U.S. debt limit feud may cause problems for Social Security

The financial feud between President Barack Obama and the Republican-controlled U.S. House of Representatives may seem far away and just a lot of politics to expats here. But there is a chance that until the two sides come to agreement there will be problems with August Social Security checks.

Wire service reports confirmed Tuesday that if there is no plan to let the federal government keep borrowing funds by Aug. 2, the United States risks defaulting on its debt. The U.S. Treasury says it could not pay all of its obligations, and interest rates would rise for anyone seeking loans from U.S. banks. The government also may not be able to pay Social Security checks to retirees or fulfill corporate contracts, the wire services confirmed.

But White House Chief of Staff William Daley says he is confident the United States will not default on its debt.

Daley told CNBC television Tuesday that there are a lot of debt reduction plans on the table and everyone is stressed as the Aug. 2 deadline for default gets closer. But he said that, in the end, Congress will do what is right.

Congress and the White House are in what President Barack Obama calls a dangerous stalemate over two competing plans to deeply cut spending while raising the debt limit by next week. The White House says Obama is doing whatever he can to reach a compromise, calling it the only option to avoid default and the cataclysmic effects it would have on the world economy.

Daley said it is obvious a plan by Republican Speaker of the House John Boehner would not pass the Democratic-controlled Senate. Boehner’s plan would immediately raise the debt limit by $1 trillion while cutting spending by the same amount.

Obama prefers a plan by fellow Democrat and Senate Majority Leader Harry Reid: $2.7 trillion in cuts and raising the debt ceiling through next year’s election to avoid another divisive debate.

In a televised speech Monday, Obama told Americans to call their representatives and senators to urge them to back a plan that cuts spending while boosting taxes on corporations and millionaires. Officials on Capitol Hill say lawmakers’ telephone lines and email were jammed all day Tuesday.

The U.S. Social Security Administration said that as of May 1 anyone who applies for Social Security or Supplemental Security Income benefits will receive payments electronically, and all current beneficiaries must switch to electronic payments by March 1, 2013. To sign up or learn more, recipients can visit www.godirect.org.

Many U.S. expats in Costa Rica have the monthly Social Security payment deposited directly into their local state bank account. Other simply use a debit card to withdraw money from a stateside account.

Typically Social Security monthly payments are deposited on the first of every month, but the checks have to be collected by banks from the federal government, and that may result in problems if the U.S. debt limit is not changed by Aug. 2.

This entry was posted in World News. Bookmark the permalink.