Don’t steal Social Security funds with another round of reforms, cut federal spending now.
In recent presidential elections, candidates have discussed reforming entitlement programs like Social Security. Let’s be clear: Social Security will never be bankrupt. But politicians use “it’s going bankrupt” as a scare tactic to get all the spending they really want. (RELATED: BRYAN LEIB: Too Many Politicians Have Ruled The Roost For Decades. Term Limits Can Send Them Packing)
Don’t be fooled — the original 1983 Social Security reform really meant taking money from excess Social Security payroll taxes to fund the rest of the welfare state. If you don’t believe me, ask yourself this question: Why are politicians so eager to “reform” a program that has a 10-year runway before it would have to make any adjustments to benefits?
Social Security does not “go bankrupt.” When the accumulated balance in the trust fund runs out, Social Security essentially reverts to a cash-in/cash-out system. The benefits paid can’t exceed the receipts. So, if the dollars coming into the system cannot meet projected benefit expenses, benefits would be reduced. Keep in mind that past reforms like raising retirement ages or taxing benefits were clearly a benefit reduction for those impacted.
How does extending the life of Social Security forestall addressing the federal leviathan’s spending appetite? For that answer, we need to turn to the Office of Management and Budget’s (OMB) historical Social Security data.
The main trust fund is the first and largest, the Old Age and Survivors Insurance Trust Fund (OASI). It was first funded back in 1937. From 1937 until 1983, this fund brought in $1.312 trillion in income. And it paid out $1.303 trillion, meaning it was slightly cash positive, by $9 billion, over those years.
However, from 1976 to 1983, it went cash negative. It paid out $30.8 billion more than it took in. Hence the 1983 Social Security reforms. The reforms raised the retirement age, increased contribution rates, and started the taxation of some benefits.
From 1984 through 2023, OASI took in about $2.7 trillion more in total cash contributions than it paid out in benefits, according to data from OMB.
This excess cash was used by the U.S. Treasury to cover deficit spending each year, and the cash was replaced with intergovernmental debt. This means that the Treasury gave the OASI Trust Fund about $2.7 trillion in IOUs. These funds owed by the Treasury to Social Security comprise the trust fund balances commonly referred to. So, when you hear about the OASI trust fund “running out in ten years,” these are the funds provided when Social Security contributions don’t cover benefit payments.
Beginning in federal fiscal year 2021, OASI began a string of negative cash flow years. The annual payments to beneficiaries again exceeded the total cash contributions from workers, employers and interest earnings. (Note that fiscal year 2018 was negative, but in fiscal year 19 and 20 reserves increased). This is projected to continue until the entire accumulation of dollars runs out sometime around 2033.
If 10 years seems like a long time from now, given that Congress generally completes its annual budget late, you are not wrong. You see, what the reformers of Social Security want to forestall is not the depletion of the trust fund. They want to have Social Security generate annual positive cash flow for the Treasury so that every other program, like Medicaid, faces less financial pressure for cuts.
How so? Going to the official Social Security website and reviewing the OASI data, we see that the trust fund decreased by about $170 billion from 2020 to 2023, from $2.812 trillion to $2.641 trillion, which is not comparatively large, when the annual federal deficits summed to nearly $9 trillion over those four years.
But instead of contributing excess contributions to the Treasury, the Treasury had to redeem obligations it owed to OASI with cash.
So, when national politicians speak of reforming Social Security (e.g. increasing Social Security contributions and delaying benefits), we now see the game that is being played. Give recipients some small benefit cuts, increase taxes on today’s workers, and scrape off the excess to feed existing programs.
Relying on borrowed funds — including those borrowed from Social Security contributions — to grow the government is one of the reasons the U.S. government faces a debt crisis with federal debt approaching $35 trillion. Let’s take Social Security trust-fund theft off the table. Cut spending in every other program first — because we can’t wait two years, let alone 10 years, to forestall a debt crisis.
Fred Birnbaum is the Director of Legislative Affairs, Idaho Freedom Foundation and Idaho Freedom Action.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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