Matt Cover writes in a March 29 CNSNews.com article about a claim by Sen. Harry Reid:
“Social Security has not contributed one penny to the debt or the deficit ever in its 75 years,” Reid said at Monday’s event.
The claim is false. According to the actuaries for Social Security and Medicare, the Social Security program ran a deficit of approximately $41 billion, excluding interest on the bonds in the Social Security trust funds. Those bonds, which are a special type of Treasury bond, are placed in the trust funds in place of the cash surpluses Social Security has taken in from payroll taxes.
Because there is no cash in the Social Security trust funds, any deficits the program runs, including the 2010 deficit – and those projected into the future – must be repaid from current tax revenue.
Since the federal government was already running a deficit in 2010, and ran one in 2009, the money required to pay the Social Security deficit would have had to be borrowed, meaning it was added to the deficit and the national debt, contrary to Senator Reid’s claim.
Cover's reasoning here is specious. Near-term Social Security deficits were designed to be covered by surpluses from previous years, which were converted into treasury bonds and spent by the government. The current value of the trust fund is $2.6 trillion. The insistence of previous Congresses on spending the money in the trust fund, replacing it with the treasury bonds to be cashed in when needed, is the reason Social Security is running a deficit that must be covered out of the current federal budget.
Social Security is not running a deficit within the program's accounting because the money to cover that shortfall has already been collected. Cover's attempt to equivocate the need to cash in treasury bonds to cover the revenue shortfall with the overall federal budget deficit is ridiculous.