Has Congress Really Stolen Trillions From Social Security? Here's the Truth

"Congress stole trillions of dollars from Social Security and left it with nothing but worthless IOUs."

You've probably heard similar statements. I certainly have. With public approval of the U.S. Congress at only 16% -- lower than it has been for root canals, head lice, and colonoscopies in the past -- it's not surprising that many Americans believe this claim.

But has Congress really stolen trillions from Social Security? Here's the truth.

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What actually happened

Many viral claims have at least some truth to them. That's the case here. The U.S. Congress has spent a boatload of money obtained from the Social Security Trust Funds to fund general government operations. And the Trust Funds were given, as you might say, IOUs in exchange. However, there's more to the story.

When Americans pay FICA payroll taxes, the money goes into the Social Security Trust Fund. But that cash isn't stored in a vault somewhere. Any surpluses above what's required to pay Social Security retirement and disability benefits must be invested, by law, in special-issue U.S. Treasury bonds.

While these bonds are basically IOUs, they're definitely not worthless. The securities, like all U.S. Treasuries, are backed by the full faith and credit of the U.S. government. They also pay interest to the Social Security Trust Funds. Issuance of these special bonds adds money to the U.S. Treasury's general fund. When Congress authorizes spending for government programs, the Treasury Department draws on the general fund.

The unvarnished truth

The claim that Congress stole money from Social Security reflects a misunderstanding of how the Social Security Trust Funds work. However, there is a real problem for the Social Security Trust Funds: They're running out of money. Unless something is done, the combined Trust Funds will be depleted by 2034.

The issue isn't theft; it's demographics. The worker-to-retiree ratio is much lower than it was when Social Security was launched. Americans are living longer. Birth rates are lower. Automatic cost-of-living adjustments (COLAs) are also given each year, unlike initially.

Social Security won't go bankrupt, by the way. Payroll taxes will still flow into the program, but they'll likely cover no more than 80% of benefits.

Ideally, Americans should create retirement plans that don't depend entirely on Social Security for income. And if you want to be outraged at Congress, the most productive thing to do is direct your ire at encouraging your representative and Senator to take the steps needed to bolster Social Security's finances.

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