Debt Ceiling: What would happen to Veterans’ benefits if the US defaults on its payments?

Negotiations over raising the debt ceiling remain ongoing in Washington DC as both sides of the table report that the talks soured over the weekend. Treasury Secretary Janet Yellen has warned Congress that her department could run out of money to pay its debts by 1 June, leaving negotiators just over a week to reach an agreement to avert a financial crisis.

One of the groups left most vulnerable during a default would be US veterans who receive healthcare, job training, disability assistance, or a pension through the Veterans Adminstration (VA).

The Center for American Progress has broken down the amount of aid sent by the VA to veterans in each state, highlighting that some would be much more severely impacted if the agency was left insolvent. Of the 19.2 million veterans living in the United States, 3.7 million receive aid from the VA.

A significant government bill that could be hamstrung come 1 June is $12 billion of veteran benefits, while another $12 billion is to be sent to retired military and civilian personnel.

“These are people on very low, sometimes fixed incomes that rely on these payments as a lifeline to pay for housing, to pay for food, to pay for expenses for children and other family members,” says Cole Lyle, a Marine Corps veteran and executive director of the veterans advocacy group, Mission Roll Call.

“So it could be potentially very crippling.”

What would happen to Veterans’ benefits if the US defaults on its payments?

In the event of a default the US government would face a severe fiscal crisis, leading to a significant reduction in available funds for all government programs, including veterans’ benefits.

This would result in delays to benefit payments until alternate funding has been sourced. Veteran pay would be up against other welfare programs such as social security in priority. How this is to be worked out has not yet been explained.

“We expect to be unable to pay all of our bills in early June,” said Treasury Secretary Yellen. “If the debt ceiling isn’t raised, there will be some hard choices to make about what bills go unpaid.”