Truth or Lie: Social Security Doesn’t Add to the Debt
Congress, the branch of government that controls the purse strings and that is therefore responsible for the national debt, passed yet another milestone the other day when the debt blew past $22 Trillion. That’s a 14-digit liability that the American taxpayer is on the hook for. What a deal -- members of Congress get to buy your vote with your kids’ money.
In November of 2012 on The Ed Show (mercifully cancelled in 2015), Vermont Senator Bernie Sanders said: “We are not gonna cut Social Security, which, by the way, as Harry Reid just reminded us, has nothing to do with the deficit.”
Well, there’s an opioid epidemic in Vermont (which might explain how a socialist like Sanders could be in the Senate), but there are other left-wing career politicians who say the same thing. So the question is: Is Sanders right? Does Social Security, usually the largest expenditure of the federal government, have nothing to do with the yearly deficits Congress runs and the national debt?
To answer that, look at the numbers: Table 1.1 of the historical tables at the Office of Management and Budget. For those who have neither PDF nor XLS capabilities or who just don’t want to go through the rigmarole, I’ve spliced together some screengrabs of the last page of Table 1.1 and made them into a jpeg for your convenience. Just click on this link and it should load up quickly. Then click on the table to blow it up to full-size. (Right-click and select “Open link in new tab” if you want to “toggle” back and forth between this article and the table.)
Table 1.1 is divided into three sections: Total, On-Budget, and Off-Budget. The On-Budget is discretionary spending, and the Off-Budget is mandatory spending, which is mainly for social programs like Social Security which have their own dedicated taxes, e.g. the payroll tax. The On-Budget is the real budget that Congress is supposed to pass legislation for, while the Off-Budget is not budgeted, it’s automatic spending. Each section is divided into Receipts (i.e. revenue), Outlays (i.e. spending), and Surplus or Deficit (i.e. the difference between revenue and spending). We get the Total figures by adding up the On-Budget and the Off-Budget figures.
If Social Security doesn’t affect the deficit, as Democrats contend, then it also wouldn’t affect any surplus. But from 1998 through 2001, there were four Total surpluses, and only two of them coincided with On-Budget surpluses, which were tiny in comparison with the Off-Budget surpluses. The four Total surpluses came to $559B.
We used most of those surpluses to pay down the debt. Corroboration for that can be found in Table 7.1 of the historical tables, which lists the federal debt at the end of the fiscal year. Table 7.1 shows that the publicly held debt (the real debt) was $3.772T in 1997 and came down to $3.319T in 2001. Over four years, we actually paid down the debt by about $453B.
And most of those four surpluses were due to Off-Budget surpluses, primarily from Social Security. Less than 15.8 percent of the Total surpluses were On-Budget. We paid down the publicly-held debt… with Social Security surpluses.
Now look at the four trillion-dollar deficits Congress ran from 2009 through 2012. Each one of those record-setting deficits would have been even bigger were it not for the Off-Budget surpluses. For example, the $1.412T deficit in 2009 would have been $1.549T, almost $137B higher, which, as you can see over on the right, is the size of the Off-Budget surplus. The feds call this the “unified budget,” and it’s no way to run a railroad.
For the nine years from 1976 through 1984, the Off-Budget was always in deficit. When we look at the Total deficits for those year (the third column from the left), we see that they were always larger because of the Off-Budget deficits being run by the mandatory programs, primarily by Social Security.
The run of Off-Budget deficits ended with legislation in 1983 that raised the tax rate on the Social Security portion of the payroll tax, and in 1985 the Off-Budget dramatically reversed course and began to run hefty surpluses, which continued through 2017. The largest of the 1976-84 Off-Budget deficits was the -$7B in 1982 and the largest surplus since then was the $186B in 2006.
So doesn’t that all pretty well disprove the contention that Social Security doesn’t add to the deficit? Even so, that contention seems to have been a Democratic talking point back in 2012. The relevant part of this video takes 10 seconds:
In 2011, the Washington Post ran “Social Security and its role in the nation’s debt” by Glenn Kessler, who took Rep. Xavier Becerra to task for this: “Social Security has never contributed a dime to the nation’s $14.3 trillion debt… not one penny to our federal budget deficit this year or any year in our nation’s history.” In his Pinocchio Test, Kessler gave Becerra the rating of “true but false.”
Kessler was too kind to Becerra. Becerra deserved at least two Pinocchios. You see, Social Security has been “cash-flow negative” since 2010. That means that revenue from the payroll tax is insufficient to pay for the program’s benefits.
Democrats tell us that the difference is made up by tapping into the Social Security “trust fund.” But the so-called trust fund is an accounting gimmick; it doesn’t exist as an asset that can be sold. If Congress is running a Total deficit, then in order to pay back the Social Security surpluses that went into to the general fund and which were promptly spent, what must happen is this: Congress must borrow more money and go further into debt. Someone needs to tell Bernie.
Since 2006, the Off-Budget surpluses have gone down sharply, reaching a low of $27B in 2015. Table 1.1 shows that Off-Budget deficits are estimated to soon return, which will make the Total deficits higher. Look in the lower-right corner and you’ll see an estimate of -$72B for 2023. But what assumptions were used in making these estimates? If a recession wasn’t factored in, then the shortfall in 2023 could be far worse. Social Security is in need of another reform, and right now. Democrats can no longer hide behind their fictitious “trust fund.”
Why do the Democrats persist in lying about Social Security? Perhaps it’s because the system they set up in 1968, the unified budget, is a lie. Congress will never be able to get the budget under control (if that’s what they want to do) unless members start telling the truth about the real nature of federal finance.
Bernie Sanders has just re-entered the fray and is again running for president. He should be asked if he still thinks that Social Security “has nothing to do with the deficit” and doesn’t affect the debt. Actually, every 2020 candidate for president should be asked that.
Jon N. Hall of ULTRACON OPINION is a programmer from Kansas City.