How Would Default Affect Social Security and Medicare?

The word from Washington is that the U.S. is hours away from defaulting on its public debt, because Congress is unwilling to raise the debt ceiling. If the debt ceiling is not raised, the Treasury Department will be unable to raise money to pay all of the government’s current obligations.

By some estimations, if the debt ceiling is not raised on August 2, the Treasury Department will have $306.7 billion in expenses in August but will receive only about $172.4 billion in revenue. The government will be forced to slash spending by as much as 40 percent.

America’s seniors must be especially worried. Will Social Security checks arrive next week? Will the Medicare program still pay for health care? Since most mesothelioma patients are in their seniors years, many must worry whether they will be able to continue mesothelioma treatment.

We do not yet know what might happen. But here is what some experts say might happen:

Social Security. The Social Security Administration appears to have enough funds to pay Social Security checks through August. The SSA also is still receiving money from payroll (FICA) taxes. As long as revenue from FICA is at least enough to cover current expenses, seniors should still receive their Social Security checks.

That said, it is possible that the government will be forced to divert some of the FICA revenue to pay for other needs, such as national security. That would probably be a last-resort move, but it is not out of the question. If that happens, Social Security checks would stop much sooner.

Assuming the Social Security Administration is still receiving its usual share of FICA taxes, what might happen when FICA income isn’t enough? When there is a shortfall, as there was for a time last year, the Social Security Administration normally would turn to the Social Security Trust Fund.

And what is the trust fund? When Social Security receives more money in revenue than it needs to meet current obligations, the “extra” money is invested in U.S. Treasury interest-bearing securities, such as bonds. These securities are the trust fund. When Social Security has a shortfall, it can redeem some bonds to make up the difference.

However, some experts warn that default could affect the value of those securities. In particular, the Treasury Department might stop paying interest on the bonds. If that happens, the Social Security Administration could be short the money it needs to issue checks. And if playing politics with the national debt brings the value of U.S. securities into question, the health of Social Security could be permanently impaired.

And if you are about to become eligible for Social Security, your application may have to wait on someone’s desk for a long time. The Social Security Administration may be forced to lay off employees or even shut down.

Medicare. Medicare appears to be a bigger question mark than Social Security. The Medicare programs also is funded by FICA taxes, and as long as those taxes are not diverted elsewhere, it ought to be able to continue for a time. But Medicare is in a bigger danger of future shortfalls than is Social Security.

In a worst-case situation, rising interest rates caused by default could drive companies out of business and increase unemployment, which would also mean a serious reduction in the amount of payroll taxes the government is receiving. Even if the programs do not shut down immediately, a default could cause both programs to be less secure in the future.

This entry was posted on Saturday, July 30th, 2011 at 10:22 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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How Would Default Affect Social Security and Medicare?

The word from Washington is that the U.S. is hours away from defaulting on its public debt, because Congress is unwilling to raise the debt ceiling. If the debt ceiling is not raised, the Treasury Department will be unable to raise money to pay all of the government’s current obligations.

By some estimations, if the debt ceiling is not raised on August 2, the Treasury Department will have $306.7 billion in expenses in August but will receive only about $172.4 billion in revenue. The government will be forced to slash spending by as much as 40 percent.

America’s seniors must be especially worried. Will Social Security checks arrive next week? Will the Medicare program still pay for health care? Since most mesothelioma patients are in their seniors years, many must worry whether they will be able to continue mesothelioma treatment.

We do not yet know what might happen. But here is what some experts say might happen:

Social Security. The Social Security Administration appears to have enough funds to pay Social Security checks through August. The SSA also is still receiving money from payroll (FICA) taxes. As long as revenue from FICA is at least enough to cover current expenses, seniors should still receive their Social Security checks.

That said, it is possible that the government will be forced to divert some of the FICA revenue to pay for other needs, such as national security. That would probably be a last-resort move, but it is not out of the question. If that happens, Social Security checks would stop much sooner.

Assuming the Social Security Administration is still receiving its usual share of FICA taxes, what might happen when FICA income isn’t enough? When there is a shortfall, as there was for a time last year, the Social Security Administration normally would turn to the Social Security Trust Fund.

And what is the trust fund? When Social Security receives more money in revenue than it needs to meet current obligations, the “extra” money is invested in U.S. Treasury interest-bearing securities, such as bonds. These securities are the trust fund. When Social Security has a shortfall, it can redeem some bonds to make up the difference.

However, some experts warn that default could affect the value of those securities. In particular, the Treasury Department might stop paying interest on the bonds. If that happens, the Social Security Administration could be short the money it needs to issue checks. And if playing politics with the national debt brings the value of U.S. securities into question, the health of Social Security could be permanently impaired.

And if you are about to become eligible for Social Security, your application may have to wait on someone’s desk for a long time. The Social Security Administration may be forced to lay off employees or even shut down.

Medicare. Medicare appears to be a bigger question mark than Social Security. The Medicare programs also is funded by FICA taxes, and as long as those taxes are not diverted elsewhere, it ought to be able to continue for a time. But Medicare is in a bigger danger of future shortfalls than is Social Security.

In a worst-case situation, rising interest rates caused by default could drive companies out of business and increase unemployment, which would also mean a serious reduction in the amount of payroll taxes the government is receiving. Even if the programs do not shut down immediately, a default could cause both programs to be less secure in the future.

This entry was posted on Saturday, July 30th, 2011 at 10:22 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

View the original article here

St. Augustine Would Be Pleased, I Think

I ask in advance for your forgiveness. I'm being like those doting fathers who insist on boring their friends with the latest snapshots of their children. The above picture shows our Eighth Grade boys at The Atonement Academy. They had just finished serving at Mass (try dividing up the jobs amongst that many!), because today's school Mass was the last time our graduating Seniors and Eighth Graders attend as students. The other students attend until the end of this next week; graduates are made to feel special by allowing them their own "early departure." Of course, most of them will probably show up anyway — our former students tend to think of the Academy as their "other home." The Eighth Grade girls sang in the choir, and they provided a charming setting of the Mass written by the great French composer Jean Langlais when he was only eighteen. We celebrated the Ordinary Form of the Mass in Latin, which is our practice on Fridays. On the other weekdays we celebrate using the Anglican Use, but it's important for our students to be able to participate in Latin, so we do that on a weekly basis.

Of course, we commemorated St. Augustine of Canterbury today. It was a great opportunity for me to speak of the life of this great missionary bishop, who did so much to lay the foundation for the particular spirituality which forms the very Patrimony that the Holy Father has asked us to preserve, nurture and share. St. Augustine is depicted in the triptych which forms the reredos behind the High Altar, so the students see him every day, along with St. Gregory the Great, St. Alban, and the Venerable Bede.

An interesting piece of information — our Eighth Grade boys outnumber the total number of parishioners we had when we began the parish in 1983. A growing Patrimony indeed!

Related posts:

St Augustine of Canterbury: a 'Celtic' perspective"Train up a child in the way he should go…"Some Pictures From "Becoming One" GatheringSchedule for the San Antonio Gathering"Becoming One" Report from Canada Fr. Christopher G. Phillips is the pastor of Our Lady of the Atonement Catholic Church in San Antonio, Texas, where he has served for the past twenty-seven years. He is the founding pastor of the first Anglican Use parish, erected in 1983 under the terms of the Pastoral Provision. Fr. Phillips was ordained as an Anglican for the Diocese of Bristol, England, in 1975. After serving as Curate for three years at St. Stephen Southmead, he returned to the United States and served in two Episcopal parishes in the Diocese of Rhode Island. In 1981 he left the Episcopal Church and moved with his family to Texas, where he was subsequently ordained as a Catholic priest in 1983. Fr. Phillips and his wife, JoAnn, have been married for forty years. They have five children, all grown and married, and two grandchildren.

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