The Social Security trust funds are widely misunderstood. Sometimes called an accounting gimmick, surplus funds, and frequently referred to as being stolen by Congress. Here is what they are.
The Social Security trust funds are financial accounts in the U.S. Treasury. There are two separate Social Security trust funds, the Old-Age and Survivors Insurance (OASI) Trust Fund pays retirement and survivors benefits, and the Disability Insurance (DI) Trust Fund pays disability benefits.
Social Security taxes and other income are deposited in these accounts, and Social Security benefits are paid from them. The only purposes for which these trust funds can be used are to pay benefits and program administrative costs.
The Social Security trust funds hold money not needed in the current year to pay benefits and administrative costs and, by law, invest it in special Treasury bonds that are guaranteed by the U.S. Government. A market rate of interest is paid to the trust funds on the bonds they hold, and when those bonds reach maturity or are needed to pay benefits, the Treasury redeems them.
https://www.ssa.gov/news/press/factsheets/WhatAreTheTrust.htm#:~:text=The%20only%20purposes%20for%20which,guaranteed%20by%20the%20U.S.%20Government.
Yes, the trusts are a form of accounting for tax revenue. In this case payroll tax revenue. The same is true for Medicare.
Yes, the trust holds only special Treasury bonds. Just IOUs? In a way, but in the same way pension funds, countries and individuals hold IOUs from the federal government in the form of bonds, etc.
Yes, when the trust bought the Treasury bonds the proceeds were spent on anything the government spends money on – just like any bonds the government sells to any entity, person or country. That’s how deficit spending is financed.
There has never been any change in the way the Social Security program is financed or the way that Social Security payroll taxes are used by the federal government. The Social Security Trust Fund was created in 1939 as part of the Amendments enacted in that year. From its inception, the Trust Fund has always worked the same way. The Social Security Trust Fund has never been “put into the general fund of the government.”
Most likely this question comes from a confusion between the financing of the Social Security program and the way the Social Security Trust Fund is treated in federal budget accounting. Starting in 1969 (due to action by the Johnson Administration in 1968) the transactions to the Trust Fund were included in what is known as the “unified budget.” This means that every function of the federal government is included in a single budget. This is sometimes described by saying that the Social Security Trust Funds are “on-budget.” This budget treatment of the Social Security Trust Fund continued until 1990 when the Trust Funds were again taken “off-budget.” This means only that they are shown as a separate account in the federal budget. But whether the Trust Funds are “on-budget” or “off-budget” is primarily a question of accounting practices–it has no effect on the actual operations of the Trust Fund itself.
https://www.ssa.gov/history/InternetMyths2.html#:~:text=The%20Social%20Security%20Trust%20Fund,general%20fund%20of%20the%20government.%22
By the way, while the Trust holds about $3 trillion in bonds, the accrued liability for Social Security is over $22 trillion
QUINNSCOMMENTARY 
The trust fund serves as a smokescreen for the costs of social security. Cash in and cash out is what matters. The reason there are digits in the “trust fund” balance is because it was a cash cow for years until the outgo outran the income. You can’t pretend that everything is hunky dory because there are digits in the treasury’s books. That money was spent and over the years and now more borrowing must be done to take care of today and tomorrow. How long can the charge card be used? I don’t know. I have said before it is above my pay grade to decide and the clowns in charge don’t worry about it so I’m not going to lose sleep over it.
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The money was not spent by the trust. It was invested in bonds. Yes, it is government accounting, but the trust is credited with interest. The way the money was spent is no different than the proceeds of any bond sales. Nothing to do with SS. The trust has assets simply because incoming payroll taxes used to exceed program spending. If there were no bonds to be redeemed by the trust today, full benefits could not be paid.
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I guess where we differ is in the assumption that if there were no bonds that full benefits could not be made now. I disagree with that, the full benefits would be paid even if there were no trust fund. If the government (taxpayers) can pay the interest on the bonds, the necessary shortfall could be paid directly to SSA without going through the treasury bond scheme. My position is that in 2032 or 2033 when the trust fund busts out, the benefits will be paid as normal. If the adjustments are made prior to then we will continue with the trust fund idea.
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That’s not an assumption but a fact. The interest is used for benefits. If you want to change the entire system with no separate accounting for payroll taxes and other income, sure just throw SS in the pot with other spending and pay from general revenue, but there were good reasons it was set up this way and if Congress had done it’s job over the last two decades, there would not be an issue.
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“Just IOUs? In a way, but in the same way pension funds, countries and individuals hold IOUs from the federal government in the form of bonds, etc.”
Yes, IOUs, but IOUs in EVERY way!
It would be different if our federal government had a surplus, was running an annual surplus, wasn’t already $31+ Trillion in debt, and in a situation where the last two idiots and the current idiot President was proposing budgets with annual deficits for every year of the 10 year budget window. Not to be outdone, the current idiot President has proposed $2+ Trillion deficits for as far as the eye can see and the CBO cares to predict. And, he and our Treasury Secretary recently proposed even more spending.
Ask yourself. When the bondholders cash those government bonds in (at maturity, etc.), when the government redeems that $3 Trillion in bonds, where will the money come from? Will they raise the taxes you and I pay? Will they print money and devalue our other savings? Will they issue new bonds (increase the deficit/Debt)? Will they cut spending on defense and other constitutionally mandated requirements of government in order to even more p*ss money down the drain on the Green New Deal, DEI, etc.
Nothing New!
These idiots have known, almost since 1983, that the “fix” they implemented wasn’t a “fix” but a delay. Consider:
On April 20, 1983, as he signed the Social Security Amendments Act of 1983 into law, President Ronald Reagan stated, in part: “We promised that we would protect the financial integrity of Social Security. We have. Time and again, benefits were increased far beyond the taxes … that were supposed to support them. The changes in this legislation will allow Social Security to age as gracefully as all of us hope to do ourselves, without becoming an overwhelming burden on generations still to come.“
Ten years later: November 5, 1993: President Bill Clinton, by Executive Order #12878, created the Bipartisan Commission on Entitlement Reform (the Danforth Commission) to evaluate entitlement programs, specifically Social Security and Medicare. The Commission never reached consensus and couldn’t get all members to agree on even an Interim Report. Subsets of the commission members made their own proposals. None gained any traction, nor action.
Twelve years later: February 5, 2005: President George W. Bush made a reform recommendation to add personal accounts and change the COLA. These proposals triggered great criticism and no action was taken.
Five years later: In 2010: President Barack Obama created the bipartisan National Commission on Fiscal Responsibility and Reform (often called Simpson-Bowles) to recommend fiscal reform including recommendations regarding Social Security. The Commission first met on April 27, 2010. Despite widespread popular support, the report failed to get enough support to send it to Congress for approval.
Six years later: June 1, 2016: President Barack Obama reminded us that Social Security’s finances needed strengthening. “We should be strengthening Social Security. It’s time we finally made Social Security more generous and increased its benefits so that today’s retirees and future generations get the dignified retirement that they’ve earned.” No proposal was ever made.
Two years later: October 17, 2018: President Donald Trump was quoted by the Associated Press as stating: “I’m not touching Social Security.”
Five years later, last week: March 20, 2023: President Biden: “I will protect Social Security and Medicare, without any change.”
Are you feeling secure? Are you comfortable dumping this on your children and grand children?
And, even if you are, why are you so confident your children and grandchildren won’t someday renege on the promises Congress and our idiot Presidents have made over the past 90 years but have failed to properly fund?
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What percentage of the sum total of payroll taxes and self-employment taxes are put into OASI vs. DI trust funds.
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I believe the split is as follows:
OAS = 5.3% employee, 5.3% employer (10.6% SECA); DI = .9% employee,, .9% employer (1.8% SECA).
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