Social Security and the Budget


Current law requires that Social Security funds be dedicated exclusively to the program’s obligations and that any funds not needed to pay benefits immediately be invested in US Treasury bonds. These bonds, which are fully guaranteed by the US government, provide interest income to the Social Security trust funds.

Because Social Security has its own dedicated funding source and a sizable reserve, legislation adopted in 1990 permanently separated Social Security revenues, spending on benefits, and annual surpluses or deficits in the Social Security trust funds from the rest of the federal budget calculation (putting them “off budget”). The program’s administrative costs remain “on budget.”

When Social Security takes in more tax revenue than it needs to pay benefits, the Treasury borrows these excess funds from Social Security rather than borrowing from the public. When Social Security revenue is insufficient to pay benefits, Social Security may redeem trust fund bonds to make up this difference. These transactions do not affect the solvency of the program, but put a pressure on the rest of the budget. By redeeming the bonds, Social Security is making a claim on the Treasury to repay borrowed money. Satisfying this claim means either reducing funds available for other expenditures or raising taxes, or the Treasury’s borrowing from other sources.

The Social Security Administration (SSA) faces a number of significant challenges to maintaining the quality of its services. SSA needs employees who can respond to a multilingual and culturally diverse population of applicants and beneficiaries, as well as new hires to replace the large group of employees who are scheduled to retire in the next five years. The agency has a substantial backlog of both disability applications and continuing disability reviews.

Efforts to deal with SSA’s service problems, however, are hampered by insufficient funds. Although the agency’s administrative expenses are paid from the trust funds, Congress has not provided sufficient funds in recent years because SSA’s administrative expenses have been included as part of the non-Social Security spending that is subject to caps and across-the-board cuts. This means the agency’s funding has been kept artificially low in order to comply with spending targets unrelated to Social Security.

Social Security and the Budget: Policy

Social Security treatment

The Social Security trust funds represent a compact among generations that must be honored.

Changes to Social Security should be made only to strengthen its ability to provide guaranteed lifetime income, not to reduce the unified budget deficitThe amount by which annual expenditures exceed annual revenues. .

The costs of some proposed changes to Social Security, such as those that would finance private accounts with general revenueRevenue that can be used for any purpose. transfers, could affect the non-Social Security budget. Therefore they must be recognized and accounted for in a clear and transparent way.


AARP supports exempting Social Security’s administrative costs from limitations on discretionary appropriations in the federal budget.

AARP supports allocating sufficient funding to strengthen the administrative capacity of the SSA so it can better meet the needs of applicants and beneficiaries.

Found in Social Security and the Budget