Folks Could Get Run Over When Debt Limit Rubber Meets the Road

July 29th, 2011 by Leave a Comment

Chances are extremely high that you know someone who receives Social Security or Medicaid or unemployment compensation or another federal benefit payment.  If so, they may be scared.

More than 1.6 million Georgians receive Social Security or Supplemental Security Income monthly benefits.  Some receive both.  Nobody knows what they will receive starting next week when direct deposits and paper checks are due on August 3 and 10.  That’s just one way that you can look at the real world impact of adults behaving angrily in Washington political circles.

The federal debt limit ceiling fiasco that has Washington in volcanic gridlock has become some weird super energy cell that drives politically testy conversations and it holds a lightning bolt over real Georgians whose lives might depend to a great degree on federal assistance.

Almost 15 percent of all Georgians – about 1.5 million — receive Medicaid benefits.  Twelve percent – about 1.2 million — receive Medicare benefits.  The state has more than 200,000 enrolled in the children’s health insurance program.  What happens to them next week?  Medicaid and the PeachCare children’s program cost the state $694.4 million per month.

About 181,000 Georgians receive weekly unemployment compensation benefits.  Will those checks still be written next Friday if the federal government suddenly goes into fiscal default?

These are real world, feet-on-the-hot-pavement questions.  No doubt, the next several days in Washington will be historic, regardless of how it ends, but away from Washington real world folks are trying to understand the impact created by something way beyond their control.

Unemployment checks appear safe.  “The long and short of it is the unemployment insurance payments will go out like they are supposed to,” said state labor commissioner Mark Butler.  Checks are written on Friday.  This week Georgia paid $47 million to 181,665 recipients.

In an average month, Georgia writes almost $200 million in unemployment benefit checks.  Funds to cover those checks originate with taxes paid by employers into the unemployment insurance trust fund.  The state account is flush and Georgia has not needed to borrow money from Washington since April.

Social Security and Supplemental Security Income benefits would be less certain during a Washington financial default.  The federal government owes benefits payments to 28 million Americans next Wednesday and 27 million more payments are scheduled one week later

President Barack Obama famously said he could not guarantee benefits unless Congress agrees how to raise the debt limit ceiling and sends legislation he is willing to sign.  Others contend payments, or at least partial payments, could continue by selling Social Security trust fund bonds in a scenario that raises cash, but also requires issuing other bonds.

All that matters to real folks are their payments.  The Social Security Administration website has nothing that would help citizens through this minefield.  When I looked today the top news announcement on the SSA website was an entry about reduced hours in field offices starting next month.  There was nothing about possible delayed benefits or even how one should follow that information trail.  Equally unhelpful: the White House website.

Each month in Georgia more than 1.4 million people receive $1.5 billion in Social Security benefits, according to data provided by the SSA’s Atlanta public affairs office.  Another 228,500 receive almost $118 million per month in Supplemental Security Income benefits.

Or to describe that in a different context, 17 percent of Georgia residents depend on SSI or Social Security checks, based on newest SSA available data from December of last year.

Moody’s Corporation, the big international debt ratings service, recently named Georgia among a small number of states that would be least affected by a federal government default.  Still, the percentage of federal dollars inside the state budget is significant.

The current fiscal year budget includes $18.1 billion in state funds, $10.8 billion in federal funds and about $8.6 billion from sources that include the lottery, tobacco settlement funds, motor fuel taxes and other receipts.  So to have some percentage of that in doubt for any time is a big deal for everyday folks from all walks of life, particularly those using health care.

Brian Robinson, deputy chief of staff for Governor Nathan Deal, said this in an email:  “Because of the uncertainty surrounding what Congress and the president will do, federal agencies have not contacted their state counterparts to discuss potential funding disruptions.”

Governor Deal’s office has asked agencies to report how they would be affected if the federal payments faucet slows down and how they would prioritize their spending.

At some point, rubber always meets the road.  This time, a lot of folks could also get run over.

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