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The US Treasury Department announced that the debt has increased to 40 Trillion dollars. In the articles explaining the debt, I keep reading about how Social Security payments are adding to the debt. Can someone please explain to me how that is? My understanding is the payments are made from collections of Social Security taxes from current employees and employers, as well as taking money from the Social Security trust fund. So please explain how a self funded program adds to the deficit. I know that some of Medicare payments are made from the general fund.
Some really good thoughts here. I was pondering this topic after reading a WSJ article on the deficit. My conclusion:the typical representation of huge deficits generated from Social Security and Medicare ignores revenue from employers, employees and taxation of SS.
Quick Answer: The government needs to borrow from the open market to repay the money it borrowed from the Trust Fund.
The Government pretends that the money that it owes to the trust fund is not truly a debt in order to reduce what the national debt looks like. If you believe the money it owes to the Social Security trust fund is an actual debt then the net effect of this is zero. It is all an accounting sleight-of-hand.
Also, the federal government is writing IOUs to the trust fund to cover the interest payments. It owes to the trust fund. At some point, these IOUs will need to be repaid, and that will be money borrowed.
All good and mostly accurate comments…as usual. Here’s how I try to explain to folks how Social Security affects the deficit/debt.I hope I’m accurate.
During the first 90 nyears or so more money was coming into the trust fund than going out. Congress said that excess money had to be invested in a special treasury security. Had FICA taxes or other rule changes kept up with the outflow ( money needed to pay benefits), the social security trust would have just kept on buying these treasuries with the excess.The mere purchasing of any treasury security adds to the debt year by year.
Then demographics changed about 5 years ago and and the trust fund started cashing in those treasuries to pay benefits. I’ve gotten a couple different figures but I think the U.S. treasury is having to sell about $100 billion in NEW treasuries to pay off the treasuries Soc Sec is cashing in as of late. So, technically, one type of treasury is coming off the books and is being replaced by another to pay it. Net affect is zero on the debt. If our budget was balanced prior to this event, our debt remains the same.
The problem is that the $100 billion was being used to pay for other things because our budget is not balanced. Therefore, debt is really going up $100 billion due to the Social Security situation.
Can some of you sharpies out there tell me if I mistated it? Thanks