Social Security and the Federal Debt: An Editorial Opinion - commondreams.org
Much has been written about Social Security’s trajectory toward insolvency, along with many accounts of pathways to be explored to head off the catastrophe awaiting America’s seniors. Unfortunately, many of the news accounts have complicated the overall issue by insinuating that Social Security, in addition to its own funding problems, is a primary contributor to the federal debt crisis also prominent in today’s headlines. This complication, unfortunately, is a stumbling block of sorts as legislators try to determine the appropriate adjustments to save Social Security for current and future beneficiaries.
The simple and easily verifiable fact is that Social Security has been a self-funded, pay-as-you-go benefit system since its inception over eight decades ago. Through the years, 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 into 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.
An OpEd piece posted on commondreams.org by Frederic H. Decker Ph.D. addresses this mischaracterization of Social Security, noting that “…spending attributed to Social Security and other social programs is a recurrent theme during this debt-ceiling news cycle.” His article points out that many accounts of federal spending unfortunately portray general funding as the source of Social Security benefits. His argument is summed in this passage, “Essentially, the Social Security program has not contributed in any markedly way to the totality of deficits and associated debt. Rather, paradoxically, the program has historically loaned the government monies to cover the debt and, thereby, help pay for other federal programs.”
The Decker editorial, which you can read in full here, also weighs in on the much-discussed option of raising the full retirement age to 70 as a step toward restoring solvency. In his view, such a move would constitute a cut in benefits despite the statistical inferences associated with extended longevity. This is another area of the debate currently swirling in the area of Social Security reform, with one side of the debate focused on income inequality and the other focused on the longer life spans of future generations of beneficiaries. Decker’s editorial is interesting in its clarification of the debt issue, but unfortunately offers no suggestions on what to do about the looming insolvency problem.
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