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On Social Security? Don't Fear Trump's Shutdown Threat

The Motley Fool logo The Motley Fool 11/20/2018 Dan Caplinger

Millions of retirees worry about a possible government shutdown, but there's not as much to worry about as you might think. © Jim McGuire/Getty Images Millions of retirees worry about a possible government shutdown, but there's not as much to worry about as you might think. On several occasions in recent years, the threat of a federal government shutdown has made millions of Americans nervous about the potential consequences. The impacts from a shutdown are extensive. Millions of nonessential federal workers face the prospect of involuntary furloughs that could jeopardize their pay, and many services that Americans typically take for granted might suddenly become unavailable.

Given how ominous the whole idea of a government shutdown sounds, it's not surprising that the 60 million Americans who count on getting Social Security payments often get scared that they'll no longer receive their benefits if a shutdown occurs. Although fears that monthly Social Security checks would stop coming are completely unwarranted, it's true that shutdowns can have detrimental effects on key services that Social Security recipients count on.

Why a shutdown is possible (again)

Earlier this week, President Donald Trump once again raised the specter of a government shutdown, expressing his desire for Congress to provide funding for a wall along the Mexican border. Unless lawmakers and the president reach a deal by early December, a repeat of the two-day shutdown that the government experienced in January could occur.

Related video: Fight for border wall funding could spark government shutdown (provided by Fox Business)

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Government shutdowns have been in the news several times over the past year. On Jan. 20, the government was closed for two days, running through the evening of Jan. 22. A technical shutdown also occurred as of midnight on Feb. 9, although it ended later that morning, before there was any impact.

Later in the year, though, lawmakers had difficulty agreeing to provisions to fund the federal government for the 2019 fiscal year, which began on Oct. 1. Disagreements between Republicans and Democrats in Congress prevented consensus for an annual omnibus appropriations bill, and even once senators and representatives made progress toward a compromise, the president said that he might well veto anything that came to his desk if it didn't provide funding for his priorities. In the end, the White House signed a spending bill in late September that provided money for the Departments of Defense, Labor, Education, and Health and Human Services. However, funding for several other key agencies is set to end on Dec. 7.

Why Social Security recipients don't need to worry

The first thing to understand about government shutdowns is that they don't have the power to release the U.S. government of its obligations. Social Security is a mandatory spending program, so benefits continue to be paid regardless of a shutdown. Because of the trust funds that cover both retirement and disability benefits, there are sources of money for the program even when the U.S. Treasury can't use ordinary borrowing functions to obtain cash.

In addition, there are essential services that the Social Security Administration has identified in past episodes involving shutdowns. Among them are processing new applications to receive Social Security, handling appeal requests from adverse Social Security decisions, and dealing with cases in which benefits haven't been paid in an appropriate manner.

Some nuisances for Social Security

That said, there are some ways in which a government shutdown can affect Social Security. For instance, if you're trying to get an original Social Security card for a newborn, you'll have to wait until the shutdown ends. The same is true if you need a replacement for a lost card. In addition, you typically can't get benefit verification services or have errors in your earnings record corrected.

Those who have ongoing disagreements with the SSA could also see an impact. Delays are likely to occur in conducting hearings and processing complaints, and responses to requests for information are also generally considered to be nonessential even if they come from lawmakers looking out for the interests of their constituents.

Never fear

Nervousness about Social Security benefits in the face of a government shutdown is natural, but there's no reason to fear. Regardless of what happens in Washington's latest funding disagreement, those who count on their Social Security checks shouldn't see a disruption that would affect their immediate financial situation.

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