Social Security is one of the government’s most popular programs. Three-fourths of potential beneficiaries, in a recent survey, recommended that the program’s benefits be continued at present levels in the future.
Since 1935, when the first Social Security checks went out, the program has also represented a major expansion to the federal bureaucracy. In 2019, Social Security payments accounted for roughly one-fourth of all federal spending. To pay for the programs, Social Security taxes have been issued, but the government uses money from its Social Security Trust Fund to purchase bonds—effectively loaning the money to itself to use for other programs until it is needed. This has increased the federal debt, which has grown steadily under every administration, Democratic and Republican, since President Bill Clinton in the 1990s.
The consequences of the deficit, while delayable, are significant. Earlier in July, Treasury Secretary Janet Yellen sent a letter to Congress, warning about the potential danger of defaulting on U.S. government debts. While a number of short-term fixes were proposed in the letter—notably the raising of the federal borrowing limit—critics have alleged that temporary borrowing of money would do little to alleviate the problem.
An economic theory called the Ricardo-Barro effect argues that increased government spending, and consequently budget deficits if taxes remain the same, will result in economic conditions the same as if taxes had been raised. When a government borrows money, it does so through the sale of government bonds, and when people are spending money on government bonds, they are giving their money to the government and not spending it on other goods—effectively creating a tax.
This implies that increased borrowing in 2021, through the sale of bonds, will affect the U.S. economy as a tax would. The only long-term and sustainable way to address U.S. debt is through adjustments in spending and taxation. And increasing government debt to temporarily pay for entitlement programs, though effective in the short run, creates a major liability for the United States in the long run. One of the targets for cuts—though politically unpalatable—might be Social Security.
Previous administrations have attempted to decrease Social Security payments and raise associated taxes to address budgetary concerns. However, consistently, these efforts have been prevented by senior advocacy groups (opposed to benefit reductions) and fiscal conservatives (opposed to higher taxes). As this situation continues, however, the Social Security issue will continue to contribute to America’s budget deficit.
Trevor Filseth is a current and foreign affairs writer for The National Interest.