21.1 Are there any budget/expense analyses that address whether/how much funding of current entitlement programs (such as military and government pensions) are coming out of or funded out of Social Security trust funds?

There has been no analysis of this question. When the Social Security system runs a surplus, the excess revenue is invested in interest-bearing Treasury bonds. Both the principal and interest on the loan are legal obligations for the Treasury to pay back the money to the Social Security trust funds when due, just as the Treasury has a legal obligation to pay the principal and interest on U.S. Treasury bonds held by the public.

Once the money is loaned to the Treasury, there is no separate accounting of how much of this money, as opposed to other tax money, is used for particular federal activities.

21.2 What is meant by Federal budget surpluses as they relate to the Social Security system?

The Federal budget surplus is created in part by considering the invested money from Social Security in the "unified budget".

21.3 Why is income to the Social Security trust funds counted as a part of the federal budget?

Social Security programs were removed from the budget during the 1980's, but the budget policy makers continue to add them back into the "unified budget". This practice has continued despite legislative efforts to stop it, because the federal deficit would be much larger if Social Security excesses of income over outgo were not added back in. During 1998 alone, such excess is expected to be about $100 billion. When this $100 billion is included in the unified budget, the federal government operating deficit appears to be $100 billion less than actually is. The budget "surplus" to which the Congress and President refer exists only because of the Social Security excess of income over outgo. By the end of 1998, the total assets of the Social Security trust funds will reach about $750 billion--an amount that has helped to hide the true size of the federal deficit.

21.4 Why wasn't the use of federal budget surpluses originally considered as an option for reform?

Originally, the projected surpluses were not sufficiently large to make a significant difference; in the latest list of options, we have included the use of budget surpluses.

21.5 Is it true that the federal balanced budget includes the operations of the Social Security trust funds, and would it balance without it?

Social Security was removed from the budget during the 1980's, but the budget policy makers continue to add the operations of the Social Security trust funds back in to the "unified budget". This practice has continued despite legislative efforts to stop it, because the federal deficit would be much larger if Social Security excess of income over outgo were not added back in. During 1998 alone, the Social Security excess of income over outgo is expected to be about $100 billion. When this $100 billion is included in the unified budget, the federal government operating deficit appears to be $ 100 billion less than it actually is. The budget "surplus" that the Congress and President claim exists only because of the inclusion of the Social Security excess of income over outgo. By the end of 1998, the total assets of the Social Security trust funds will reach about $750 billion--an amount that has helped to hide the true size of the federal deficit.

21.6 Why does the operation of the Social Security program have to be included in the general budget?

The inclusion of the operations of the Social Security program in the "unified budget"should be done so as to enable Congress and the President to report smaller deficits (and now a surplus) than would be possible without so doing.. The size of the excess of income over outgo of the Social Security program has made it less and less politically popular to report the actual operating deficit of the federal government.

21.7 Why do we have a unified budget? Why isn't there a separate set of books?

Social Security was removed from the budget during the 1980's, but the budget policy makers continue to add Social Security back in to the "unified budget". This practice has continued despite legislative efforts to stop it because the federal deficit would be shown to be much larger if Social Security reserves were not added back in. During 1998 alone, the Social Security "surplus" is expected to be $100 billion. When this $100 billion is included in the unified budget, the federal government operating deficit appears to be $100 billion less that it actually is. The budget "surplus" to which the Congress and President refer exists only because of the Social Security surplus. By the end of 1998, the total Social Security assets will reach about $750 billion--an amount that has helped hide the true size of the federal deficit.

21.8 The gentleman who wanted all the Social Security funds to stay in the trust funds and be invested to increase the fund -- and not be used to balance the overall federal budget, which has left the fund in crisis -- was not answered to anyone's satisfaction. We, as citizens, have the option with IRA's and 401s to keep our money only as retirement funds and not as general use to help us balance our household budget. Why can't the Social Security Trust Funds do this?

The question of how Social Security Trust Funds should be invested --in government securities or the private market--is one that will be decided by the Social Security reform debate.

21.9 Why are we calling the budget "balanced" when we are borrowing so much from Social Security to "balance" our budget?

In order to determine the deficit or surplus in the federal government budget, the Social Security "surplus" ($100 billion in 1998) can be deducted from the deficit or surplus as calculated under the "unified budget".

21.10 If the Social Security fund money were not taken to put into the regular budget, wouldn't we have sufficient Social Security funds AND be able to lower FICA taxes?

No, the Social Security program would still face a financing shortfall in about 34 years even if Social Security funds were not invested in government securities and used by the government for other purposes.

21.11 How much does the government owe the Social Security trust funds?

As of December 1997, the $655.5 billion in Social Security assets was invested in government securities, the proceeds of which the government uses to finance its operations.

21.12 Why not end corporate subsidies? ($170 billion in corporate welfare yearly) and allocate those funds to Social Security or other essential programs? (And leave Social Security alone)

This proposal could be considered as part of the debate and is one that could be brought to the attention of your Congressional Representative and Senators.

21.13 Could you state simply how today's contributions are used in current budgets?

Social Security contributions that are not needed to finance current benefits are invested in government securities, which are backed by the full faith and credit of the U.S. Government, just as are government securities bought by private investors. The government pays interest to Social Security on these investments. The government then uses these proceeds to finance its operational budget shortfall.

21.14 What effect would the investment of a portion of Social Security funds in the equity markets have on the federal budget, since presently all money is invested in treasury securities?

This would have the effect of correspondingly increasing the reported budget deficit (or reducing the reported budget surplus).

21.15 When you say that we will have a surplus in the budget in 1998, are you including Social Security proceeds in this figure? If so isn't this a misstatement?

Yes, Social Security proceeds are included. Many people do believe that this is a misstatement.

21.16 Why is Social Security even a part of the U. S. budget?

Some budget experts believe that this is a better portrayal of the fiscal operations of the entire federal government.

The graph shows $30 billion per year of Social Security funds being used to underwrite the federal budget deficit. I've heard the figure of $100 to $110 billion per year as being used for this purpose. Please explain this discrepancy.

The $30 billion figure is only the excess of payroll tax receipts over outgo and does not include the $44 billion of interest receipts of the trust funds and $8 billion of receipts from the income taxes on benefits. Also, not included are similar receipts of several trust funds for other programs.

21.17 How exactly can the budget surplus be used to help fund Social Security?

Policy analysts are now studying this question. In one sense, the new surplus that exists in the unified budget is due to surpluses in the Social Security trust funds. A number a proposals are under consideration.

According to legislation enacted several years ago, the operations of the Social Security program have been taken "off budget," not to be included in the Federal Budget. However, Social Security's operations are included in the "Unified Budget," which is used primarily for determining how much the Treasury must borrow from the general public. In fiscal year 1998, the "Unified Budget" reported a surplus of $70 billion. However, included in that budget was Social Security's fiscal 1998 surplus of $99 billion (payroll tax receipts plus the interest income less benefits paid out).

21.19 In Fiscal Year 1998, there was an excess of income over outgo of $99 billion in the Social Security Trust Funds. Is this considered a part of the government surplus?

Using the "Unified Budget" approach, which includes the operations of the Social Security Trust Funds, the fiscal year 1998 results show a surplus of $70 billion. Excluding Social Security from the budget calculations would result in a deficit in fiscal 1998 of $29 billion.

21.20 How are the Social Security Trust Funds invested?

Under current law, any surplus in the Social Security Trust Funds must be invested in special-issue Treasury securities. The proceeds received from the "sale" of these securities to the Trust Funds are counted as general revenue just as income taxes, gas taxes, or cigarette taxes are counted. The securities themselves are public debt obligations of the government and, as such, are included in the reported National Debt. Each obligation has a fixed duration (prescribed by regulation) and a long-term fixed interest rate (prescribed under current law). These special issues cannot be bought by the public at large, but they are redeemable on demand at the face amount, plus accrued interest.

21.21 Does the U.S. Government use the Social Security Trust Funds surpluses for purposes other than Social Security?

The Social Security Trust Funds surpluses are invested in government securities and counted as general revenue. The Federal Government, in turn, can use the revenue for any legally authorized purposes it chooses. For example, the invested surplus could be used to finance highway construction, fund the operations of The Yellowstone National Park, or pay the salaries of FBI agents. Like the Federal Government, private corporations sell corporate bonds, and use the proceeds to fund their operations.