WASHINGTON — Maine could be among the hardest-hit states in the nation if the political dysfunction in Washington leads to the double-punch scenario of a long-term government shutdown combined with a federal default, statistics show.
To date, the two-week-old partial shutdown of the federal bureaucracy has had a modest impact, at best, on most Mainers, with the exception of people whose salaries are paid with federal dollars and some businesses that depend on tourists visiting Acadia National Park in Bar Harbor.
That could change dramatically, however, if Congress is unable to reach agreement by Thursday on increasing the country’s borrowing limit, also known as “lifting the debt ceiling.” There were signs of progress in negotiations Monday, but there also were no public breakthroughs.
Per capita, Maine has among the highest proportions of veterans, Social Security and Medicaid recipients, and residents who depend on food stamps to feed themselves or their families. The Portland area has been ranked as one of the top 25 metro regions in terms of the percentage of federal workers in the workforce.
While there is no clear road map for how an unprecedented default would play out, Americans who rely on Social Security, Medicaid or food stamps or other federal payments could see their checks delayed, reduced or cut off as federal officials try to figure out which bills to pay and which to delay.
“On a day-to-day basis, handling all payments for important and popular programs (such as Social Security, Medicare, Medicaid, defense, military active duty pay) will quickly become impossible,” wrote analysts with the Bipartisan Policy Center. The result will be “chaotic,” they wrote: unpaid bills, “winners and losers,” public uproar and international attention.
U.S. Sen. Angus King, an independent who served two terms as Maine’s governor, put the impact on Maine in broader terms.
“I can say without a doubt that the fiscal condition of the state is intimately tied to the fiscal condition of the country,” King said. “If Washington sneezes, Maine gets a cold.”
MEDICARE, MEDICAID AND SOCIAL SECURITY
Census figures show that Maine was the oldest state in the nation in 2011, with a median age of 43.5. That means Maine is among the states with the highest rates of Social Security and Medicare beneficiaries.
Treasury Secretary Jack Lew warned Congress last week that timely payments for Social Security and Medicare – as well as payments to active-duty military personnel and veterans – could be put “at risk” if the $16.7 trillion debt ceiling is not increased by Thursday.
The Bipartisan Policy Center estimated that the Treasury will owe $49 billion in Social Security benefits plus $18 billion for Medicare between Oct. 18 and Nov. 15.
Just shy of 24 percent of Maine’s 1.3 million people were receiving Social Security benefits in December 2012, according to federal statistics. Among Mainers aged 65 or older, 94 percent were on Social Security. Another 37,000 Maine residents received income-based payments through the Supplemental Security Income program.
Maine and West Virginia tied for the highest portion – 21 percent – of residents on Medicare, the federal health insurance program for Americans aged 65 and older or those with disabilities.
Additionally, 31 percent of Maine’s residents in 2010 received health coverage through Medicaid, the federal program that covers lower-income families, the elderly and the disabled. Maine was tied for second – with California and Vermont – among states with the highest Medicaid usage rates.
With more than 130,000 veterans in a state of 1.3 million, Maine was second only to Alaska in 2010 in terms of the percent of residents who served in the armed forces.
The veterans health programs run through the U.S. Department of Veterans Affairs have been unaffected by the government shutdown that began Oct. 1 because they are funded a year in advance.
Other benefits programs for veterans, such as pension and disability compensation payments, would potentially be affected if the shutdown dragged on until the end of the month. The VA has said that those payments to more than 5 million veterans could be halted within weeks.
VA Secretary Eric Shinseki testified last week that the continued government shutdown will result in the Veterans Benefits Administration going from 13,000 staffers to roughly 1,100.
“I am planning to operate as long as I can this month. But at a certain point – in days – I will begin to furlough people,” Shinseki told the House Veterans’ Affairs Committee. “Whatever occurs with the debt ceiling, I imagine, will be even worse.”
Indeed, as Lew indicated, the U.S. Treasury will be forced in the event of a default to decide whether to pay out veterans benefits or pay its other debts.
Veterans in Maine received $420 million in pension and disability compensation payments in fiscal year 2012, according to the VA.
Steve SanPedro, commander of the Veterans of Foreign Wars’ Portland post, is worried for members who rely on their military retirement payments to live. More than half of the post’s 478 members served in the Korean War or World War II, and many don’t have other sources of income, he said.
“We always help. Obviously, we can’t pay all of our members’ mortgages,” SanPedro said of what would happen if those checks don’t arrive next month.
SanPedro, who retired from the Army, is also on disability for multiple physical problems from “jumping out of planes for 16 years,” he said. He’ll have to delve into his savings to cover his bills, if those payments don’t come.
“Those two checks are my main source of income,” said SanPedro, who works part time selling appliances at Sears. His job as commander is voluntary.
FOOD ASSISTANCE PROGRAM
Maine also consistently ranks near the top in the nation in terms of the number of people who receive food stamps, officially known as the Supplemental Nutrition Assistance Program, or SNAP. In 2012, 17.8 percent of Maine residents – one out of every six Mainers – were using food stamps, ranking the state fourth.
A default’s impact on SNAP and its 47 million recipients nationwide is unclear at this point.
The U.S. Department of Agriculture, which operates the program, said it has enough money to continue paying households through October in the event of a prolonged shutdown. The program also has about $2 billion in contingency funds that could be used after that. But those policy assessments addressed only a shutdown, not a default.
Another nutrition assistance program – the Women, Infants and Children, or WIC, program – that serves roughly 26,000 clients in Maine would be affected by a long-term impasse. Maine’s WIC administrators have said they have enough money to pay for current enrollees and new applicants through November.
Maine, as a whole, does not have a disproportionately large number of federal workers, especially when compared with states such as Virginia and Maryland.
But Greater Portland ranks 22nd among the 100 largest metropolitan areas in terms of the percent of the local workforce employed by the government or the military, according to an analysis by The Washington Post. In 2012, roughly 4.8 percent of the Portland area’s 265,000 workers were employed by the federal government.
Kevin Miller can be reached at (207) 317-6256 or at: