Q & A
Ask Rusty – About Repaying Social Security Money Taken by Politicians
Dear Rusty: It is common knowledge that over the decades politicians have taken billions if not trillions of dollars out of the Social Security fund to finance other government programs. This information is never published or addressed and having the government repay this money back to SS is never discussed, as it seems to be the most logical solution. When the SS program is financially viable again, future changes to the program can be discussed in a more meaningful way. Signed: Informed Senior
Dear Informed: I’m afraid that what you refer to as “common knowledge” is actually a common myth, pervasive on social media but nevertheless not accurate. Here at the AMAC Foundation we have thoroughly researched this charge and reality is that every dollar ever contributed to Social Security since the program’s beginning has been used only to pay benefits to beneficiaries, or to pay for the cost of running the Social Security Administration (administrative costs are about 1%). Any surplus revenue exceeding program cost was deposited into the Social Security Trust Fund as “special issue government bonds” which pay interest (at 2.2% for 2019). As of the end of 2019 there were nearly $2.9 trillion in assets held in Social Security’s Trust Funds, and none of those assets have ever been used for any purpose other than Social Security.
Some of the myths you may have heard include:
- That President Kennedy used SS funds to pay for the Peace Corp.
- That President Reagan used SS funds to pay for his Strategic Defense Initiative
- That President Johnson used SS funds to pay for the war in Viet Nam
None of these are true, but the one which gains the most visibility is the last one. And that comes from an accounting gimmick that President Johnson used back in the 1960s to make the Federal debt look less than it was. When Johnson realized the Federal balance sheet didn’t reflect assets held in the Social Security Trust Funds, he arranged for that balance sheet to reflect SS reserves as a Federal asset, which masked the size of Federal debt. But no Social Security money was ever taken out of the Trust Funds and, indeed, this accounting “gimmick” was reversed in the 1980s so that Social Security’s reserves no longer partially offset the Federal debt in the Government’s financial reporting.
I know how pervasive these allegations are, and I also know that some Americans will never be convinced that politicians have not accessed, and cannot access, Social Security’s money. But by law, Social Security’s assets can be used only for Social Security, and nothing else.
Some say that the assets in the Trust Funds are merely IOUs and that the actual money has been used by politicians. The Trust Funds assets are interest-bearing investment instruments which can be redeemed on demand by the Social Security Administration, as needed to pay SS program costs. Those “special issue government bonds” are backed by the “full faith and credit” of the United States Government which, in investment circles, is viewed as primarily risk-free. If they are “IOUs,” it is in the same sense that the assets in a stock and bond portfolio are IOUs.
Social Security’s current financial issue stems from steadily increasing life expectancies and the declining ratio of workers to beneficiaries. People are now collecting Social Security benefits for decades instead of a few years, and the number of beneficiaries is steadily increasing (about 64 million today). Simultaneously, there are now only 2.8 workers per SS beneficiary compared to, for example, 1960 when there were 5.1 workers for every beneficiary. Both these realities have resulted in the need to withdraw assets from the Trust Funds to fully pay benefit obligations. And, according to the Social Security Trustees, those Trust Fund reserves will be depleted in the early 2030s, resulting in an across the board cut in benefits – unless Congress acts soon to restore Social Security to financial solvency.
This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (amacfoundation.org/programs/social-security-advisory) or email us at ssadvisor@amacfoundation.org.
Why then, are there printed stories, by supposed experts, that the SS money the government borrowed makes enough interest that it actually helps the SS fund.
Steve:
Thank you for your comment. I haven’t seen the “printed stories” you mention, so if you can point me to a source, I’d like to read them. In the meantime, I offer that the interest on the special interest Treasury bonds held in the trust funds is a substantial part of the Social Security program’s revenue stream–$67 billion in 2023–although that revenue portion will steadily decline in future years as the program approaches insolvency. So, the interest “actually helps the SS fund” but the offset is only in the 5% range.
Thanks again for your comment. We sincerely appreciate hearing from our readers and their questions on Social Security.
Gerry Hafer, Social Security Advisor
AMAC Foundation, Inc.
CONFIDENTIALITY NOTICE: The contents of this message, including any attachments, are confidential and are intended solely for the use of the person or entity to whom the message was addressed. If you are not the intended recipient of this message, please be advised that any dissemination, distribution, forwarding, printing, copying, or use of the contents of this message, and any attached documentation, is strictly prohibited. If you received this message in error, please notify the sender. Please also permanently delete all copies of the original message and any attached documentation. The opinions and interpretations expressed in this message are the viewpoints of the message’s author, a trained advisor accredited under the National Social Security Advisors program of the National Social Security Association, LLC (NSSA). The author, the NSSA, and the AMAC Foundation are not affiliated with or endorsed by the United States Government, the Social Security Administration, or any other state agency.
If what you say was true the funds diverted from SS to The Green deal would never have happened. It is true that funds were diverted. Maybe you just can’t seem to find the evidence. Very convenient.
Jeff:
Thanks for your comments! We appreciate readers taking the time to send us their thoughts. Your comment on the “evidence” related to diversion of funds touches on an area that, as pointed out in the “Ask Rusty” post you cited, we’ve researched extensively. Let me offer some commentary that will help put our position in perspective.
First, let me explain how money flows into and out of the Social Security system. When workers and employers pay FICA tax, the funds withheld via their payroll systems are forwarded to the U.S. Treasury, where they are immediately (by law) converted into special interest Treasury bonds. The actual cash, of course, goes in the U.S. general treasury. The special interest bonds are forwarded to, and held by, Social Security awaiting redemption to pay scheduled benefits. This happens throughout the month as benefits become due. Through the years and up to 2021, the Social Security program’s revenue has exceeded the cost of the program’s operating costs (benefits and administrative costs), leading to an accumulation of reserves (in the form of bonds) in the program. This reserve accumulation had reached nearly $3 trillion by the end of 2020. The details associated with the bonds held in reserve are auditable and reported annually to Congress via the Social Security Trustees Reports.
As part of our on-going research, our staff at the AMAC Foundation’s Social Security Advisory Service has traced the movement of funds (in the form of treasury bonds) into and out of the program from inception to current day, using information provided to Congress by SSA officials. We do this to dispel the popular myth that “the money has been stolen,” an assertion that we conclude to be not factual. With respect to “evidence” of fund diversion, our research shows that every dollar ever contributed to Social Security has been accounted for (either as benefits paid or held in trust fund reserve) and has never been used for any purpose other than that described in the Social Security Act.
Given the facts as explained above, we can only say that the “The Green deal” you mentioned was funded via the U.S. Treasury rather than by Social Security funds. Again, the evidence we use to make this claim is in the certified accounting records of the Social Security Administration records as reported to Congress and the President annually.
We know that this is a murky area, and we welcome the opportunity to provide explanations on how government funding works with respect to Social Security. If you’d like to discuss this issue further, please feel free to contact me at the AMAC Foundation (888-750-2622).
Gerry Hafer, Social Security Advisor
AMAC Foundation
CONFIDENTIALITY NOTICE: The contents of this message, including any attachments, are confidential and are intended solely for the use of the person or entity to whom the message was addressed. If you are not the intended recipient of this message, please be advised that any dissemination, distribution, forwarding, printing, copying, or use of the contents of this message, and any attached documentation, is strictly prohibited. If you received this message in error, please notify the sender. Please also permanently delete all copies of the original message and any attached documentation. The opinions and interpretations expressed in this message are the viewpoints of the message’s author, a trained advisor accredited under the National Social Security Advisors program of the National Social Security Association, LLC (NSSA). The author, the NSSA, and the AMAC Foundation are not affiliated with or endorsed by the United States Government, the Social Security Administration, or any other state agency.