Which presidents borrowed from the social security fund? (2024)

Social Security provides various forms of benefits to millions of retired workers and their families, disabled workers, and survivors of deceased workers. It is funded with payroll taxes from workers, taxes on benefit payments, and interest on funds held by the treasury. However, there are concerns about the solvency of Social Security, with critics attributing the cash shortfalls to the plundering of Social Security by successive governments.

Since 1983, every US President has borrowed from Social Security to pay for government expenditures. However, there is no evidence that any of the presidents has stolen a dime from Social Security. Usually, payroll taxes paid by workers are deposited in the trust funds, and the surplus funds are invested in special-issue securities that are backed by the full faith and credit of the US government.

Did Bush borrow money from Social Security?

There were beliefs that George W. Bush financed income tax cuts and the Iraq war by plundering money from Social Security. These beliefs were attributed to the following statement:

Next time a Republican tells you that ‘Social Security is broke,’ remind them that Pres. Bush ‘borrowed’ $1.37 trillion of Social Security surplus revenue to pay for his tax cuts for the rich and his war in Iraq and never paid it back”.

The statement appeared in a 2009 newsletter post by Allen W. Smith, a professor of economics at Eastern Illinois University. PolitiFact rated this statement as "mostly false" since the statement was a false interpretation of how the Social Security trust fund system works. Bush, like other former presidents, borrowed from the Social Security asset reserves to finance government expenditures.

The amount that Bush borrowed was $708 billion, which is nearly half of the $1.37 trillion that the statement claimed the Bush regime borrowed. Additionally, the claim that Bush never paid back the amount borrowed is false. The special-issue bonds have maturities of up to 15 years, the Treasury repays these principal and interest amounts when the Trust Funds start redeeming the bonds. The bonds only became redeemable in 2020, long after the Bush presidency ended.

How Congress borrows from Social Security

Congress requires the US Treasury to invest Social Security income in securities guaranteed as to both principal and interest by the federal government. The Treasury issues special issue securities specifically for Social Security as it does for US Treasury bonds.

However, special issue securities vary from US treasury bonds in several ways- they are not tradable, they are only purchased with payroll taxes, and they are only made available to the Trust Funds. When the special-issue securities mature, the treasury redeems the bonds and uses the proceeds to pay Social Security benefits.

When the US Treasury creates the bonds, it sends payroll taxes collected from American workers into the General Fund. The federal government uses the funds in the general fund to pay for government expenditures- this is how presidents have borrowed from Social Security over the years.

When the Treasury needs to pay for benefits, it uses the General Fund to redeem the special-issue bonds, plus the corresponding interest. The principal amount of the special issues redeemed and the interest income are enough to pay the required cost.

Did Congress steal from Social Security?

One of the arguments why Social Security is staring at a cash shortfall is that Congress raided the Social Security trust funds and never paid back the money. There were claims that lawmakers comingled the Social Security asset reserves with the General Fund to finance the war and tax cuts. However, these claims are incorrect, and Congress has not pilfered any Social Security monies.

The law requires Social Security asset reserves to be invested in special issue securities, instead of letting the cash sit in a vault. This means that the $2.9 trillion in cash reserves that Social Security has accumulated over time are required to be invested in special issue securities that are specially issued by the Treasury for Social Security. The bonds are backed by the full faith and credit of the federal government.

Since these bonds are sold by the federal government, it means that the government is borrowing money from Social Security and paying interest on the amount borrowed. Otherwise, if the money was not invested, it would lose value through inflation. The Congress’ borrowing is expected to yield $804 billion in aggregate interest income between 2018 to 2027.

The law gives Congress access to the payroll funds to finance government expenditures, and it is responsible for appropriating and determining how the funds will be spent. If the president needs to finance a deficit, he must submit the proposed budget to Congress to secure funding.

What is the Social Security Trust Fund?

The Social Security Trust Funds comprise the Old Age and Survivors Insurance (OASI) and the Disability Insurance (DI) Trust Fund. These Trust Funds are managed by the Department of Treasury, and they provide an accounting mechanism for tracking incomes and benefits payments and holding accumulated asset reserves. Social Security uses the accumulated reserves to pay benefits to eligible beneficiaries.

The OASI trust fund pays benefits to retired workers, their spouses and children, as well as families of deceased workers, while the DI Trust Fund pays benefits to disabled workers and their families. Both funds are funded with payroll taxes- workers contribute 6.2% of their pay, while employers match a similar percentage. A Board of trustees manages the trust fund’s operations and is required to report the financial status of the trust funds to Congress annually.

How are Trust Funds invested?

Surplus funds to the trust funds must be invested in "special issue" securities guaranteed by the federal government. Social Security purchases special-issue securities from the federal government at a defined interest rate.

This, in essence, means that the federal government borrows money from Social Security at different interest rates and maturity dates to finance deficit spending. The special issues can be redeemed at any time at face value, and they give Social Security the same flexibility as holding cash.

In the past, the federal government’s ability to tap into the Social Security surplus reverses has been incorrectly interpreted to mean that the funds have been pilfered or raided, with no chance of the government paying back. However, this is misleading, since the amount borrowed is paid back when the bonds mature.

Which presidents borrowed from the social security fund? (2024)

FAQs

Which presidents borrowed from the social security fund? ›

Since 1983, every US President has borrowed from Social Security to pay for government expenditures. However, there is no evidence that any of the presidents has stolen a dime from Social Security.

Has the government paid back what they borrowed from Social Security? ›

According to the SSA, the government is obligated to pay back borrowed funds and has never failed to do so. The interest that the government pays to borrow this money is additional income for Social Security, according to Johnson, which helps to provide funding for benefits.

How much money does the US government owe for Social Security? ›

As of December 2022 (estimated), the intragovernmental debt was $6.18 trillion of the $31.4 trillion national debt. Of this $6.18 trillion, $2.7 trillion is an obligation to the Social Security Administration.

When did the government start taking money from the Social Security Fund? ›

The taxation of Social Security began in 1984 following passage of a set of Amendments in 1983, which were signed into law by President Reagan in April 1983. These amendments passed the Congress in 1983 on an overwhelmingly bi-partisan vote.

What did Reagan do to Social Security? ›

December 29, 1981 President Reagan signed legislation which, among other changes: restored the minimum Social Security benefit; provided the trustees of the various trust funds with the authority to borrow from each other through December 1982; made changes in sick pay reporting; and increased the penalties for misuse ...

Which president pulled money from Social Security? ›

Bush financed income tax cuts and the Iraq war by plundering money from Social Security.

What happens to Social Security if the debt ceiling isn't raised? ›

Under normal conditions, the Treasury sends Social Security payments one month in arrears. That means the check you receive in June covers your benefits for the month of May. If the debt ceiling isn't raised, the Social Security payments due to be sent to beneficiaries in June would most likely still go out.

How do I get the $16728 Social Security bonus? ›

Have you heard about the Social Security $16,728 yearly bonus? There's really no “bonus” that retirees can collect. The Social Security Administration (SSA) uses a specific formula based on your lifetime earnings to determine your benefit amount.

How much does China owe the US? ›

China (Mainland)

China is the U.S.'s second-largest foreign creditor, owing more than $1 trillion of U.S. debt. With 1.4 billion people, the world's second-largest economy and rapid economic growth, mainland China is an undisputed economic powerhouse [source: World Bank].

Where does the money in the Social Security Trust Fund come from? ›

Introduction. Social Security benefits are paid from the reserves of the Old-Age, Survivors, and Disability Insurance ( OASDI ) trust fund. The reserves are funded from dedicated tax revenues and interest on accumulated reserve holdings, which are invested in Treasury securities.

Which president started Social Security payments? ›

President Franklin Roosevelt would choose the social insurance approach as the "cornerstone" of his attempts to deal with the problem of economic security. On June 8, 1934, President Franklin D. Roosevelt, in a message to the Congress, announced his intention to provide a program for Social Security.

At what age is Social Security no longer taxed? ›

Social Security tax FAQs

Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.

Why is Social Security taxed twice? ›

The rationalization for taxing Social Security benefits was based on how the program was funded. Employees paid in half of the payroll tax from after-tax dollars and employers paid in the other half (but could deduct that as a business expense).

Which president wanted to privatize Social Security? ›

February 2005 – Republican President George W. Bush outlined a major initiative to reform Social Security which included partial privatization of the system, personal Social Security accounts, and options to permit Americans to divert a portion of their Social Security tax (FICA) into secured investments.

Which political party gave us Social Security? ›

Portrait of Theodore Roosevelt.

As a third-party candidate in 1912 he was the first to propose that America adopt social insurance, and his Progressive Party (aka the "Bull Moose" party) adopted the proposal in its platform.

How much has Congress borrowed from Social Security? ›

The fact is that Congress, despite borrowing $2.9 trillion from Social Security, hasn't pilfered or misappropriated a red cent from the program. Regardless of whether Social Security was presented as a unified budget under Lyndon B.

How does the government pay back borrowed money? ›

Here is how Treasury securities - such as savings bonds - generally work. People lend money to the Government so it can pay its bills. Over time, the Government gives that money, plus a bit extra, back to those people as payment for using the borrowed money. That extra money is "interest."

What is a strange but true free loan from Social Security? ›

The brief's key findings are: An unconventional strategy allows individuals to use early Social Security benefits like a “free loan,” paying back the principal while keeping the interest. If this strategy were widely adopted, it would cost Social Security $6 billion to $11 billion per year today and more in the future.

How much money is in the Social Security Trust Fund? ›

This is one year later than projected in last year's report. While most of Social Security's benefits are funded by the payroll taxes collected from today's workers, the program has also accumulated $2.9 trillion in trust fund reserves over the past three decades.

Is Social Security giving back pay? ›

Types of SSDI Back Pay

Retroactive payments are designed to cover up to 12 months prior to the date the SSDI application is filed, assuming the individual can demonstrate that they were disabled during this period and meet the SSDI eligibility requirements.

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