August 30, 2011
The Honorable Jeb Hensarling
129 Cannon House Office Building
Washington DC 20515
Dear Rep. Hensarling,
During a recent exchange outside of the Lakewood Country Club in Dallas, Texas, you were asked by members of the crowd about Social Security and other social insurance programs. You said:
“I want to change it…. I don’t want Social Security to go bankrupt.”
As it turns out there is little cause for concern. The recommendations of the National Commission on Social Security Reform in 1983 led to the growth of a large surplus in Social Security. This surplus was used to buy bonds and now Social Security holds more than $2.6 trillion in government bonds. As a result, the Congressional Budget Office’s projections show that the program will maintain full solvency through the year 2038. Even if Congress never makes any changes to the program, Social Security will be able to pay slightly more than 80 percent of scheduled benefits from then on.
If you were to retire at the normal retirement age for a person born in 1957, you would initially get a benefit of $34,802 (in 2011 dollars) per year through 2038 and starting in 2039, a benefit of $27,842 (also in 2011 dollars) each year for the rest of your life. Clearly a program that is projected to pay substantial benefits for decades to come is not in danger of bankruptcy.
Inside the country club, it was reported that you told the Greater East Dallas Chamber of Commerce that the budget crisis is fueled by growth in entitlement spending. In fact, under the law, Social Security can only spend money that came from its designated tax or the interest on the bonds held by its trust fund. It has no legal authority to spend one dime beyond this sum. In that sense it cannot contribute to budget deficits or the national debt.
As a co-chair of the “super committee” tasked with providing the rest of Congress recommendations on the nation’s deficit, I hope you and your staff will have the opportunity to further review the design and finances of the Social Security program. If you would like any additional background on the program, I would be happy to assist you.
