On Jan. 19, the U.S. government hit the debt ceiling, which is the largest amount of money the government can borrow to pay for expenditures that lawmakers have already approved and committed to.
This has happened many times before as the U.S. has more than $31 trillion of debt. The next step is for the government to raise the debt ceiling, or borrowing limit -- something lawmakers have now done 78 times since 1960, which includes raising the debt ceiling, temporarily extending it, or changing the definition of the debt ceiling.
But this time around, the debate over the debt ceiling has intensified due to partisan gridlock. If Congress doesn't raise the debt ceiling, the U.S. could default on its debt payments, which may result in cuts or delays for government-run programs such as Social Security. But don't panic because even if the U.S. does default on its debt, which is still very unlikely, Social Security benefits could still continue to be paid out on schedule. Let me explain.
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Why would lawmakers not raise the debt ceiling?
Politics in Washington have become incredibly partisan over the last several years, making many votes that used to be rudimentary much more difficult to pass. One such vote of concerns the debt ceiling.
With the Republicans gaining a majority in the U.S. House of Representatives, party leaders have sought to leverage the debt ceiling in order to achieve spending cuts and try to better balance the U.S. budget. There has even been some talk that those cuts could be tied to programs like Social Security and Medicare.
But the White House is holding firm right now. White House Deputy Press Secretary Olivia Dalton recently issued a statement saying, "There will be no negotiations over the debt ceiling."
In the meantime, U.S. Treasury Secretary Janet Yellen has said the Treasury is taking "extraordinary" cash-management measures so the U.S. government can keep fulfilling its financial obligations. But things will likely come to a head around June.
How Social Security payments could continue
If the U.S. government defaults on its debt, there is still a decent chance that Social Security payments could be paid on schedule if the Treasury Department has discretion over what gets paid first. However, keep in mind that the U.S. has never defaulted on its debt, so nothing is 100% certain right now.
Jason Fichtner, who formerly worked at the Social Security Administration (SSA) and is now a chief economist at the Bipartisan Policy Center, said if the Treasury Department can prioritize payments, he definitely thinks Social Security will be included.
"Social Security I'm sure will get paid, interest on the debt will get paid," he recently told CNBC. "After that, flip a coin, who gets paid?"
So, while it's hard to definitively say that Social Security benefits won't get paid, I think it is clear that if the government has any discretion, these payments will be at the very top of the list.
A default is still very unlikely
At the end of the day, I don't think we'll get to this point because allowing the U.S. to default on its debt would very likely hurt both the Democrats and Republicans more than it would help from a political standpoint.
First, if the U.S. defaults on its debt, global markets and the global economy are likely all in trouble. Second, disruption of Social Security payments could result in a crisis for the 66 million people who claim Social Security. A big chunk of this group relies on Social Security for their monthly expenses, so even a slight pause could significantly dislocate millions of retired Americans.
Furthermore, older Americans are more likely to vote than younger ones, so whichever party ends up taking the bulk of the blame for failing to get the debt ceiling raised would likely suffer politically.
U.S. Senate Minority Leader Mitch McConnell (R-Ky.) recently voiced confidence that lawmakers would figure this out. "America must never default on its debt. It never has, and it never will," he said.
