Ask Rusty – About Repaying Social Security Money Taken by Politicians
Dear Rusty: It is common knowledge that over the decades politicians have taken billions if not trillions of dollars out of the Social Security fund to finance other government programs. This information is never published or addressed, and having the government repay this money back to SS is never discussed, as it seems to be the most logical solution. When the SS program is financially viable again, future changes to the program can be discussed in a more meaningful way. Signed: Informed Senior
Dear Informed: I’m afraid that what you refer to as “common knowledge” is actually a common myth, pervasive on social media but nevertheless not accurate. Here at the AMAC Foundation, we have thoroughly researched this charge and reality is that every dollar ever contributed to Social Security since the program’s beginning has been used only to pay benefits to beneficiaries, or to pay for the cost of running the Social Security Administration (administrative costs are about 1%). Any surplus revenue exceeding program cost was deposited into the Social Security Trust Fund as “special issue government bonds” which pay interest (at 2.2% for 2019). As of the end of 2019, there were nearly $2.9 trillion in assets held in Social Security’s Trust Funds, and none of those assets have ever been used for any purpose other than Social Security.
Some of the myths you may have heard include:
None of these statements is true, but the one that gains the most visibility is the second one. And that comes from an accounting gimmick that President Johnson used back in the 1960s to make the federal debt look less than it was. When Johnson realized the federal balance sheet didn’t reflect assets held in the Social Security Trust Funds, he arranged for that balance sheet to reflect SS reserves as a federal asset, which masked the size of federal debt. But no Social Security money was ever taken out of the trust funds and, indeed, this accounting “gimmick” was reversed in the 1980s so that Social Security’s reserves no longer partially offset the federal debt in the government’s financial reporting.
I know how pervasive these allegations are, and I also know that some Americans will never be convinced that politicians have not accessed, and cannot access, Social Security’s money. But by law, Social Security’s assets can be used only for Social Security, and nothing else.
Some say that the assets in the trust funds are merely IOUs and that the actual money has been used by politicians. The trust funds assets are interest-bearing investment instruments which can be redeemed on demand by the Social Security Administration, as needed to pay SS program costs. Those “special issue government bonds” are backed by the “full faith and credit” of the United States Government which, in investment circles, is viewed as primarily risk-free. If they are “IOUs,” it is in the same sense that the assets in a stock and bond portfolio are IOUs.
Social Security’s current financial issue stems from steadily increasing life expectancies and the declining ratio of workers to beneficiaries. People are now collecting Social Security benefits for decades instead of a few years, and the number of beneficiaries is steadily increasing (about 64 million today). Simultaneously, there are now only 2.8 workers per SS beneficiary compared to, for example, 1960, when there were 5.1 workers for every beneficiary. Both these realities have resulted in the need to withdraw assets from the trust funds to fully pay benefit obligations. And, according to the Social Security Trustees, those trust fund reserves will be depleted in the early 2030s, resulting in an across-the-board cut in benefits — unless Congress acts soon to restore Social Security to financial solvency.