Social Security: Things You Need to Know

Today’s Silly Little Question: Which government program is so flush it holds more than three years of spending commitments in reserve?

Answer: Social Security.

Yes, you read that right. Social Security.

The 2019 report from the trustees tells us the program closed 2018 with 3.3 years of spending, about $2.8 trillion, in the fabled trust fund. As years go, it was an unhappy first: The program spent $22.4 billion more than it received in revenue.

It was the first deficit year since 1983.

Building the trust fund

That was also the year of the Greenspan Commission on Social Security and the year things were changed so that workers would be paying more in employment taxes than the program spent, year after year, for decades.

As a result, the trust fund grew from having less than two months of spending in reserve in 1983 to having over three years in reserve. The reserves peaked at 4.02 years in 2011 and now number 3.3.

Indeed, the long history of the program is all about surplus. In the 81 years between 1937 and 2018, the program ran a surplus in all but 15. In those years, the losses were tiny. The surpluses in the other years, however, were huge.

That’s how the $2.8 trillion trust fund was built.

The treasure house of the off-budget

If you were working in the post-reform period — 1983 to present — it was built on our hard-working backs.  That fund is the treasure house of the “off budget,” the special part of the federal budget reserved for programs that are supposed to be self-financing.

No one can say that Social Security hasn’t been responsibly run.

Unfortunately, the same can’t be said for the rest of our government, usually measured in the “on budget.” That includes the long list of federal departments from Agriculture to Veterans Affairs, plus the judicial and executive branches, and interest on the federal debt.

The Dr. Jekyll and Mr. Hyde of federal finance

On that side of the federal budget, the surpluses and losses are essentially reversed. Seven years of surplus, all minor. And 74 years of deficits, mostly huge. Think of the off budget as Dr. Jekyll and the on budget as Mr. Hyde. One is thoughtful and kind. The other is a monster, a monster that will become wildly high as the coronavirus year rolls on.

Here are a few measures of how big a monster the on-budget deficit is.

Measuring the monster

In 2018 the on budget had $2.475 trillion in revenue. But our friends in Washington spent $3.36 trillion, running a deficit of $785.3 billion. Another way to look at this is that our elected miscreants spent $1.36 for every dollar they had in revenue. They did this in a boom year of full employment.

In 2019 they continued: They spent $1.39 for every dollar of revenue.

And in the first three months of the current fiscal year, according to the President’s Council of Economic Advisors, the overspending blossomed to $1.59 for every dollar of revenue. Before the coronvirus.

Here’s still another way to measure the horror of Mr. Hyde. According to the Social Security trustees’ report, the cumulative losses expected for Social Security from 2020 to 2028 – That’s the next two presidential election cycles — will amount to 4.45 percent of gross domestic product, all covered by assets in the existing trust fund.

Meanwhile, the on budget deficit for fiscal 2019 amounted to 4.7 percent of gross domestic product.

For Social Security, those eight years of expected losses, all covered by assets, are less than a single year of deficit in the on budget.

So whatever difficulties we face in the near future the big problem isn’t Social Security.  It’s everything else.

There is a reason I’m telling you this.

We’re having an election in November. In it, we will decide between a government run by spend-thrift Republicans or a government run by spend-thrift Democrats.

The big difference between our two witless parties is who benefits from their spending. And it doesn’t matter whether they are spending money they have (our taxes) or money they don’t have (government borrowing).

Whichever party wins, we can be sure of one thing. They will start talking about “entitlements” – that’s the demeaning word used to describe the benefits you and I have earned and overpaid for since 1983.

The solution Republicans favor, already proposed many times, will be to cut future benefits in weaselly, technical ways that few understand. The solution Democrats favor is to treat Social Security as though it was the returned prodigal son and shower it with new benefits that require new taxes.

My suggestion: Red and Blue, tell this gathering of cretins to keep their hands off Social Security. Tell them Social Security is off the table until they’ve balanced the on budget.

Related columns:

Scott Burns, “Senator McConnell: Looking for Cash in all the Wrong Places,” 10/21/2018  https://scottburns.com/senator-mcconnell-looking-for-cash-in-all-the-wrong-places/

Scott Burns, “Social Security Reform: If You’re Under 50, Watch Out,” 1/1/2017 https://scottburns.com/social-security-reform-if-youre-under-50-watch-out/

Scott Burns, “Lower Wage Workers Also Likely To Lose In Social Security Reform,” 1/8/2017  https://scottburns.com/lower-wage-workers-also-likely-to-lose-in-social-security-reform/

Sources and References:

WhiteHouse.gov annual budget of the United States   Table 1.2 – SUMMARY OF RECEIPTS, OUTLAYS, AND SURPLUSES OR DEFICITS ( – ) AS PERCENTAGES OF GDP: 1930 – 2025   https://www.whitehouse.gov/wp-content/uploads/2020/02/hist_fy21.pdf

2018 Social Security Trustees Report, Table VI.A1.—Operations of the OASI Trust Fund, Calendar Years 1937-2018 https://www.ssa.gov/OACT/TR/2019/VI_A_cyoper_hist.html#282924

2018 Social Security Trustees Report, Table VI.G4. — OASDI and HI Annual and Summarized Income, Cost, and Balance as a Percentage of GDP, Calendar Years 2019-2095 https://www.ssa.gov/OACT/TR/2019/VI_G2_OASDHI_GDP.html#200732

This information is distributed for education purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service.

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(c) Scott Burns, 2020