Just saw this on Facebook:
Is the freehand-circled claim true? Does the United States Social Security have a surplus of $2.5 trillion?
Also, if the above is true, how did SS accrue this much extra?
"Asset reserves" were $2,891.8 billion at the end of 2017.
The "net increase in asset reserves in 2017" was $44.1 billion.
The asset reserves of the combined trust funds were $2.9 trillion at the end of 2017. The trust fund reserves decline on a present value basis after 2017, but remain positive through 2033. However, after 2033 this cumulative amount becomes negative, which means that the combined OASI and DI Trust Funds have a net unfunded obligation through each year after 2033. Through the end of 2092, the combined funds have a present-value unfunded obligation of $13.2 trillion.
Starting in 1983, Social Security increased revenues (i.e. taxes), raised the retirement age for future beneficiaries, and adjusted spending. It is now over thirty years later and that surplus has been accruing interest over time. Less than $100 billion a year is not so much in the context of Social Security, which currently spends $988 billion per year (2018). Currently the trust fund has more than the $2.5 trillion claimed. Social Security statistics.
Throwing those numbers into a spreadsheet, I found that Social Security has collected more than $2 trillion as interest since 1983.
The idea was to prepare for the retirement of the baby boomers, who were born in 1946-1964. They started retiring on Social Security in 2008 (at age 62). The last will start in 2035 (at age 70.5). Perhaps not coincidentally, the Social Security trust fund is projected to run out of money in the early to mid 2030s. At that time, the trust fund would be covering about 25% of benefits.
Almost forty years of Social Security saving spent in less than twenty years.
Source: 2018 OASDI Trustees Report.
For a contrarian answer, I rate this as false. At least the mechanism of how the SS Trust Fund works should be considered in giving a full and honest answer to this question.
As political leaders debate how best to fix Social Security, many policymakers are focusing on the wrong issue. Their sole concern seems to be the date when the Social Security retirement and survivors trust fund will run out of its paper assets. This mistaken emphasis misses the fundamental point about Social Security's problems: There is no cash in the Social Security trust fund, and there never has been any.
The Social Security trust fund is merely an accounting device filled with IOUs that future taxpayers must repay.
The Treasury both receives the payroll taxes (and income taxes that higher-income retirees pay on their Social Security benefits) and pays monthly benefits on behalf of the Social Security Administration (SSA). The money stays in the Treasury's hands until it is either paid out as Social Security benefits or otherwise spent by the government. In fact, no money ever goes into the trust fund. Instead, the trust fund balance is the result of two accounting entries by the Treasury.
First, the Treasury estimates how much of the aggregate tax receipts are Social Security taxes and "credits" the Social Security trust fund with that amount. Then the Treasury "subtracts" the total amount paid in monthly Social Security benefits from the trust fund balance. No money actually changes hands; these are strictly accounting entries.
Any "money" remaining in the trust fund is converted into special-issue Treasury bonds, which are really nothing more than IOUs. In addition, the Treasury pays interest on the trust fund's balance by crediting the trust fund with additional IOUs. These are also strictly accounting entries, and again no money changes hands. After crediting the trust fund with the proper amount in IOUs, the government spends the extra Social Security tax collections just like any other tax revenue--to finance anything from aircraft carriers to education research.
Not only is any surplus gone, the principal balance is gone as well. All future outlays from Social Security will have to be financed on the future taxpayers or more debt.
Please note that the Office of Management and Budget explains the Trust Fund in exactly the same way:
They do not consist of real economic assets that can be drawn down in the future to fund benefits.
Same source but from Charles Krauthammer:
In other words, the Social Security trust fund contains - nothing.
Here's why. When your FICA tax is taken out of your paycheck, it does not get squirreled away in some lockbox in West Virginia where it's kept until you and your contemporaries retire. Most goes out immediately to pay current retirees, and the rest (say, $100) goes to the U.S. Treasury - and is spent. On roads, bridges, national defense, public television, whatever - spent, gone.
In return for that $100, the Treasury sends the Social Security Administration a piece of paper that says: IOU $100. There are countless such pieces of paper in the lockbox. They are called "special issue" bonds.
Special they are: They are worthless. As the OMB explained, they are nothing more than "claims on the Treasury [i.e., promises] that, when redeemed [when you retire and are awaiting your check], will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures." That's what it means to have a so-called trust fund with no "real economic assets."
If the pyramid of those currently paying taxes (the base) shrinks or even becomes more rectangular, say to people living longer, the promise to pay by the US Federal Government becomes a broken promise. I don't think anyone can gainsay that this is at root a pay as you go program, and the idea that there is a surplus is anywhere is kind of a slight of hand.
For those that would like some additional literature on how SS benefits and program resemble a Ponzi scheme you can go here which opines that it is a manageable Ponzi scheme due to 1) a growing population, 2) growing GDP, and 3) relatively flat benefits that are not targeted to investment returns:
The beauty of social insurance is that it is actuarially unsound. Everyone who reaches retirement age is given benefit privileges that far exceed anything he has paid in — exceed his payments by more than ten times (or five times counting employer payments)!
How is it possible? It stems from the fact that the national product is growing at a compound interest rate and can be expected to do so for as far ahead as the eye cannot see. Always there are more youths than old folks in a growing population. More important, with real income going up at 3% per year, the taxable base on which benefits rest is always much greater than the taxes paid historically by the generation now retired.
…A growing nation is the greatest Ponzi game ever contrived.
For those that would like a good contrast between what authoritarian social security systems are more asset based versus democracy based systems that are more Ponzi in nature you due to public choice theory can go here
The cash, pay as you go, reality of SS has real world implications:
In conventional media accounts, the trust funds will “run out of money” when the lines on the graph in Figure I cross the x-axis and become negative. This will occur next year for the Disability program. For Medicare Part A, it will occur in 2030. For Social Security retirement, it will occur in 2035. Of course, there is no “money” to run out of. But those are the dates in which Congress and the President must act. If they fail to act, the Treasury will be required to reduce benefit payments to the point where they equal the income (taxes and premiums) into each of the programs.
Debt accruing over time...Not a surplus. The US has unfunded obligations over time, and even the SSA acknowledges it (Same source):
If we have a debt that is growing through time, the natural question to ask is: What is the value of that debt in current dollars? The Trustees actually answer that question. But the answer is buried deep in the report and camouflaged in various ways that require expert deciphering. The table below reflects calculations by former Trustee Thomas Saving and his colleague Andrew Rettenmaier. As the table shows, promises we have made minus expected premiums and dedicated taxes total $41.3 trillion over the next 75 years. [Ed. note that is SS, Disability, and Medicare, $28 Trillion in unfunded liability is attributed to SS]
Others have posited that the true size of the unfunded total liability is closer to $100 trillion.