Time magazine has just published online the latest in the media’s unceasing stream of alarmed reports on Social Security, declaring that the next president will have to face up to “one of the largest financial issues facing the country: shoring up Social Security.”

Unfortunately, Time’s analysis is undermined by a glaring misstatement about the program’s fiscal condition. “Since 2010,” reports the author, Penelope Wang, an editor at large at Money magazine, the program has been “running at a deficit, with tax revenues falling short of the benefits being paid out.”

This is fundamentally incorrect. Social Security is not running at a deficit. It’s recording a surplus and has done so every year since well before 2010. As is shown by the chart below (from the 2016 report of the Social Security trustees), from 2011 through 2015 the surplus came to $351.1 billion for the retirement component of the program. Last year alone, its surplus was $51 billion. When the cost of disability benefits is factored in, the surplus is smaller but still came to $23 billion last year.

Wrong, Time! As this chart from the 2016 Social Security trustees report shows, payroll taxes (red line) plus interest on payroll taxes (blue line) continue to exceed benefits (green line), producing a surplus every year (purple line). Figures are for the retirement program only. (Social Security Administration )


Measuring benefits against “tax revenues,” as Wang does, reflects at best a fundamental misunderstanding of Social Security’s revenue streams. They comprise more than current payroll taxes, which presumably is what Wang means by “tax revenues.” They also include interest on Social Security’s Treasury bonds, which constitute an asset portfolio currently amounting to about $2.8 trillion, and income taxes on Social Security benefits.

It’s fashionable for conservatives and the misinformed to dismiss the bonds as merely “IOUs” from the government, but in fact they’re real assets — as real as the T-bonds in institutional and individual portfolios all over the world — and are backed by the full faith and credit of the U.S. government. More important, they represent past payroll taxes paid by millions of American workers, but collected in excess of benefits paid out each year. The excess has been banked by lending it to the government, with interest, in the form of bond purchases. There’s no justification legally, morally or logically for treating those interest payments as somehow illusory or irrelevant to Social Security’s financial condition.

Add the two categories together, and one can see the flaw in Wang’s statement. In 2015, current payroll taxes and interest on the bonds attributed to the retirement program came to $770.7 billion. Benefits came to $742.9 billion. In other words, no deficit. Federal income taxes on Social Security benefits, to which the program is legally entitled, provided an additional $30.6 billion.

For the combined retirement and disability programs, payroll taxes and interest came to $888.2 billion and income taxes on benefits generated an additional $31.6 billion, for a total of $919.8 billion. Benefits cost $886.3 billion. Detailed annual figures for the retirement and disability programs separately and the two combined can be found here.


It may be unsurprising that Wang’s analysis runs awry. One key source for her article, Maya MacGuineas, heads a think tank that has been campaigning for years to cut benefits, based on alarmist rhetoric about the program’s financial condition.

MacGuineas, president of the Committee for a Responsible Federal Budget, is quoted lamenting that “we’ve had eight years of lost opportunity to make Social Security structurally sound.” Her organization is described in the article as “a nonpartisan nonprofit dedicated to educating the public on fiscal issues.” What’s not mentioned is that it’s been closely affiliated with billionaire Peter G. Peterson, a deficit hawk and an outspoken advocate of Social Security benefit cuts.

In this chart of 2000-2045 federal spending, the Congressional Budget Office projects that Social Security spending will remain relatively stable in the future but health spending, chiefly on Medicare, will rise as a share of GDP. The dotted vertical line represents 2016. (Congressional Budget Office )

MacGuineas is further cited in the Time article in support of the assertion that Social Security, Medicare and Medicaid account for an inordinately large portion of the federal budget and for “most of the future growth in spending, not including interest payments on debt.”


A couple of points are important here. First, even if those three programs really do account for half the federal budget, as the article states, that doesn’t answer the basic question: “So what?” Shouldn’t caring for the sick and elderly rank among the top concerns of the U.S. government? Maybe devoting half of all spending to these important goals is too much, but who says so, and why?

Second, MacGuineas’ assertion involves a feat of legerdemain common among conservatives and especially among Social Security’s enemies — yoking together Social Security and the health programs and ascribing the ostensible future budget crisis to all three, without distinguishing among them.

The truth is that Social Security spending is expected to be fairly stable as a percentage of gross domestic product — rising from 4.9% in 2016 to 6.3% in 2046, and possibly plateauing or even shrinking toward the latter part of that time frame. The real problem is spending for the healthcare programs: That’s projected to grow from 5.5% of GDP now to 8.9% in 2046. That growth is mostly an artifact of America’s ridiculously high per-capita spending on healthcare, which outstrips the rest of the developed world by a handsome margin. Saying that “Social Security and Medicare” together are threatening the federal budget is misleading in the extreme.

The magazine claims that “time is starting to run out” to make changes in Social Security, but it doesn’t make the case. The trustees projected this year that the program’s trust fund will last until 2034, which is nearly two decades from now, at which point money will be available to pay only 79% of currently scheduled benefits.


MacGuineas and other critics of the program argue that the time to start cutting benefits is now so that we don’t have to do so later, but they don’t adequately explain why it makes sense to deprive retirees and disabled persons of benefits today based on conjecture about the future 18 years out. Time’s article asserts that “the future of millions of Americans depends on saving Social Security,” which is true. But it doesn’t tell us why the richest nation in the world can’t afford to do so while preserving, even expanding, its benefits rather than shrinking them.

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