Anxious retirees, social service groups among those making default contingency plans

WASHINGTON — Phoenix retiree Saundra Cole has been watching the news about the debt limit negotiations in Washington with dismay — and limiting her air conditioning use to save money just in case her monthly Social Security check is delayed due to a default.

For her, air conditioning is no small thing in a city where the average daily high hits 94 degrees in May. If the government can’t make good on its obligations, she says, “I would be devastated.”

“What I’m worried about is food banks and electricity here because you know, we’ve had deaths with seniors because of the heat,” says Cole.

Politicians in Washington may be offering assurance that the government will figure out a way to avert default, but around the country, economic anxiety is rising and some people already are adjusting their routines.

Government beneficiaries, social service groups that receive state and federal subsidies and millions more across the country are contemplating the possibility of massive and immediate cuts if the U.S. were to default on its financial obligations.

Treasury Secretary Janet Yellen warned last week that a default would destroy jobs and businesses, and leave millions of families who rely on federal government payments to “likely go unpaid,” including Social Security beneficiaries, veterans and military families.

“A default could cause widespread suffering as Americans lose the income that they need to get by,” she said.

The number of people potentially impacted is huge. According to the Census Bureau, in 2020 roughly 35% of U.S. households included someone receiving Social Security benefits, 36% received Medicaid benefits and more than 13% of the total population received food stamps.

A recent poll by The Associated Press-NORC Center for Public Affairs Research found that 66% of Americans said they’re very or extremely concerned about the impact on the U.S. economy if the debt limit is not raised and the government defaults, though only 21% said they’re following the debate closely.

Robert Gault, 63, who depends on a $1,900 monthly Social Security disability payment, says an economic default “would make life so real awfully hard on me.” The former longtime factory worker said he suffers from chronic back pain caused by degenerating disks in his spine.

Gault, who lives in Bradford, Pennsylvania, near that state’s border with New York, said he thinks about the debate — and the stalemate — in Washington a lot.

He hasn’t made any drastic changes to the way he lives, but said, “I’m more conscientious of everything and I think about everything I do now.”

Negotiations between the president and congressional leaders are down to the wire as they try to break an impasse. GOP lawmakers have been pressing for spending cuts in exchange for agreeing to increase the government’s borrowing authority and President Joe Biden wanted a “clean” debt ceiling increase without conditions.

Without a deal, the U.S. could default as soon as June 1, according to Yellen.

House Speaker Kevin McCarthy, R-Calif., was asked Monday if people should start preparing for default, and insisted “no, no, no, no.”

But people on fixed incomes and organizations that serve the poor — already feeling the after-effects of the pandemic and dealing with inflation — are bracing for a potential debt default that would deal an overwhelming blow to their finances.

Clare Higgins, executive director of Community Action Pioneer Valley in Massachusetts, said demand at the organization’s food banks has skyrocketed since the start of the pandemic, and is growing again.

With a possible debt default, she said, she’s seeing more demand for food from the three pantries that the organization either runs or financially supports.

“Yes, demand has gone up — but it was already up before,” she said.

“We’re already behind the eight-ball in what we’re able to pay teachers,” she said of the organization’s head start and early learning programs. “And the inflation that has happened in the economy has already reduced our ability to stretch the dollar.”