Debt Ceiling Fight Puts Retirement Security at Risk: ARA’s Graff

A high-stakes game of political chicken is set to come to a head this week, as the country will reach its $31.381 trillion debt limit on Thursday.

The debt limit is the total amount of money the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments. It was last raised on December 16, 2021.

In a letter to lawmakers Friday, Treasury Secretary Janet Yellen warned that her department “will need to start taking certain extraordinary measures to prevent the United States from defaulting on its obligations.”

The measures include:

• redeeming existing, and suspending new, investments of the Civil Service Retirement and Disability Fund (CSRDF) and the Postal Service Retiree Health Benefits Fund (Postal Fund), and
• suspending reinvestment of the Government Securities Investment Fund (G Fund) of the Federal Employees Retirement System Thrift Savings Plan.  

“Failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability,” Yellen wrote. “Indeed, in the past, even threats that the U.S. government might fail to meet its obligations have caused real harms, including the only credit rating downgrade in the history of our nation in 2011.”

According to the Bipartisan Policy Center, once the extraordinary measures and the Treasury’s cash reserves run out, “the federal government would reach the ‘X Date’—the day on which the U.S. government is unable to meet all its obligations in full and on time.”

Republican Response

The Washington Post reported that House Republicans are preparing an emergency plan for breaching the debt limit, prompting remarks from American Retirement Association CEO Brian Graff.

“This is not looking very good,” Graff said, taking to LinkedIn to express his concern.

“The full faith and credit of the United States government is nothing to be trifled with,” he wrote. “The American Retirement Association will make sure Congress understands that any default on our nation’s debt is putting Americans’ hard-earned retirement savings at risk.”

Created in 1917, the debt ceiling is a perennial political fight used by deficit hawks to call attention to what they see as bloated government and out-of-control federal spending.

Since 1960, Congress has acted 78 separate times to permanently raise, temporarily extend, or revise the definition of the debt limit — 49 times under Republican presidents and 29 times under Democratic presidents.

“Presidents and Treasury Secretaries of both parties have made clear that the government must not default on any obligation of the United States, and as noted, Treasury Secretaries in every Administration over recent decades have used these extraordinary measures when necessary,” Yellen concluded. “Yet the use of extraordinary measures enables the government to meet its obligations for only a limited amount of time. It is therefore critical that Congress act in a timely manner to increase or suspend the debt limit.”