Democratic U.S. Rep. Keith Ellison is among lawmakers who are advocating Congress leave Social Security alone in a deal to avoid the fiscal cliff.
In a floor speech on Nov. 29, Ellison argued that the program is in trouble, but shouldn’t be a top priority because it’s not contributing to the deficit, a point that many Democrats have been making during the lame duck session.
“Social Security is solvent through 2037,” Ellison said. “Does it need to be fixed? Yeah. It is true that there is slightly more money going out than coming in. But when you look at all the money that is owed to Social Security and you have the interest payments that are being made on it, it more than pays for itself for now.”
Ellison’s claim is correct, but deserves further explanation.
Until recently, Social Security was taking in more cash than it was paying out. As a result, it loaned that extra money to the federal government, and got interest-bearing bonds in return.
But In 2010, for the first time in decades, less money came into the Social Security trust fund than was paid out. In 2010, the fund’s deficit was $49 billion and in 2011, the deficit was $45 billion. The latest Social Security Trustee’s report predicts that the deficit will average around $66 billion until 2018, and then rise steeply as the number of beneficiaries grows at a faster rate than the number of workers who contribute.
For now, the interest on past surpluses is helping pay for the Social Security’s annual deficits, so program participants are not seeing changes in their benefits these days.
Ellison is incorrect that the program is projected to remain solvent until 2037; that’s an old number. According to the most recent Social Security Trust Fund report, interest earnings won’t cover those shortfalls any longer by 2020, and the Social Security Trust Fund will be exhausted by 2033.
But overall, his claim is basically correct, said Virginia Reno, who is the National Academy of Social Insurance’s Vice President for Income Security Policy.
“The system is financed by dedicated revenues by payroll taxes that workers and employers pay, from income taxes on benefits that beneficiaries pay… and from interest that’s owed to the trust fund from the surpluses that it ran in past years,” Reno said. “All three of those sources of money are more than the outgo of the system.”
Ellison has also said that Social Security isn’t contributing to the deficit, which is a popular talking point among Democrats. Strictly speaking, he’s correct if Social Security is considered a program that isn’t connected to spending from the government’s general fund.
But that doesn’t mean the program isn’t in trouble. And some social security experts argue that the interest owed the program contributes to the deficit; money is just being shuffled from one account to another.
In his floor speech, Ellison characterizes the state of Social Security correctly, though he’s off by a few years in terms of when the program will be insolvent.
In the not too distant future, interest won’t be enough to cover the program’s deficits, and fiscal experts agree that the program is in trouble as a result. That’s something that Ellison acknowledges in his statement, too.
His claim leans toward accurate.
The Social Security Administration, A Summary of the 2012 Annual Reports, Social Security and Medicare Boards of Trustees, accessed Dec.
CBS News, Does Social Security Contribute to the Deficit, by Steve Vernon, Sept. 16, 2011
The Urban Institute, Social Security and the Budget, by Eugene Steuerle and Stephanie Rennane, May 2010
Minnesota Public Radio, PoliGraph: Nolan claim complicated, but mostly wrong, Aug. 8, 2012
Interview, Virginia Reno, National Academy of Social Insurance’s Vice President for Income Security Policy, Dec. 5, 2012