Debt ceiling impasse imperils safety net

@CNNMoney July 25, 2011: 9:10 AM ET

NEW YORK (CNNMoney) -- Social Security payments aren't the only federal lifeline that could grind to a halt if the debt ceiling impasse continues beyond Aug. 2.

The federal government supports myriad safety net programs, such as unemployment insurance, tuition grants, food stamps, child care subsidies and housing assistance. That's not to mention the nation's massive health insurance programs: Medicare and Medicaid.

All told, the federal government should distribute nearly $145 billion in lifeline funds next month, according to the Bipartisan Policy Center. A total of $306.7 billion in federal payments is on the hook in August.

"You've got just a huge number of people who, in one way or another, interact with the federal government," President Obama said Friday night when he announced that House Republicans had pulled out of the debt talks.

But many of these checks will not go out if an agreement isn't reached.

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The Treasury Department would not have the funds to send out between 40% and 45% of its 80 million monthly payments, which also include checks for active-duty soldiers, tax refunds, federal workers' salaries and other items, according to the center. Obama has said he can't guarantee that Social Security recipients will receive the $49.2 billion in payments set go out next month.

The problem is that no one knows what will be paid. And that has left those depending on the federal government for assistance -- and their advocates -- holding their breath while the president dukes it out with House Republicans.

"If the debt limit isn't raised, every government payment and program would be in question," said Judy Conti, federal advocacy coordinator at the National Employment Law Project, which fights for the unemployed.

A gunshot to the economy

An unprecedented number of Americans now depend on the government for assistance. Roughly one in six people are receiving public aid, with Medicaid and food stamps straining in the wake of the Great Recession.

A record 44.6 million people -- or one in seven Americans -- received food stamps in April. That's up nearly 10% from the year before. The government is scheduled to send out $6.7 billion in food and nutrition support, which includes aid for children, pregnant women and new mothers, in August.

Medicaid, the nation's largest safety net program, serves more than 60 million people. It not only provides health insurance for low-income Americans, but it is also the primary payer for two-thirds of the country's nursing home residents. Some $50 billion in Medicaid and Medicare payments are set to go out in August.

Nearly 5 million low-income families depend on vouchers or other assistance from the Department of Housing and Urban Development to keep a roof over their heads. But the $6.7 billion in payments in August could be at risk.

And some 3.8 million of the long-term jobless are receiving federal unemployment benefits, which could be halted if the impasse isn't resolved. They are scheduled to collect $12.8 billion in August.

"If the federal government defaults, people who depend on assistance for food and housing and other basic needs could find themselves in an immediate crisis," said Jodie Levin-Epstein, deputy director at the Center for Law and Social Policy, an advocacy group for low-income Americans. To top of page

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