Debt ceiling crisis: What happens to Social Security, Medicare, and Child Tax Credits?

Tensions are high in Washington this week: With the U.S. government hurtling past its debt ceiling, Congress is scrambling to pass a new borrowing limit before October 18, the day federal cash is expected to run out. But negotiations have stalled to a partisan deadlock in recent weeks, and with the threat of default looming, politicians and citizens alike are growing sweaty-palmed.

Dire words have been tossed to describe what happens if the government can’t pay its bills: “cataclysm,” “economic catastrophe,” “fiscal calamity.” The White House explains it as far worse than a government shutdown (when Congress fails to pass a spending bill, rather than a borrowing bill). In a Capitol Hill hearing, Treasury Secretary Janet Yellen said, “It would be disastrous for the American economy, for global financial markets, and for millions of families and workers whose financial security would be jeopardized by delayed payments.” Credit rating firm Moody’s reported that the country could plunge into a sudden recession, and up to 6 million jobs and $15 trillion in household wealth could be lost.

Here’s what’s at stake for specific federal programs:

Social Security: If federal funds are emptied, benefits from the Social Security Administration—which reach about 65 million Americans, including 15 million seniors—could be delayed or even suspended. Those payments average over $1,000 monthly for retirees.
Medicare and Medicaid: According to research from the Center on Budget and Policy Priorities, Medicare and Medicaid reimbursements to hospitals could be delayed, which could ultimately result in patients losing access to medical care as doctors struggle to cope. Additionally, funding to states that helps supply healthcare programs could be significantly cut.
Supplemental Nutrition Assistance Program: SNAP benefits, also dubbed the food stamps program, could be affected. Additionally, federally funded, state-run programs that offer free or reduced-price meals to low-income students, such as school breakfasts and lunches, could see delayed reimbursements, potentially stunting their operations.
Child Tax Credits: The recently expanded Child Tax Credit payments, claimed monthly by roughly 35 million families, could be halted altogether.

But that’s not all—numerous programs could be impacted. Government employees and postal workers could stop receiving paychecks. Military members could stop receiving paychecks. Federal Emergency Management Agency (FEMA) aid to hurricane and wildfire victims—crucial, amid raging fires on the west coast and Hurricane Ida recovery—could be halted. Pandemic mitigation efforts, funded by public health dollars, could be hurt. U.S. credit worthiness could be downgraded, spiking interest rates on mortgages, car loans, and credit card bills. Tax refunds could take even longer.