The Honorable Bill Huizenga
1217 Longworth Office Building
Washington, DC 20515

Dear Representative Huizenga,

Thanks for taking the time to read and respond to my letter. While I appreciate your concerns about the country’s debt, I still think that you are mischaracterizing the Social Security program.

Your letter asserts:

“While it is true that the program’s [Social Security] total expenses are not projected to exceed its total revenue until 2037 (when it will fall to 78%), this fact can be highly misleading. Politicians have for decades treated money raised through Social Security payroll taxes just like they treat any other revenue: it went to the general fund, and it was spent, quickly.”

Under the law, 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. Just as it would be inaccurate to say that a private pension fund is in trouble because the government spent the money it borrowed from the fund, so it would be wrong to say that Social Security is in trouble.

As you know, the $2.6 trillion in 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. While Congress could in principle default on the debt held by Social Security while honoring other debt, to my knowledge no member of Congress currently advocates taking this route. I suspect that this sort of partial default on the country’s debts to retired workers would be highly unpopular, and therefore unlikely to be approved by Congress.

However, political speculation aside, under current law 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.

Thanks again for taking the time to respond to my earlier letter.