Liberal politicians seeking to “protect” Social Security like to say loudly and repeatedly that Social Security has nothing to do with the federal deficit or debt.
Government accounting is a complex animal and I’m certainly no expert, so let’s keep this simple. If you continually borrow money and pay interest on what you borrow, that interest is an expense and as it grows will limit what you can spend on other things. If you continue to spend anyway, you have a growing deficit and a growing debt.
The federal Treasury used Social Security taxes in excess of funds needed to pay benefits by issuing special interest paying bonds to the Social Security Trust; this has stopped because there is no longer an excess. The Treasury continues to pay interest on these bonds and currently that interest is essential to paying full benefits. Between today and 2033-34 incoming payroll taxes, plus interest will not be enough to pay full benefits so the Trust will redeem bonds until there are no more bonds to redeem. At that point incoming taxes will only pay about 75% of earned benefits.
So, when a politician tells you that Social Security does not impact the deficit or debt ask them (1) where does the money come from to pay interest on the Trust Bonds and (2) where will the money come from to pay the Trust when it redeems the Trust Bonds issued by the Treasury? You can employ all the creative bookkeeping and accounting gimmicks you want, but the fact remains that when you borrow money and pay interest on that money, you are increasing your debt and expenses and while you are paying interest you are diverting money from other things you may want to buy.
Congressional Budget Office: Beyond the 10-year projection period, further increases in federal debt relative to the nation’s output almost surely lie ahead if certain policies remain in place. The aging of the population and rising costs for health care will push federal spending up considerably as a percentage of GDP. If that higher level of spending is coupled with revenues that are held close to their average share of GDP for the past 40 years (rather than being allowed to increase, as under current law), the resulting deficits will cause federal debt to skyrocket. To prevent debt from becoming unsupportable, policymakers will have to substantially restrain the growth of spending, raise revenues significantly above their historical share of GDP, or pursue some combination of those two approaches.
General Accounting Office
How does the budget deficit or surplus relate to federal debt?
When the Congress makes budgetary decisions, it is also indirectly making decisions about the level of debt held by the public. The yearly change in debt held by the public is approximately equal to the budget surplusThe amount by which the government’s revenues exceed outlays in a given period, usually a fiscal year.The amount by which the government’s revenues exceed outlays in a given period, usually a fiscal year. or deficitThe amount by which the government’s spending exceeds its revenues for a given period, usually a fiscal year.The amount by which the government’s spending exceeds its revenues for a given period, usually a fiscal year.. The budget surplus or deficit is the difference between total federal revenue and spending in a given year. When the budget is in deficit, the government borrows from the public. Alternatively, when the budget is in surplus, the government can reduce debt held by the public. Thus, debt held by the public generally represents the total of all cash deficits minus all cash surpluses accumulated over time.
How do trust fund surpluses or deficits affect debt?
Trust fund total surpluses add to debt held by government accounts, but only cash surpluses reduce the need for the federal government to borrow from the public. The Social Security program has historically run large cash surpluses that helped reduce the government’s need to borrow from the public to finance other federal government activities. But in fiscal years 2010-2012, the program paid more in benefits than it received in taxes, thereby contributing to the government’s borrowing needs. While the program’s recent cash deficits were largely due to the economic slowdown, the Social Security Trustees project that the program will run persistent cash deficits over the next 75 years.
QUINNSCOMMENTARY 
Why are the SS $’s in the General Fund instead of a protected fund that can’t be used for anything except SS benefits? To me, that is the mistake the Government is making. I realize that it is not a sure thing that people will get SS benefits perhaps that is why the govt is able to use these funds for anything, however, how about taking funds from some of the Pet Projects of Congressmen instead of always from SS. SS seems to get hit every time the govt needs $’s. At some point back in history I believe that SS had it’s own fund that was in abundance, until someone decided to move the amounts deducted from a person’s paycheck into the General Fund. What would it take to protect the fund from govt spending it.?It is a law to have SS deducted from a person’s check for a person’s retirement, so basically the government is stealing our money and we are having to pay the government to work with no protection that the funds will be there upon retirement. These monies should be protected from any government agency using it. Perhaps because there has always been an abundance of $’s in the funds! Why – because the American people are forced to put into the fund. Really bad government policies that the SS fund can’t be protected!!
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Interest earned on the fund is vital to paying benefits and always has been from the very start. Who is going to pay interest to the fund if they can’t borrow the money and use it? Where would you have this SS fund invested? If there were no interest paid, you wouldn’t be getting your full benefit today.
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