Schumer says debt default puts Social Security recipients at risk

Posted 25 January 2023 at 2:39 pm

Benefits for veterans, Medicare also could be interrupted with default

Press Release, U.S. Senate Majority Leader Charles Schumer

WASHINGTON, DC – U.S. Senate Majority Leader Charles E. Schumer revealed today that the fringe House Republicans’ plan to stop paying the nation’s bills and default on the debt would spell an “economic nightmare” for Upstate NY families.

Charles Schumer

Schumer said that congressional Republicans across the country should think hard about the local communities and families they represent, and places like Upstate NY, before continuing to send America down a politically extreme and disastrous economic path risking a first-ever default by the United States government.

If the U.S. were to default, the senator said this would risk benefits for over 1.8 million Upstate New Yorkers on Social Security, who receive $3 billion in benefits each month, threaten the health of those on Medicare, hinder care for veterans, risk disruptions for those who rely on SNAP and even lead to surging mortgage rates and increasing housing costs.

It would also blow a hole in the deficit and cause a sharp rise in the unemployed. Schumer said it is time for Democrats and Republicans to come together, as they have always done before regarding the debt ceiling, to ensure America continues to pay its bills on time.

“We cannot let the extreme views of a few who want to play chicken with the debt ceiling and recklessly risk driving the American economy off the cliff put Upstate New York families wallets at risk,” Schumer said. “This is not an abstract issue, if these irresponsible extremists fail to allow America to pay its bills and default, Upstate New Yorkers could see real dollars from so much of what they own disappear from their monthly Social Security checks, their retirement savings, their home value.”

Schumer said Upstate NY families have very specific reasons to worry about the debt ceiling.

A debt default would be catastrophic for Upstate New York’s many retirees who could lose an estimated $20,000 in retirement savings. In Upstate New York, there are over 1.8 million Social Security beneficiaries that receive nearly $3 billion in benefits each month.

A default could throw these payments in jeopardy for beneficiaries who earned these benefits.

Medicare payments could be interrupted, threatening the ability of New Yorkers on Medicare to receive and/or pay for healthcare. In total, New York State could see 3,766,000 Medicare beneficiaries lose or have benefits interrupted.

Medicare reimbursements for Upstate NY hospitals and other providers could also be interrupted leading to severe financial distress and even closures for these critically needed community services.

Veterans across Upstate New York who rely on the government for their disability, health care and pension benefits could be left with no support.

Upstate NY Families who rely on federal benefits to keep food on the table could be impacted. If the Treasury is unable to meet its obligations due to default, families who rely on federal nutrition assistance such as SNAP, WIC, or TANF could risk benefit disruption.

  • 2,830,000 New Yorkers across the state depend on SNAP to get the nutrition they need. SNAP is a lifeline for many people who struggle to make ends meet.
  • 1,651,000 children in New York State receive free or reduced price meals through the National School Lunch Program. For many children, school meals are the most reliable meals they get during the day. Free and low cost school meals ensure that all children, regardless of their family’s income level, get the food they need to grow and learn at school.

Mortgage rates, credit card rates, overall interest rates could go up

Moody’s predicts a default could surge new mortgage rates to over 8% – adding significantly to the cost of a new home loan. At a time when mortgage interest rates are already sky high, the GOP threatens to send home financing costs even higher. Even the mere threat of default could send interest rates souring just as inflation is beginning to cool.

Schumer says overall interest rates are likely to increase. Default will trigger a liquidity shortage, making new student, small business and car loans costly and scarce.

It would also cause college financing costs to rise. Upstate New York is home to dozens of public and private colleges, and 58% of New York college students graduate with debt and borrow more than the national average student debt loan of more than $30,000.

Auto loan interest rates for new cars are already at their highest since 2019, and at their highest rate for used cars since 2010. The average cost of a used car in Albany is $33,200, a default will cause a spike in borrowing costs as interest rates skyrocket, adding almost $3,000 to the financing cost of the car.

The average interest rate on bank-issued credit cards is already high, reaching 19.1% late in 2022, according to a Federal Reserve consumer credit report released January 9th, marking the highest rate since the government began tracking this data in the 1970s.

“Look how clear it is: local economies, everyday wallets and Upstate NY families will take the hit should we default and stop paying our bills,” Schumer warned. “The larger Republican Party wants to work with Democrats to prevent this needless economic crisis, but it will take the public putting pressure to inoculate the fringe of the party and for bipartisanship to prevail in making sure America is able to pay its debts on time.”