For most Americans, Social Security income is a necessity to cover their expenses during their golden years. In 22 years of annual polling from Gallup, no fewer than 80% of then-current retirees noted a reliance, in some capacity, on their monthly Social Security benefit to make ends meet.
That’s what makes this next statement so worrisome: Social Security is in trouble.
America’s leading retirement program is facing the prospect of sweeping benefit cuts in under a decade, and the finger-pointing as to how this illustrious program got into this mess has begun.
Image source: Getty Images.
Across social media message boards, no theory has gained more steam than the premise that Congress stole from Social Security and should return what it’s taken, in full, with interest. The idea here is that if lawmakers returned the cash that’s been removed from Social Security’s trust funds, the program would no longer be facing a long-term cash shortfall.
The all-important question is: Did Congress really steal money from Social Security?
Let’s take a closer look at whether this popular online belief is fact or fiction.
Social Security benefits could face sweeping cuts by 2033
Before diving into the specifics, it’s important to understand what’s at stake for the program’s over 50 million retired-worker beneficiaries, as well as the collective 67 million people currently receiving a monthly payout.
Every year, the Social Security Board of Trustees releases a report that effectively examines the financial health of the program. It provides a detailed balance sheet of revenue collected and dollars disbursed from the previous year, as well as offers short-term (10-year) and long-term (75-year) projections for Social Security that factor in things like fiscal and monetary policy changes and demographic shifts.
Since 1985, every Trustees Report has opined that Social Security was facing a long-term funding obligation shortfall. In plain English, revenue collection in the 75 years following the release of a report is estimated to be insufficient to cover outlays, including annual cost-of-living adjustments (COLAs). As of the 2024 Social Security Board of Trustees Report, the program is staring down a $22.6 trillion (and widening) funding obligation shortfall through 2098.
The OASI’s asset reserves may be exhausted by 2033. US Old-Age and Survivors Insurance Trust Fund Assets at End of Year data by YCharts.
The bigger worry is what could happen in just nine years. The Trustees believe the Old-Age and Survivors Insurance Trust Fund (OASI), which is responsible for doling out monthly benefits to retired workers and survivor beneficiaries, could exhaust its asset reserves by 2033. If this extra capital built up since inception is depleted, monthly OASI benefits could be slashed to ensure no further need for reductions through 2098.
Something caused Social Security to work its way into a $22.6 trillion (and growing) deficit — but is Congress to blame?
Fact or fiction: Congress stole from Social Security?
While it’s easy to blame lawmakers for Social Security’s shortcomings, the idea that Congress pilfered funds from Social Security is 100% fiction.
In August 1935, the Social Security Act was signed into law by Franklin D. Roosevelt. Contained within this law is a provision that requires all excess cash to be invested in interest-bearing special-issue bonds. In other words, if Social Security brings in X amount of revenue, and the amount it pays out for benefits and administrative expenses in a given year is lower than X, there’s going to be a surplus of money that’s collected. This extra money, known as Social Security’s “asset reserves,” is required by law to be invested in special-issue bonds.
Imagine for a moment that you go to your local bank and purchase an interest-bearing certificate of deposit (CD) for $1,000. Although you’ve given your bank $1,000, it’s not going to let this cash sit in a vault and collect dust while paying you interest on your cash. The bank is going to loan out your money and aim to generate a higher rate of return than what it’s paying you in interest.
Even though you can’t see your $1,000, the bank hasn’t stolen it from you. It’s fully accounted for by your CD and backed by the federal government.
The same applies to Social Security’s OASI and Disability Insurance (DI) trust funds. Though they’re required by law to be invested in special-issue government bonds, every cent is fully accounted for, and these bonds are backed by the full faith of the U.S. government.
The OASI and DI entered 2024 with $2.78 trillion in combined asset reserves. US Old-Age, Survivors, and Disability Insurance Trust Fund Assets at End of Year data by YCharts.
Additionally, the OASI’s and DI’s asset reserves are public data that’s updated monthly by the Social Security Administration. As of the end of March, the combined OASI and DI had about $2.767 trillion in asset reserves invested across an assortment of bonds and (to a lesser extent) certificates of indebtedness that were yielding an average interest rate of 2.429%. If you’re wondering why this rate is so low compared to current Treasury yields of around 5%, it’s because the program is constantly laddering its bond-buying activity, and not putting all of its eggs in one basket.
Hypothetically speaking, if the federal government were to repay every cent of this fully accounted-for $2.767 trillion, it would cost Social Security around $67 billion in annual interest income. In short, the program would actually deplete its asset reserves even faster without the federal government paying annual interest to the program.
One final thing I’ll add is that the federal government has never failed to make an interest payment to Social Security.
Therefore, the notion that Congress “stole from Social Security” is patently false.
Image source: Getty Images.
Demographic changes have dug a $22.6 trillion hole for Social Security
However, I didn’t say Congress was absolved from the mess Social Security finds itself in.
One of the reasons Social Security is up a $22.6 trillion creek without a paddle is because lawmakers on Capitol Hill can’t agree on how best to fix it. Although there are plenty of proposals, neither Democrats nor Republicans have been willing to find common ground with their opposition. The longer this congressional stalemate goes on, the costlier it’s going to be for working Americans, and potentially retirees, to strengthen America’s leading retirement program.
Beyond congressional inaction, demographic shifts represent the root cause of Social Security’s growing funding shortfall.
Some of Social Security’s demographic changes are well-known by the public. Examples include the ongoing retirement of baby boomers, which is lowering the worker-to-beneficiary ratio, as well as a 13-year increase in life expectancy since the first retired-worker benefit was mailed out in January 1940.
But the far bigger issue for Social Security is what may not be as apparent.
For instance, net legal migration into the U.S. has declined every year since 1998 and plunged by an aggregate of almost 58% since its peak. Social Security relies on a steady stream of younger migrants into the U.S. who’ll spend decades in the labor force, providing valuable income via the payroll tax. If fewer legal migrants enter the U.S., it’s only going to weigh on the worker-to-beneficiary ratio and reduce future payroll tax revenue estimates.
Another problem is a historically low U.S. birth rate. While a significant decline in births isn’t an issue right now, it will become an issue in a generation when even fewer workers are replacing those retiring from the labor force.
As I’ve pointed in the past, income inequality is also worsening.
As of 2024, all earned income (wages and salary, but not investment income) between $0.01 and $168,600 is subjected to the 12.4% payroll tax. Meanwhile, earned income above this figure is exempt. Keep in mind that monthly benefits at full retirement age are also capped.
In 1985, just shy of 89% of all earned income was exposed to the payroll tax, with roughly 6.5% of workers hitting what was then the level where payroll taxation ceased. But as of 2021, only 81.4% of earned income was exposed to the payroll tax, with 6.2% of workers hitting this upper bound. More earned income than ever before is “escaping” payroll taxation.
There’s no question that Social Security has a lot of problems, but congressional theft simply isn’t one of them.
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22 Comments
STOP sending money to freaking Ukraine and give it back to Social Security! THIS is OUR Country, Ukraine can puke off!
Where does money come from to pay freeloaders on SSi disability. Nevershould they use retirement funds to pay for this fraudulent welfare program. Yes there are some legit disability claims but there is so much fraud.
You’re right. Since when does dyslexia make you unable to work? Or how about Bi-polar, and I could name many more. These people are fully capable of working, so quit giving them SSI. People with cancer, or MS, MD, Cerebral palsy, things like that, should be able to get it. Even some of them will still work, because they want to. But the other lowlife lazy asses, and drug addicts, just need to go out and get a job. What did they do before SSI or SSD was around? BUt the thing with this article also is, it’s not correct. Congress did “borrow/take, money for the SS account, and used it for something back in the 80’s, I believe. And they have never paid it back. So pay it back!!!!
There are many stories on the internet about SS Trust Funds being spent for non SS government programs that mirror your post. I am at an age that should I live long enough, my benefits would be cut when the trust was exhausted. It made me curious enough to look into the matter. Finding answers to my questions is not as easy as you might think. I don’t believe there are conspiracies behind every closed door, however I do believe the government keeps the doors closed as much as they can. For a country that boasts about the freedom and liberty enjoyed by its citizens in a transparent society where government of the people, is at the consent of the governed, there are too many hidden agendas and secrets kept from the governed for the governed to determine if giving consent to be governed is in their best interest. Decades ago a free press investigated and reported to the public accurate information regarding internal affairs of concern, so the people could make an informed decision on election day. White House press releases, daily press briefs, department press releases etc. were all good sources of information for the people to keep them informed of government actions. A majority of people had trust in the media’s reporting as accurate and the importance of issues they covered aligned with citizens. My oh my, how things have changed over the years. Over the years government communications to the governed changed in ways that have resulted in a lack of trust by the governed. It became apparent that media was co-opted no longer unbiased in their reporting. It is now the propaganda arm of the US Government. The media has an outsized influence on voters and is being used as a tool to deliver propaganda of their choice to the masses. People are realizing the scams being promoted are not the desire of the majority and things are turning around. Lets hope it gets done.
This article is full of errors and a cover up of government misspending SS into oblivion. Ridiculous to state SS would owe $Billlions in interest to be repaid the money in the low yield bonds. That’s like saying I would owe interest on the money my savings account earned at a bank. The Federal Reserve pays 2.3% on the SS bonds, and re-loans the money to banks at a higher percentage rate. The Fed is not controlled and draining $Trillions from Americans. This Big Bank-Big Government scheme needs to be stopped by electing Trump in November and auditing the Fed like Senator Paul has demanded for years.
Depopulation by abortion and non-working would be something to look at. Less people paying into social security.
I was a teenager during early Vietnam War. On two separate occasions newspapers reported that Money would be taken out of Social Security to fund expansion of the Vietnam War; and with assurances that the growth of Social Security in the future would balance it in some way. You failed to address this. Your article if Fake News. Retirely must be a fake scam, either foer hiring your or lying to the public like politicians today. Back then, we all knew the more money invested earlier returns a higher return decades later.
Social Security will potentially right itself at the cost of the heart attacks, strokes, and the turbo-cancers caused by Pfizer/Bio-N-Tech/Moderna Shots, shortening lives of Seniors and people at every age (keeping many disabled off Medicare roles, etc. Nobody knew what was in those shots until very late 2021 and 2022. Trump promised funding to develop a solution; but Big Joe made sure the needle got shoved into the shoulders of every possible person; and if any President had opportunity to know what was in the shot it was Biden.
As far as the “full faith of the Federal Government goes” it has been reported that up to half of USA population has no faith in any Federal agency, including the current Presidency. So go back to college and take the history courses you never learned and start reporting articles with more truths than falsehoods..
Has The Gobernmemt EVER DID WHAT IS WAS SUPPOSED TO DO? and In the Time Frame? Or to Be as Good as it Was proposed ? OR EVER COME IN BUDGET ???? Social Security was SOLVENT UNTIL in 1980’s DEMONCRAT Tipp Oneil TOOK THE MONEY OUT OF S.S. and PUT AN I.O.U. in It’s Place ! THEY COULDN’T STAND $MONEY$ That They Couldn’t Control.. Did The I.O.U. Ever Pay It Back? DEMOCRATS DESTROY EVERYTHING THEY TOUCH !.. P.S.– Some RINO’s Too !
Thank you for bringing out their intentional lying and obfuscation.
What a line of BULLSHIT!!! Social Security is paid from the US Treasury NOT FROM SOME BOGUS TRUST FUND
Why can’t someone figure this out?
The US Treasury isn’t about to go out of business anytime soon.
WAKE UP AMERICA !!!!!!
Every major federal department has at least 2 trust funds or dedicated funds that pay for key programs. The money comes from related taxes, fees, and premiums—e.g., U.S. postage stamp revenue goes to the Postal Service Fund.
As of 2021, the Trust Fund contained (or alternatively, was owed) $2.908 trillion. The Trust Fund is required by law to be invested in non-marketable securities issued and guaranteed by the “full faith and credit” of the federal government. These securities earn a market rate of interest.
“The US Treasury isn’t about to go out of business anytime soon.”
With a deficit approaching 35 trillion and no effort to reign in spending, It looks like the US Treasury will be out of business not far in the future. The majority of our debt is held in short term notes, because there isn’t much interest in 30 yr. notes. Silicon valley bank failed due to the loss in value of their 30 year treasuries they had to liquidate. They will not be the only bank to fail because of the problem. What makes you believe the treasury is so secure?
Do you think we will pay off the debt? It is impossible to pay back with current conditions. We have a $2 trillion deficit for this year. To balance the budget every wage earner (158 million) needs to pay $12,658 just to get to zero.
That doesn’t include any interest.
National debt is $35trillion divided by wage earners and everybody that has a job owes $221,518. Todays interest rate is a little below historical average and will likely go up in the future. $221,518 at the current 5.5% interest rate equals $12,183 yearly interest owed by each wage earner before any principal can be paid. Using the values on a mortgage calculator at 5.5% interest for a 30 year term, gives the result of $1,258 you will pay a month for 30 years to pay off our debt. See the problem? Do you have that kind of money? How could this have happened? We believed what politicians told us.
Abortion is the MAIN cause of this. and illegal immigration is probably the 2nd most cause. Since 1973. For 50 years 1,000,000 babies per year have been aborted, that’s a conservative # , Those 1,000 babies aborted in 1974 would be 50 years old today, so the majority of them would have paid into social security for approx 30 years now, and these people would have had children, so let’s say 1,000,000 people would have probably had 1,00,000 children, who would on average be around26 years old, and would not be paying into social security, and it would have made, and so on for the succeeding years resulting in 100’s of billion’s of dollars, maybe trillions. Then you have 10’s of million of illegal immigrants in our country, and a large percentage of them find a way to draw benefits (be paid by social security admin), resulting in more 100’s of billions taken from the social security fund. Wake up, we are killing ourselves !
” large percentage of them find a way to draw benefits (be paid by social security admin)”
That isn’t true. You have to work enough to earn enough credits to qualify for SS benefits. there are ways around some of it, but it is difficult. Supplemental Security Income (not SS) is a safety net that isn’t Social Security and doesn’t have the SS work requirements to qualify.
Abortion isn’t the main reason for the SS problem, longevity increases are for the most part the reason. SS was set up as a PAYGO pay as you go program. Todays beneficiaries money comes from those already working. At inception the trusts started with no cash, only money paid in by workers was available for beneficiaries. I can’t find the reasoning for original equation, but I know how it works from all the research I did when I became worried about their solvency. The benefit equation determined monthly benefit by using average indexed monthly earnings with a multiplier for credits which are earned by time worked. I’ll post part of it.
PIA formula
For an individual who first becomes eligible for old-age insurance benefits or disability insurance benefits in 2024, or who dies in 2024 before becoming eligible for benefits, his/her PIA will be the sum of:
(a) 90 percent of the first $1,174 of his/her average indexed monthly earnings, plus
(b) 32 percent of his/her average indexed monthly earnings over $1,174 and through $7,078, plus
(c) 15 percent of his/her average indexed monthly earnings over $7,078.
We round this amount to the next lower multiple of $.10 if it is not already a multiple of $.10.
Determination of the PIA bend points for 2024
Amounts in
formula
Average wage indices
For 1977: 9,779.44
For 2022: 63,795.13
Bend points for 1979
First: $180
Second: $1,085
Computation of bend points for 2024 First bend point
$180 times 63,795.13 divided by 9,779.44 equals $1,174.21, which rounds to $1,174 Second bend point
$1,085 times 63,795.13 divided by 9,779.44 equals $7,077.88, which rounds to $7,078
When Social Security began, a determination was needed to calculate the payroll deduction needed to pay benefits years later. 6.2$ of wages with an equal amount from the employer was decided to be what was needed to pay benefits to the age expectancy at that time.. The number of people paying in vs. those paying out would always fluctuate, which resulted in the establishment of the trusts. That is the basics. SS worked well for a long time until we started living longer than the original formula accounted for. They have changed things over time to extend fund solvency and it is time to address it again.
it just kicks the can down the road making the problem larger. the longer we put it off the more expensive the fix will be. You will draw out much more than you pay in because the average person does. The trusts aren’t growth funds and make little interest as a general rule and longevity, Medicare cost increases and economic collapse are the only other things that can drastically change ss benefits.
Adding workers to the system does not cure the problem. I
I was thinking the same thing abortion and illegal immigration are the top problems! There is no excuse for them not fixing the problem they have had many years to do it.
Neither the (D) nor (R) approach to resolution is required. Just three measures would restore the SS trust fund:
1) Revise the 1935 law such that only 67% of surplus is paid into the special issue bonds, and the balance into a no-load minuscule-fee S&P 500 index fund.
2) Make attorneys criminally liable for representing fraudulent SSI disability cases – and ENFORCE it!
3) Streamline LEGAL immigration so young “newcomers” who are capable of filling the current 11M excess job openings are welcomed into our great “melting-pot”.
Gee Wally…I clearly remember Clinton being hailed as a hero for paying down the national debt…using $$ from social security…as they themselves claimed. I think you need to refresh your history..and resharpen your pencil. I am 75, and Social Security has been “going to run out” as far back as I can remember. It’s always going to happen in about 8-10 years down the road. Nobody can predict a decade out. It’s Bullshirt. Money miraculously appears for every nonsensical thing under the sun…the war in Ukraine…a bottomless pit of money for illegals…money for gender queer studies in some po-dunk country. We know it’s all lies. We know the recipients are really corrupt politicians getting kickbacks or taking 90% as administrative costs. Get on another band wagon. They’ve cried wolf too long. I yawn.
Bill Clinton was given lots of praise for his budget surplus on budgets he didn’t want to sign. Newt Gingrich, the draft dodger who had no problem sending your children to die, and the same person who entered politics poor who today has a net worth of $12 million made Newt’s Contract with America which was the reason for the budget surplus. Clinton refused to sign stating he wouldn’t let Gingrich blackmail him. Clinton and Gingrich are both stains on America. Elitist Clinton the sexual predator and Jeffery Epstein pal abused many women and got away with it and got away with it for decades. Bill Clinton left office in 2001 claiming to be 16 million in debt and in the same year started the Bill, Hillary & Chelsea Clinton Foundation to direct family philanthropy. They were broke and immediately began a foundation to direct giving money they didn’t have.
Since 1983, every President has borrowed from social security. Bill Clinton didn’t use Social Security funds to pay for the budget. In 1982, the Old-Age and Survivors Insurance (OASI) Trust Fund borrowed money from the Hospital Insurance Trust Fund, and repaid the borrowed amounts in 1985 and 1986.
Democrats have been robbing the Social Security Fund for over 50 years. This is no secret.
Congress didn’t steal our social security funds they printed worthless bonds sold them to social security and printed the cash to spend. But don’t worry your money is fully backed up by the full faith and credit of the US government that gets all its money from you the recipient of the social security.
What money do you suppose Congress would take to pay back SS?
They tax, and lately they print fiat money; both come straight out of our pocket.
OlEd
Oh, so it’s a big ol PONZY SCHEME, ok got that!
This article is full of errors and a cover up of government misspending SS into oblivion. Ridiculous to state SS would owe $Billlions in interest to be repaid the money in the low yield bonds. That’s like saying I would owe interest on the money my savings account earned at a bank. The Federal Reserve pays 2.3% on the SS bonds, and re-loans the money to banks at a higher percentage rate. The Fed is not controlled and draining $Trillions from Americans. This Big Bank-Big Government scheme needs to be stopped by electing Trump in November and auditing the Fed like Senator Paul has demanded for years.