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What does the debt limit debate mean for disability benefits?

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The upcoming expiration of the debt limit, or “X date”, is fast approaching. Treasury Secretary Janet Yellen has repeatedly suggested that the US government could default on its debt as early as June 1. Moreover, given the relatively subdued tax receipts seen so far, some experts suggest that a default could occur even sooner.

As a result, we could be a week away from a possible debt downgrade or outright default. If such a situation occurs – which has never happened before in the history of the United States – all bets are off as to what it would ultimately mean for the economy.

But investors are only part of the population. Many people do not have a wallet and may also be negatively affected by this news.

Let’s dive into what a potential debt limit disaster would mean for those receiving disability benefits.

What impact will a debt limit crisis have on disability benefit recipients?

Unfortunately, the people most likely to be affected by this whole fiasco are among the most vulnerable populations in the United States.

According to Kathleen Romig, director of Social Security and Disability Policy at the Center on Budget and Policy Priorities, those who receive disability benefits (also known as Supplemental Security Income (ISS)) would be among the first and most affected by a debt limit default.

These individuals are only allowed to hold an asset limit of $2,000 to qualify for payouts. Therefore, if those checks stop coming in on a monthly basis, that specific population could be in trouble.

Now, it’s unclear how President Joe Biden’s administration and the Treasury Department would prioritize payments in the event of a default. We would like the most vulnerable populations to have priority over others to receive their checks. However, Republicans continued to push for cuts to some programs, including disability benefits, in exchange for raising the debt ceiling. Thus, there are additional risks that people with disabilities may need to consider as a result of the negotiations.

Of course, most pundits believe a deal will eventually be struck by the 11th hour. And if so, all that worrying may be unnecessary.

That said, in the worst case, it could get ugly fast. For everyone in the economy, a potential default is one of the most important issues to watch over the next week.

As of the date of publication, Chris MacDonald did not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

Chris MacDonald’s love of investing has led him to pursue an MBA in finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative long-term investment outlook.


Not all news on the site expresses the point of view of the site, but we transmit this news automatically and translate it through programmatic technology on the site and not from a human editor.
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