Social Security - The Surplus Conundrum

Social security is an entitlement program that people tend to either love or hate. There specific attitude is usually a reflection of whether they think it is a success or not. This determination is often misguided because discussions of its problems don't include the surplus issue.

What do we all here about social security in the media? The general premise is it is in trouble and thus must be poorly run. Well, it is in trouble, but not because of the way it is run. Instead, the program is underfunded and holds a ton of IOUs from a group that is just about the least credible creditor on the planet - the United States Government! It all comes down to the surplus issue.

Social security has been running out of money because it spends more than it takes in, right? No. The opposite is true. The program has nearly always brought in tens to hundreds of billion dollars more a year than it has expended. One needs only look to the 2006 year when it brought in just over $100 billion more than it spend. Given all these surpluses, the program should literally have trillions of dollars built up in its trust account. It does not. So, where did all the money go?

Most people know they are in trouble when they have to borrow from one credit card to pay another. Well, our government never really learned the lesson. It has been borrowing the social security surplus for years and using it to pay the interest on the national debt. Talk about a shell game! Well, it worked so long as there was a surplus. That no longer is the case.<


2010 is the first year that social security will not run a surplus. Incoming taxes and expenditures will basically match. This is partially due to the economic mess, but is a continuation of a trend that is arising as the baby boomer generation begins to retire and seek benefits from the program. The number of boomers making claims will balloon over the next fifteen years and the program is going to be running big deficits.

The social security deficit problems is doubly painful. First, there will be no surpluses to pay the interest on the national debt and, second, the government will have to find money to fund the program. That is a lot of money to come up with and it will be interesting to see how it is handled. Most expect benefits to be cut, the participation age raised and taxes to go up. Oh, joy.