This year Social Security will pay out $45 billion more in benefits than it collects in taxes. And this is not the first year Social Security has had an operating deficit. Last year, Social Security paid out $37 billion more in benefits than it collected in taxes. And this year is far from the last that Social Security will run an operating deficit.
Looking forward, the Congressional Budget Office estimates that Social Security will run a more than $600 billion operating deficit over the next ten years. Every year between now and 2021 will see Social Security deficits of between $28 billion and about $120 billion. Unless spending is cut elsewhere, every cent of this $600 billion will have to be paid for through either higher taxes or more debt.
Despite these cold hard facts, Majority Leader Harry Reid told MSNBC last night: “It is not in crisis at this stage. Leave Social Security alone. We have a lot of other places we can look that is in crisis. But Social Security is not.” How can Reid possibly look at program that the CBO says will bleed $600 billion from U.S. taxpayers over the next ten years and not see a crisis? Because of a little myth called the Social Security Trust Fund.
In one sense the Social Security Trust Fund does exist. You can even travel to the sleepy little town of Parkersburg, West Virginia and visit all $2.5 trillion dollars of it. The problem is that the special issue U.S. Treasury bonds inside the nondescript office building where the Trust Fund is kept are not real assets. President Bill Clinton’s OMB noted back in 2000:
These [Trust Fund] balances are available to finance future benefit payments and other trust fund expenditures-but only in a bookkeeping sense. These funds are not set up to be pension funds, like the funds of private pension plans. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury, that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large trust fund balances, therefore, does not, by itself, make it easier for the government to pay benefits. (emphasis added)