"Social Security has not added one penny to the deficit."
-- Sen. Dick Durbin, D-Ill., Nov. 27, 2012
In 2011, we evaluated a similar statement about Social Security and gave it a relatively rare rating -- "true but false" -- which seemed to please no one. Yet as the "fiscal cliff" talks have heated up, Democrats have once again been using this talking point to shield Social Security from the chopping block.
Durbin, to his credit, in a recent speech, acknowledged that Social Security's long-term financing is an important issue that cannot be deferred. He advocates creating a commission to separately address how to ensure 75 years of solvency. So we don't mean to pick on Durbin because plenty of Democrats in recent days have made similar comments.
But we remain troubled by this talking point, especially given the recent further decline in Social Security's finances. We do not think this line is a slam-dunk falsehood, but it is certainly worth revisiting.
The facts
Social Security is a pay-as-you-go system, which means that payments collected today are immediately used to pay benefits. Until recently, more payments were collected than were needed. So Social Security lent the money to the government, which used it for other things, which in effect masked the size of the federal budget deficit. In exchange, Social Security received interest-bearing Treasury securities, which now total more than $2.7 trillion.
As we have repeatedly explained, the bonds held by Social Security are backed by the full faith and credit of the U.S. government. The bonds are a real asset to Social Security, but they also represent an obligation by the rest of the government. Like any entity that issues debt, such as a corporation, the government will have to make good on its obligations, generally by taking the money out of revenue, reducing expenses or issuing new debt.
