The Solvency Dilemma: Should Social Security Become a Borrower?

Bloomberg Businessweek’s Peter Coy, in a post today on, advances an interesting theory: What if the Social Security Administration (SSA) reversed the previous financing approach in which the program invested its surplus in U.S. Treasury special interest bonds, instead issuing its own bonds and in effect borrowing from the U.S. Treasury when the surplus runs out? In Coy’s analysis, “If Social Security borrowed from the Treasury, the Treasury would have to raise the money to lend to Social Security by raising taxes, cutting other spending, or borrowing.” In some respects, it may not be any different from the way this financing works today, becoming a question of who owns, and is backing, the bonds.

As mentioned earlier, it’s an interesting concept. Not ideal perhaps, since the onus remains on the overall economy to come up with the cash to service the bonds, but as Coy points out, “From the Treasury’s viewpoint, there is zero difference between giving cash to Social Security for new bonds it issues and giving cash to Social Security for old Treasury bonds that it redeems.” This theory will be just one of many thrown into the mix as Social Security’s plight worsens in the months and years ahead, as the redemption of Treasury bonds currently held in the trust funds progresses to honor promised benefits.

No matter what approach is taken to address the Social Security solvency issue, time remains critical. Recent analyses of the full depletion date for the program’s trust fund reserves have suggested this point will be reached later this decade rather than 2034 as projected in the 2020 Trustees Report. The accelerated depletion, of course, is a consequence of the COVID-19 pandemic and the subsequent ravaging of the U.S. economy, crises that have brought Social Security’s solvency dilemma into a clearer focus. There are many proposals on the table in Washington to address the situation, one of which is the Association of Mature American Citizens’ (AMAC) Social Security Guarantee, a legislative framework that would ensure the program’s financial viability for generations to come without the need for tax increases. Learn more about this Guarantee via AMAC’s website.

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