Social Security and National Debt
According to Senator Jeanne Shaheen, the social security benefits program should remain untouched while cutting off funds because it is self-sustaining and therefore, does not add to the national debt. This belief is not only limited to Senator Shaheen but also a number of people and magazines including PolitiFact, which stated in August 2011 that the debt crisis had nothing to do with social security in particular. The people at the Senator’s office explained that the program is self-sustaining in the sense that it is funded majorly by payroll taxes.
From 1984 to 2009, the program has been able to collect a large amount of assets with the current account balance equaling to 2.7 trillion dollars. Both the trust funds (old people and disabled people) have a certain amount of interest payment that is collected over a period of time. This amount, in fact, plays a role in reducing the deficit rather than increasing it as stated by Paul Van de Water, an analyst in Center on Band Policy Priorities. The SSA also confirms these facts by stating statistics of surplus from 2009 to 2011.
However, there is also another side of the story; some analysts are of the opinion that the social security interest payments and surplus is nothing more than shuffling of government accounts. The social security accounts are not actually saving accounts that are closed; instead, all the interest earned from these accounts actually has to be invested in interest-bearing government bonds. These are then invested in various government projects and activities including debt repayment and spending etc.
In this way, every time social security is collecting interest payments, it is actually shifting the money from one government account to another as stated by Howard Gleckman who is an analyst working in Tax Policy Center. If interest payments are considered, it can be observed that social security is actually running a deficit itself and forces the government to borrow further in order to cover the differences. All these calculations are nothing more than accounting fiction that makes the social security more solvent, when in reality you have just shuffled between government accounts according to Gleckman.
The deficit of cash excluding interest payments was around 49 billion dollars in 2012 according to SSA annual report which is expected to increase to 60 billion dollars over the next years and by 2033, the SSA will not even have enough money to cater to the people in general. The annual report states that over time the amount of covered workers will become higher than the trustees and therefore, it will be illogical to say that the social security is not a cause of national debt. What is needed is to develop a system that reduces the gap and at the same time improves the program according to Kotniff of Boston University.
Overall, social security may seem like a closed, self-sufficient program but just like any other program, it is linked to the Treasury bond in which the collected money is supposed to be invested in government interest-bearing programs. And so it is false to say that social security is not playing its part in increasing the government deficit.