“House Democrats stand united to protect and strengthen Social Security today and for future generations, and we will fight any Republican efforts to privatize Social Security. Although Republicans have proposed “retooling” Social Security in the name of deficit reduction, the facts are clear: the Social Security program is healthy. Since its inception, Social Security has paid for itself without adding a single dime to our national deficit. In fact, today, Social Security has a $2.7 trillion surplus.”
The rhetoric from the House Democrats paints an unrealistically rosy picture of Social Security finances.
In August 2012, the House Democrat website added a presentation on Social Security that emphasizes the Democratic Party’s role in legislating and supporting the program. The presentation remains a prominent feature at the website.
The House Democrats’ story about Social Security contains many claims that might interest fact checkers and omits mention of significant reforms carried out in the 1980s under President Reagan.
We’ll focus on the claims that Social Security is “healthy,” that Social Security has added not so much as a dime to the federal deficit, and that Social Security has a $2.7 trillion surplus.
Social Security and the deficit
Today the federal government tracks Social Security as an “off-budget” item. That means the federal government does the accounting for the set of Social Security programs separately from the general budget, though it also publishes a unified budget picture that includes the Social Security trust funds.
Starting in 2010, Social Security receipts started to fall short of expenditures, not counting interest income:
Social Security’s expenditures exceeded non-interest income in 2010 and 2011, the first such occurrences since 1983, and the Trustees estimate that these expenditures will remain greater than non-interest income throughout the 75-year projection period.
This means that Social Security adds to the budget deficit for the unified budget starting in 2010. A press release from the Trustees from April 2012 says assets in the Social Security trust fund will run out in 2033, three years earlier than it predicted in 2011. Increasing payroll taxes and/or cutting benefits could delay trust fund depletion.
Analyzing the Rhetoric
Is the Social Security program healthy?
The House Democrats call the Social Security program “healthy.” The Trustees report from 2012 paints a different picture:
The projected combined OASI and DI Trust Fund assets increase through 2020, begin to decline in 2021, and become exhausted and unable to pay scheduled benefits in full on a timely basis in 2033. However, the DI Trust Fund becomes exhausted in 2016, so legislative action is needed as soon as possible.
The 2012 Trustees’ report sends the clear message that Social Security needs to increase revenue, cut benefits or do both to maintain solvency over the next 75 years.
The system’s pay-as-you-go structure shares features with a Ponzi scheme, requiring an ever-growing base of workers as a source of funds while the older population grows over time. We think that fiscal outlook renders the system unhealthy to any reasonable person over the long haul. Claiming the system is healthy based on its current picture, with a rapidly shrinking annual surplus but a considerable sum in the trust fund, deceives the audience with ambiguity and missing context.
Has Social Security paid for itself without adding a single dime to the deficit?
The deficit, of course, represents a shortfall over the course of a budget year. Though the Social Security trust funds have maintained a balance over the history of the program, a number of times over the years Social Security’s receipts have fallen short of its outlays. The trust fund balance from earlier years does not count as income during a budget year. If income during any given year is less than the program’s expenses then it counts as a deficit.
A person might misspeak and mistake the term “deficit” for the term “debt.” In talking about the latter, one could count the trust fund as an asset despite the fact that money invested in Treasury bonds is spent by the federal government. The money the federal government owes to Social Security adds to the challenge of paying down the debt. The House Democrats’ presentation on Social Security presumably represents a carefully crafted statement. It is appropriate in these circumstances to stick to the term the House Democrats chose.
As noted above, the federal government treats Social Security as an “off-budget” category. By keeping Social Security’s deficits separate from the federal budget deficit, one could argue that Social Security has not added to the federal deficit.
But there’s a problem. Social Security has not always been an off-budget item. From 1969 to 1992 Social Security was part of the regular budget. Social Security had a budget deficit for seven consecutive years during that period.
Even ignoring Social Security’s effect on the unified budget since 2010, the House Democrats are incorrect to claim that Social Security has not added to the deficit “since its inception.” No charitable interpretation, short of assuming the House Democrats intended to use different words, permits an escape from that conclusion.
Is there a $2.7 trillion surplus in the Social Security trust fund?
It’s true that Social Security carries over from 2012 a $2.7 trillion surplus in its trust fund. But House Democrats use the figure as though it should allay worries that Social Security rests on shaky fiscal ground.
As shown on our graph, since 2010 Social Security has relied on interest income to avoid eroding its trust fund balance. The end of the payroll tax holiday originally passed as part of the stimulus bill in 2009 will increase receipts, but the program remains on course to deplete its trust funds by 2033.
While it’s true that the trust fund carries a $2.7 trillion surplus, the surplus amount by itself gives a very incomplete picture of the health of the Social Security system.
“The Social Security program is healthy.”
“Since its inception, Social Security has paid for itself without adding a single dime to our national deficit.”
“In fact, today, Social Security has a $2.7 trillion surplus.”
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DeWitt, Larry. “Research Note #20: The Social Security Trust Funds and the Federal Budget.” The United States Social Security Administration. U.S. Social Security Administration, 4 Mar 2005. Web. 8 Mar 2013.
Geithner, Timothy F., et al. “Trustees Report Summary.” The United States Social Security Administration. The U.S. Social Security Administration, 2012. Web. 8 Apr. 2013.
“Social Security Press Office: Social Security Board of Trustees: Projected Trust Fund Exhaustion Three Years Sooner Than Last Year.” The United States Social Security Administration. U.S. Social Security Administration, 23 Apr. 2012. Web. 8 Apr. 2013.
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