Social Security in the red? Nope, not this year and not in the future
Posted on 22 April 2011
By Mark Miller
Permanent URL of this article: http://retirementrevised.com/money/social-security-in-the-red-no-not-even-this-year
One of the oft-repeated false statements about Social Security is that the program has tipped into the red — that is, it paid out more in benefits than it took in.
Case in point: Sen. Richard Shelby (R-Alabama) said recently that “. . . last year, for the first time since Social Security began in 1935, the program paid out more in benefits than it received in payroll taxes. “Social Security is now at the tipping point, the first step of a long, slow march to insolvency if we don’t do something about it.”
That really wouldn’t mean much even if true — Social Security has been cash flow negative on occasion throughout the program’s history.
But it actually isn’t true. The statement rests on a measure of Social Security payroll taxes that excludes interest income on trust fund reserves and taxation of benefits. Looked at that way, the program is in surplus and will be so as far as the eye can see. Check out this chart, prepared by the National Academy of Social Insurance (NASI):
There’s really no reason to exclude interest income and tax receipts from the Social Security cash flow projections, since the interest is paid on full-faith-and-obligation special Treasury notes bought by the Social Security Trust Fund.
