Paul deLespinasse: Ron DeSantis either misunderstands Social Security or thinks voters do

In the third Republican presidential debate, Ron DeSantis said he would force Congress to stop borrowing money from Social Security. Hopefully, he has been badly briefed about Social Security finances by his staff.

If DeSantis actually understands Social Security financing, then his remark would have to be interpreted as a cynical attempt to take advantage of the fact that many voters don't understand it. This misunderstanding is reflected in claims that Congress has stolen the money in the Social Security Trust Fund, which at the beginning of 2023 contained $2.83 trillion.

Nobody has stolen a dime from the Trust Fund. Instead, the U.S. Treasury, as authorized by Congress, has borrowed the money, paying the usual rate of interest paid to anybody else who buys treasury notes and bonds. So the money in the Trust Fund is in the form of U.S. bonds, not cash, stock, or other assets.

The money in the Trust Fund has come from several sources. Most was collected from employers and workers through the employment tax (FICA), which for several decades was more than the annual outgo to retirees and other Social Security beneficiaries. During this time, when the U.S. population was much younger, the surplus was used to build up the Trust Fund.

Some of it comes from income tax on Social Security benefits paid by Americans whose total income exceeds a certain amount fixed by law. The rest comes from the interest the Treasury pays for the money it has borrowed from the Trust Fund.

For a few years now the annual income into the Social Security Trust Fund has been less than the money needed to pay Social Security benefits. To make up the difference, the Trust Fund sells enough bonds back to the Treasury to provide the needed cash. Actuaries estimate that the Trust Fund will run completely out of bonds it can cash about 10 years from now.

This does not mean that Social Security beneficiaries will lose all their benefits. But It does mean that current income from FICA, if that tax is not increased, would only allow paying beneficiaries about three-fourths of their full benefits. Of course this decrease would hit retired people who have no other income very hard, in some cases even fatally.

The reason I suspect that Governor DeSantis has been badly briefed on Social Security financing is that the Treasury hasn't been borrowing anything from Social Security now for several years, and in fact, is now gradually paying Social Security back. Unless the FICA tax is increased substantially, there won't be any surplus for the Treasury to borrow in the foreseeable future.

But if for some reason FICA and other Social Security financing were to produce a surplus again, it would make no sense to prohibit the Treasury from borrowing it. Social Security administrators are legally required to make prudent investments of any surplus in the Fund, and U.S. bonds are the most secure investment available.

The alternative places to invest any surplus would include stocks, which can take huge hits during recessions. Private bonds can also lose value when interest rates change. Sticking the surplus cash in a governmental "mattress" would produce no income and would allow inflation to erode the purchasing power of the money.

If the Treasury had not borrowed money from the Social Security Trust Fund, it would have had to borrow it from somewhere else. The source of its borrowing has no consequences for the total national debt.

Social Security not only helps older Americans avoid destitution, but it is also an important economic stabilizer during recessions. It is vital that the American people understand how it works, and even more vital that our leaders understand.

One hopes that Governor DeSantis, and other potential national leaders, will get informed advice before saying things that could confuse voters about this vital national program.

— Paul F. deLespinasse is professor emeritus of political science and computer science at Adrian College. He can be reached at pdeles@proaxis.com.

This article originally appeared on The Holland Sentinel: deLespinasse: DeSantis either misunderstands Social Security or thinks voters do