Jewish service groups are telling their constituents to be on guard for a possible government shutdown or slowdown after Aug. 2, when the United States is scheduled to hit its debt ceiling.
What that means is not yet clear: The government isn’t saying what it will stop paying for or which debts it will halt payment on.
Moody’s, one of the three pre-eminent credit-rating agencies, said the crisis could affect not only the AAA rating of the U.S. credit risk—the best offered by the agency—but also the ratings of nations that have loans guaranteed by Washington. It named Egypt and Israel.
Democrats, Republicans, the U.S. House of Representatives, the Senate and the White House have deadlocked over a formula that would raise the limit the U.S. can take out in loans while shaping a longer-term formula to tamp down the deficit.
The White House says that as of next Tuesday, it will not have the money to fully fund government, which means that anything from government paychecks to defense spending to social services could come to screeching halt. For Jewish service groups, housing grants that help maintain Jewish homes for the elderly could stop paying out, Medicaid money that funds services for the vulnerable could dry up and the Social Security checks that help the Jewish elderly make ends meet could stop coming.
“We are sending out guidance to federations and Jewish social service agencies to make sure they are aware of the situation and to act accordingly with a message that they should stand by” for further guidance as the deadline looms, said William Daroff, the Washington director for the Jewish Federations of North America.
Daroff said the “game of chicken in Washington could have an impact on the most vulnerable.”
“We are most worried about Medicaid payments that go to Jewish nursing homes and Jewish family services,” he said. “The people who will be most affected are the most vulnerable of our population—the people who are suffering most because of the recession.”
The effect won’t be felt immediately on Aug. 3, according to Rachel Goldberg, director of aging policy for B’nai B’rith International. Instead, its effect will become apparent as the Obama administration chooses what to cut.
“No one is going to be happy with the choices made,” she said.
There could be a ripple effect on the economy. If millions of elderly Americans don’t get their Social Security checks directly deposited after Aug. 2, then mortgages and rents due could be affected.
Likewise, said Mark Olshan, the director of B’nai Brith’s Center for Senior Services, if the Department of Housing and Urban Development fails to send out subsidies to homes for the elderly, the institutions will have to dip into reserves immediately.
“That eats up future moneys,” he said.
The principal division between the parties is over revenue—whether or not to raise taxes as part of a recovery package. Democrats want some tax hikes, while Republicans want only cuts for now.
It’s a division that seeps into the Jewish groups. The Reform movement and B’nai B’rith International back plans that include increased taxes. The Jewish Council for Public Affairs, the umbrella body for Jewish policy groups, last week wrote to Congress to oppose the cuts-only Cut, Cap and Balance Act backed by the Republicans.
On Tuesday, the JFNA wrote to the president and congressional leaders appealing to them not to gut discretionary spending—the allocations that states use to fund services that provide food, shelter and medicine to the needy, as well as Medicaid. The letter also appealed to the parties to leave alone charitable tax deductions, which have been targeted by Democrats.
Yet as the crisis looms, Goldberg said, it becomes harder to advocate for the whole social services package that Jewish service groups once favored.
“We want to protect Medicare and Medicaid,” she said of the programs that respectively subsidize health care for the elderly and the poor. “But we don’t want to keep pressing for that and end up with default. Everyone is struggling with how hard to push.”
Goldberg said that cuts that do not immediately affect Jewish services may have ancillary effects one or two weeks into the crisis. The government could authorize funds for HUD to pay institutions, she said, while cutting back government salaries.
Another consideration is whether a deal forged after a cutoff in funds would be retroactive, Daroff said.
With the sides continuing to disagree on the best way out of the crisis, no one is sure what may happen.
The looming crisis drew Muslim, Christian and Jewish clergy to the Capitol on Tuesday to press for a resolution.
“The stiffening of the ideological lines is really alarming,” said Rabbi David Saperstein, who directs the Reform movement’s Religious Action Center. “The people who fall through the cracks are very often the people in our pews. When you cut the safety net out from under, it’s the elderly and the hungry and the disabled.”