The future of the Social Security system: Part four

Is the problem that the trust fund was raided?

Trust Fund Projections, 1990-2090 (Present Value, Billions of 2015 Dollars). Source: Social Security Administration, CRFB calculations

Trust Fund Projections, 1990-2090 (Present Value, Billions of 2015 Dollars). Source: Social Security Administration, CRFB calculations

While some believe that Social Security would be fine if we hadn’t “raided the trust fund”, the fact is that The program’s financial shortfall stems primarily from a growing mismatch between benefits paid and incoming revenue.

According to the Operations of the Combined OASI and DI Trust Funds, in Current Dollars,  Calendar Years 1970-2090, in the 1990s and 2000s, Social Security ran $1.3 trillion in primary surpluses, and including interest it has accumulated $2.8 trillion of trust fund assets. Those assets are invested in special United State Treasury bonds and effectively loaned to the rest of government. Many argue that these Social Security surpluses masked deficits in the rest of government and thus allowed policymakers to enact more deficit-financed tax cuts or spending increases. In that sense, it could be argued that Congress and the President “raided the trust fund.” 

However, regardless of how that money was used at the time by the rest of government, the full $2.8 trillion dollars is still owed to the Social Security trust fund under current law and accounted for in this fashion. All measures of Social Security’s long-term imbalances assume the $2.8 trillion is first paid back by the rest of government.

Social Security doesn’t face financial problems because those funds will not be repaid, but because the trust fund is dwarfed by the system’s projected shortfall over time. On a present value basis, the program is projected to spend $13.5 trillion more than it raises in revenue over the next 75 years – far more than the $2.8 trillion held in the trust fund. In other words, policymakers must identify $10.7 trillion, or about 2.7 percent of payroll, to make Social Security solvent even after trust fund revenue is paid back. 

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