Social Security Report

Clarifying the Banking Interactions Between the U.S. Treasury and Social Security - myfoxzone.com; verifythis.com

The charge that the political arena has, through the years, “stolen” money from the Social Security program is an enduring piece of folklore that surfaces routinely in social media and in a variety of news accounts. Some sources cite specific situations and mythical narratives of who appropriated the funds and the destination of the diverted money, as in the case of President Kennedy using it to fund the launch of the Peace Corps Act in 1961, President Johnson using it to fund the Vietnam War, and so on. Recently, during the debt ceiling negotiations, the general issue of the integrity of the Social Security trust funds and the potential for disruption of benefit payments surfaced conversationally, indicating that it’s prominently in the minds of many. For this reason, today we share a post from verifythis.com that provides some measure of clarification on this issue.

In summary, the fact-checkers at verifythis.com explain in their post that the federal government does actually borrow money from the Social Security program. The emphasis here is on the term “borrow,” since the Social Security trust funds receive, in place of the tax revenue collected via FICA withholding, special Treasury bonds that are guaranteed by the U.S. government and earn interest. In a myfoxzone.com post by Megan Loe, which you can access here, Mary Johnson, Social Security and Medicare policy analyst for The Senior Citizens League, observes that “Those bonds basically are an IOU from the government to Social Security. In other words, the Social Security trust fund, which is what is authorized to pay benefits, has been loaning money to the U.S. government.” Johnson goes on in the post to explain that equating this borrowing to “stealing” is misinformation. The article further notes that the federal government is required to repay the borrowing funds and has never failed o do so.

The larger question during the most recent debt ceiling crisis is related to the outcome of a U.S. Treasury default, as many feared would happen had a compromise not been reached. As explained on the SSA website, the Social Security trust funds exist as specific accounts held in the U.S. Treasury, and function to “hold money not needed in the current year to pay benefits and administrative costs.” It is a legal requirement that these excess funds through the years were “… invested in interest-bearing securities guaranteed as to interest and principal by the full faith and credit of the U.S. government.” (This is an excerpt from a Social Security Bulletin issued by Stephen C. Goss, Chief Actuary of the Social Security Administration.) It is worthy of note that the U.S. government has never defaulted on its Treasury security obligations, and that the well-regarded National Committee to Preserve Social Security and Medicare (NCPSSM) points out that U.S. Treasury securities are “widely considered by finance industry professionals and foreign governments as the world’s best and safest investment.”

Debt ceiling issues aside, it’s likely the rumor of funds stolen from Social Security will persist in the future, so understanding the fundamentals of Social Security financing is essential.

The link provided above connects readers to the full content of the posted article. The URL (internet address) for this link is valid on the posted date; socialsecurityreport.org cannot guarantee the duration of the link’s validity. Also, the opinions expressed in the referenced article are the viewpoints of the original source and are not explicitly endorsed by AMAC, Inc.; the AMAC Foundation, Inc.; or socialsecurityreport.org.