Republicans only have a slim majority, with nine more seats than the Democrats hold.
While some in the GOP have called for negotiating changes to entitlement programs before increasing the debt limit, the idea doesn't appear to have a lot of support in the party. Even Rep. Chip Roy (R-Tex.) has publicly stated that Social Security and Medicare benefits won't be touched. Roy is an influential member of the House Freedom Caucus that extracted concessions from Rep. McCarthy in his bid to secure the speaker position,
What if the long-shot attempt to make a debt-ceiling increase contingent upon major entitlement reforms somehow gains enough votes in the House to pass? Any bill would almost certainly be dead on arrival in the U.S. Senate, where Democrats have a narrow majority.
Don't forget that President Biden would have to sign any legislation. White House press secretary Karine Jean-Pierre has made the president's position clear that there should be no conditions placed on raising the debt limit. She stated, "There will be no hostage-taking."
Buying time
It's also important to consider the timing. Although the debt limit will be reached on Thursday, Treasury Secretary Janet Yellen has notified Speaker McCarthy that the Treasury Department will take "certain extraordinary measures to prevent the United States from defaulting on its obligations." These measures include temporarily halting funding of federal government retirement funds.
Yellen stated that it's uncertain how much time the moves will buy. However, she wrote in the letter to McCarthy that it's "unlikely that cash and extraordinary measures will be exhausted before early June."
That gives Democrats and Republicans several months to reach an agreement on raising the debt ceiling. Leaders of both parties don't want the government to default on its debt.
Changes are inevitable
Yellen has hinted in the past that Social Security spending reductions could be inevitable. However, such reductions don't necessarily include actual benefit cuts to retirees already on Social Security.
For example, one idea to prevent the program from going insolvent is to raise the full retirement age (FRA). The House Republican Caucus has proposed gradually increasing the FRA to 70 by three months each year for future retirees. Anyone who is age 55 or older wouldn't be impacted by this move.
Changes to Social Security are indeed inevitable. If nothing is done, benefits will be reduced by 2035, when the program's trust funds run out of money. To avoid this predicament, reforms will be necessary to boost revenue, reduce spending, or both. While you're likely to see a lot of political drama over the coming weeks and months, rest assured that Social Security benefits won't be cut this year.
