Every year, Congress and the President work together to pass and sign a budget bill for the next fiscal year to appropriate funding for agencies and programs that rely on annual funding. However, if Congress and the President fail to pass and sign a new budget before the start of the next fiscal year, which begins in October, the government enters what’s called a “shutdown” in which everything without funding can no longer operate. And Congress has until the end of day on September 30th of each year to agree to a new budget in order to avert a shutdown. Now with regards to the recent shutdown crisis in late September, just hours before the October 1st shutdown deadline, President Biden signed a bill passed by Congress that effectively allowed us to dodge a shutdown by approving funds to the federal government through December 3rd. Talk about cutting it close...
So with the possibility of future shutdowns in our path, the real question becomes are social security payments impacted by government shutdowns? The real answer is no. Government shutdowns do not impact Social Security payments. Funding for the Social Security program is drawn from an independent trust fund revenue pool that doesn’t require annual funding. However, a government shutdown would unfortunately prevent the Social Security Administration from issuing new Social Security cards.
The Committee for a Responsible Budget has confirmed that Social Security payments will continue through a government shutdown. However, while the government would continue to disburse payments for Social Security recipients and people covered by Medicare and Medicaid, other services would surely be disrupted. For instance, benefit verification as well as card issuance would be halted during a shutdown. That could create problems for some recipients, since benefit verification is sometimes required when people apply for loans, mortgages or other services that require proof of income. In order to make sense of this, let’s first define where your Social Security funds are sourced from and how they’re used.
According to the Administration, Social Security is financed through a dedicated payroll tax. And any extra income the taxes generate is placed in trust funds that are specifically reserved for future Social Security payments. Those funds won’t be depleted until 2033, according to the Social Security Administration’s 2021 report. As for what those funds specifically cover, there will be money available both for administrative costs involved in making payments on time, and for the payments themselves, even if the government were to shut down. Yet, a government shutdown could cause issues for other aspects of the Social Security program besides issuing payments.
According to Shai Akabas, director of economic policy at the Bipartisan Policy Center, "What is impacted in Social Security is the ability of new beneficiaries to apply for benefits because some of the employees who would be handling that will be furloughed for that period of time and not working." As a result, that means the program would be unable to verify applicants' eligibility for benefits and unable to issue any new Social Security cards. In a blog post from just before the start of the 2018-2019 government shutdown, Democratic Representative Dan Kildee from Michigan stated that 60,000 Americans apply for a Social Security card each day.
And while it may not be a factor in most government shutdowns, a potential shutdown in 2021 would coincide with the Treasury Department approaching the debt limit. The Treasury Department would have to keep its daily spending no higher than its daily revenue if it were to reach this debt limit. The Bipartisan Policy Center has also stated that it’s unclear if the Treasury Department has the capability or legal authority to pick and choose which programs to pay for. As a result, both the Bipartisan Policy Center and Treasury Secretary Janet Yellen have warned that Social Security payments could be delayed in a scenario in which the Department of the Treasury reaches the debt limit before Congress suspends or increases it.