Debt Ceiling: Treasury Secretary Jack Lew says government default will hurt seniors the most

Treasury Secretary Jack Lew testified before the Senate Finance Committee on the debt limit on Oct. 10, 2013. SOURCE:

If Congress chooses not to raise the debt ceiling next week, the ensuing government default will likely hurt seniors the most, particularly those who live on their retirement savings and Social Security benefits.

The Treasury will not have enough cash to pay all the government’s bills unless Congress votes to increase the debt limit to allow investors to buy Treasury securities by Oct. 17th.

Read more: Spotlight: Debt Limit 2013

Testifying before the Senate Finance Committee on Thursday, Treasury Secretary Jack Lew told lawmakers that a default would delay Social Security payments because the government would have a cash shortfall – ranging between 20% to 50% – to meet all its debt obligations.

“I can only imagine what it would mean to a retired American who relies on Social Security as their major or sole source of income if we had to tell them their check was going to be late,” said Lew. “Many of us have relatives who live on their Social Security check. If the check didn’t come, if they didn’t have the ability to call someone who could help them out, they were in trouble. So anyone who thinks that’s anything short of a default has never experienced what it means to live on Social Security.”

Such an unprecedented government default would also send stock prices tumbling, thereby compounding the financial damage to seniors, who saw much of their wealth and retirement savings evaporate during the Great Recession from which they have yet to fully recover.

Read More: Older Americans hit hard by the Great Recession

Lew pointed out that although stock prices may eventually recover, by the time that occurs, it would be too late for many seniors who would see their income flows reduced to a trickle. This means that senior will have a harder time meeting their rent or mortgage payments, paying their utilities, or buying food and medicines.

“We saw during the financial crisis people’s retirement assets fell quite dramatically in value. It reduced what retirees had to live on,” said Lew. “If you create a crisis that causes assets to shrink in value, for retirees, they don’t have a lot of time to catch up. So even if it all rights itself over a period of time, for those retirees, they’re in a pretty bad spot. So I think it’s very unfair to have manufactured crises that have a real-life impact on working Americans and retirees.”


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One Comment on “Debt Ceiling: Treasury Secretary Jack Lew says government default will hurt seniors the most

  1. Pingback: Spotlight: Debt Limit 2013 | What The Folly?!

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