Social Security and deficits – it’s bunk

So­cial Se­cu­rity re­mains the largest fed­eral spending pro­gram. Af­ter Medicare, it’s the sec­ond-largest dri­ver of long-term deficits. As the new Re­pub­li­can House ma­jority looks to rein in the bud­get, So­cial Secu­rity re­forms could be on the ta­ble.

Andrew G Biggs, Opinion, Wall Street Journal, 1-30-23

If you read the above in the Wall Street Journal, would you accept as fact Social Security is a driver of long-term deficits❓

By law Social Security cannot contribute to the deficit because it can only pay benefits from its dedicated trust. So how can anyone make such a misleading claim.

The thinking goes something like this. The Social Security Trust has invested in special Treasury bonds, those bonds pay interest and eventually are redeemed for cash. Because the Treasury does not have the cash to pay interest or redeem the bonds, it borrows more money hence higher deficits.

All that is quite absurd.
If the Social Security Trust did not buy Treasury bonds, someone else would have to.
If you bought a Treasury bond, received interest and redeemed your bond in the future, have you contributed to the deficit?
What about China and other holders of federal debt?

Some anti-Social Security thinkers carry this further by assuming that if and when the Social Security trust is depleted, to keep benefits whole the government will have to infuse cash – through deficit spending – currently illegal and of course, assuming Congress takes no action over the next several years to make Social Security solvent.

What contributes to the federal deficit is spending in excess of revenue!


  1. Agree. What contributes to the deficit is spending in excess of revenue. And, that is what we have – you just have to look at the unified budget.

    See Chart 1:

    Chart 1 shows trust fund total income exceeding trust fund expenditures from 1984 through 2019, generating annual surpluses. Beginning in 2020, total income is projected to be less than expenditures, generating annual DEFICITS (shown as negative surpluses). (Emphasis added by BenefitJack)

    The point at which the surplus changes to a deficit in 2019–2020 corresponds with the nominal-dollar peak in reserves … An annual deficit means only that the trust funds are redeeming their assets, selling off/redeeming Treasury securities. There is no borrowing and there is no debt. …

    “… Because “federal budget deficit” is an ambiguous term, discussing the effect of Social Security on the budget deficit requires special care. … OASDI is said to be off-budget … (So) OASDI does not contribute to the annual budget deficit. … (However, true presentations of the federal budget) focus on the consolidated (UNIFIED) budget total, which subtracts the OASDI surplus from the general account deficit. Under this concept, the OASDI surplus is reducing the consolidated budget annual deficit and, under current projections, will continue to do so until 2020. After 2020, an OASDI deficit is projected to emerge THAT WILL ADD TO THE CONSOLIDATED BUDGET ANNUAL DEFICIT, EVEN THOUGH IT DOES NOT AFFECT THE ON-BUDGET ANNUAL DEFICIT. …”(EMPHASIS ADDED BY BENEFITJACK)

    So, when looking at the unified budget, when there isn’t sufficient revenue to pay all current expenses AND redeem treasury securities from the Social Security and Medicare Trust funds, you get … DEFICITS … right? The Treasury has to borrow money from somewhere to come up with the cash to pay that portion of the benefits that are not funded by FICA or other sources of income to the trust.


  2. The Social Security program is currently not in balance with tax receipts equaling outgo. The bonds in the “trust fund” are being cashed to cover the shortfall. So in that respect Social Security is another creditor of Uncle Sam. Uncle has to borrow to pay those bond holdings to pay SSA in order for SSA to send out checks or checks in the full amount. To solve the problem, Social Security and Medicare need to be self funding on an annual, ongoing basis. Right now that’s not in the cards. So right now Social Security is part of the deficit problem. Plain and simple. China doesn’t figure into it.

    The long term financing problem is how much to collect from a shrinking worker base to pay benefits without borrowing. Then calculate how much has to be extracted from the taxpayers to fund the rest of the government (assuming you can’t run deficits forever). The answer is not pretty and probably will ignite a large backlash. This is just my thinking on things.


    1. Nope, not part of the deficit even though your explanation is right. The deficit is all spending. Are all Americans who invest in any kind of bond part of the deficit problem? Nope


      1. Americans that buy US bonds, which I am one, are enablers. We enable our government to spend. The best we can hope is for our government to reduce spending enough to reduce our deficit to zero. Until that happens our national debt will continue to grow.

        Liked by 1 person

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