Sen. Richard Durbin says that “Social Security does not add one penny to our debt.” That’s false. It was wrong 21 months ago, when Durbin said it once before, and it’s even more off the mark now.
The federal government for the first time in its history had to borrow money in 2010 to cover Social Security benefits to retired and disabled workers — a trend that worsened in 2011 and will not change at any point in the future unless changes are made.
Durbin made his remarks about Social Security on ABC’s “This Week.” The Illinois Democrat argued that Social Security should not be part of the year-end negotiations between Congress and President Obama to raise revenues and cut spending in order to avoid the so-called fiscal cliff.
Durbin, Nov. 25: Social Security does not add one penny to our debt — not a penny. It’s a separate funded operation, and we can do things that I believe we should now, smaller things, played out over the long term that gives it solvency.
It’s true that Social Security is “a separate funded operation,” primarily through payroll taxes and income taxes on benefits. But tax revenues no longer cover the cost of Social Security benefits. As a result, Social Security is adding to the debt.
The combined shortfall for Old-Aged and Survivors and Disability Insurance (OASDI) trust funds was $36.8 billion (page 453, Table 28-4) in 2010. It rose to $48 billion (page 465 Table 28-4) in 2011. Those figures are from the White House’s Office of Management and Budget.
The nonpartisan Congressional Budget Office in a January 2012 report estimated that the 2012 shortfall will be $59 billion — rising to $76 billion in 2013, $86 billion in 2014 and $86 billion again in 2015. The CBO does not project beyond 2015 because “CBO projects the DI trust fund will be exhausted during fiscal year 2016.”
CBO projected a total shortfall of $355 billion over five years, from January 2011 through 2015. That’s more than double what CBO estimated just a year ago, when the budget office projected the cumulative shortfall from 2011 through 2015 would be $164 billion.
The OMB and CBO figures represent the difference between annual revenues and expenses, and do not include interest payments. Prior to 2010, when Social Security was running a surplus, excess Social Security revenues were turned over to the Treasury Department, which spent the money on other government operations.
Technically, the Social Security trust funds have about $2.7 trillion in “special issues” of the U.S. Treasury, and the funds earn interest. Social Security can redeem these “special issues” to finance its operations, as it has done since 2010. But when it does, the government needs to borrow the money.
In the summary of its 2012 annual report, the Social Security board of trustees said: “Social Security’s expenditures exceeded non-interest income in 2010 and 2011, the first such occurrences since 1983, and the Trustees estimate that these expenditures will remain greater than non-interest income throughout the 75-year projection period.”
It’s true that the federal government has had to borrow a relatively small amount to fund Social Security’s operations. The $36.8 billion shortfall in 2010 was a fraction of the government’s total $1.37 trillion deficit that year. But that amount is rising each year, and will continue to rise — until the money in the trust funds, principal and interest, is exhausted.
When will that be? The CBO explains in its most recent report, “The Long-Term Projections for Social Security“:
CBO, October 2012: CBO projects that under current law, the DI trust fund will be exhausted in fiscal year 2016 and the OASI trust fund will be exhausted in 2038.
That’s unlikely to happen. The Social Security Administration says it expects changes to Social Security “to restore long-term solvency, making it unlikely that the trust funds’ securities will need to be redeemed on a large scale prior to maturity.”
— Eugene Kiely