The Honorable Joe Heck
132 Cannon House Office Building
U.S. House of Representatives
Washington, DC 20515
Dear Dr. Heck:
Earlier this week on Alan Stock’s radio show on KXNT, you stated, “You know and it’s already said that Social Security is probably going to be insolvent in about 20 years.”
However, this is not the case. The Social Security trustees’ projections show that Social Security will maintain full solvency through the year 2037. Even if Congress never makes any changes to the program, Social Security will always be able to pay close to 80 percent of scheduled benefits from then on. This means that when you retire in 2028, you will receive $36,210 a year (in 2010 dollars). After 2037, you would still receive $27,158 a year in Social Security benefits for the rest of your life.
You also stated that “previous Congresses have raided the trust fund for other pet projects and to try to balance the budget and use it for other projects.”
However, the fact that Congress opted to spend the money it borrowed from the Social Security Trust Fund is irrelevant to the finances of the program. In exchange for the money it lent to the government, the Trust Fund now holds more than $2.6 trillion in government bonds that are honored by the “full faith and credit” of the U.S. government.
The fact that the government spent the money borrowed from Social Security makes no more difference to the status of these bonds than it would with any other bond issued by the U.S. government.
The bonds held by the Trust Fund are a part of the $14.294 gross federal debt covered by the debt ceiling. About two-thirds, or $9.6 trillion, of this debt is held by the public, made up of both American and foreign investors. The remaining one-third is held by government entities, including Social Security, the U.S. Military Retirement Fund, and the U.S. Civil Service Retirement Fund. The revenue raised by all of these bonds, not just those held by Social Security, went to the general fund, and were spent, as you contend.
Under the law, the bonds held by Social Security are to be treated like any other debt. The bonds held by the Trust Fund are as good as the credit of the U.S. government, the same credit that gives the dollar bills in our wallets their value. In assessing the prospects for Social Security it seems that we have to work from current law, since none of us can really know how the program will be changed in the future. And, under current law, the program is projected to be fully solvent for more than a quarter century with no changes whatsoever.
As the discussion over Social Security continues, I hope you and your staff will have the opportunity to further review the design and finances of Social Security. If you would like any additional background on the program, I would be happy to assist you.
Co-Director, Center for Economic and Policy Research