$3.0
Social Security Does Not Add
A Single Penny to the Federal Debt
$2.5
$1.4 Trillion
additional
debt
$Trillions
$2.0
$1.5
$68 Billion
Surplus
$1.0
$0.5
$0.0
FY 2011 Income
FY 2011 Benefits and
Related Expenses
Social Security Trust Funds
(Old Age, Survivors, and Disability)
FY 2011 Revenue
FY 2011 Outlays
Federal Government's General Fund
EXPLANATORY NOTE:
The federal government will reach the limit on federal debt, or debt limit, in a matter of months. Cutting Social Security’s expenditures or increasing
its income does not reduce the United States’ debt subject to that limit. This sharply differs from cuts to agricultural subsidies, defense, or other
expenditures from the government’s general fund.
If a program paid for from general-fund revenue were cut by $100 billion and nothing else changed, the federal government’s borrowing needs
would go down by $100 billion. As a consequence, the federal debt would also go down (or more realistically, given the current large deficits, would
go up less than it would have, without the cut). If the savings from that hypothetical cut were offset dollar-for-dollar by a cut in income taxes or an
increase in other expenditures funded from general revenues, the federal debt subject to limit would be unchanged.
In stark contrast, if Social Security benefits were cut by $100 billion, the federal debt subject to limit or total debt would remain unchanged. If the
$100 billion savings from cutting Social Security benefits were offset dollar-for-dollar by a cut in income taxes or an increase in general-revenue
spending, the total federal debt would increase!
For those who are used to thinking about Social Security as just another spending program and about Social Security contributions as just another
tax, the relationship between Social Security and the federal debt may be counterintuitive. Nevertheless, the only way to reduce the amount of
federal debt Treasury issues is to reduce the expenditures of the government’s general fund or increase its income.
The federal debt is a compilation of all annual deficits minus all annual surpluses. Consequently, Social Security does not add to the federal debt or
deficit. Some economists loosely use the term “deficit” to refer to the difference between all the expenditures of the United States minus all of the
revenue collected from outside the government. While that may be useful for macroeconomic analysis, it does not change the facts described above.
To seek to clarify these facts, federal law unambiguously states that Social Security “shall not be counted…for purposes of - (1) the budget of the
United States Government as submitted by the President, [or] (2) the congressional budget….” Pub. L. 101-508, title XIII, Sec. 13301(a), Nov. 5, 1990,
104 Stat. 1388-623. In another attempt to clarify the facts, 276 academics and other Social Security and budget experts have sought, through a
signed letter to the President dated April 12, 2011,, to dispel confusion about this often misunderstood point. The letter is available at
http://strengthensocialsecurity.org/letter-of-experts-opposed-to-cuts-in-social-security-benefits
The General Fund revenues, outlays and deficit can be found in The President’s Budget, Fiscal Year 2013, Historical Table 2.4, available at
http://www.whitehouse.gov/omb/budget. The Social Security Trust Fund income, expenditures, and surplus are from The 2012 Annual Report of the
Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, Table VI.C3, available at
http://ssa.gov/oact/TR/2012/tr2012.pdf. (Because of the temporary nature of the so-called payroll tax holiday, the chart does not differentiate the
general revenue that was transferred to compensate for the revenue lost as the result of the temporary reduction of employee contributions from
6.2% of covered wages to 4.2%. For simplicity and clarity, the chart simply includes the transferred funds as part of the FICA contributions the funds
replace.)