Trust Funds in Deficit Says CBO

The government is beginning to admit what TSCL and a few other senior advocacy groups have said for a long time—the Social Security Trust Fund is closer to being broke than it appears. The government recently “restated” the fiscal health of the nation’s Social Security, Civil Service Retirement, and Medicare trust funds. According to the CBO, the government’s trust fund accounting tends to be misleading.

The three trust funds appear to be running a surplus of $3.4 trillion over the next 10 years. “However,” says the CBO, “much of the trust funds’ income comes not from sources outside the government (tax revenues), but from credits from one government account to another.” The CBO continues, “In assessing the cash flow that trust fund programs generate, if one considers only the portion of their income that represents receipts to the government (or real cash revenues), the trust funds are projected to run a cumulative deficit of $1.2 trillion over the next 10 years. The apparent surplus,” says the CBO, “relies on both actual receipts and the government’s promise to pay itself.”

For example, only 25% of the funding for Medicare Part B benefits come from outside the general government revenues, that being from the premiums paid for by beneficiaries. Although the Social Security Trust Fund alone is not yet in deficit, overall, $95 billion, or 15% of Social Security’s so called projected income for fiscal year 2003 comes from government credits, and much of this is interest earned on the IOUs credited to the Social Security Trust Fund.

Because the rest of the federal budget is in deficit, Congress will face tough budget pressures this session that will only grow over time. Says the CBO, “when receipts for such programs as Social Security fall below their expenditures, the legal authority to pay benefits will exist as long as the trust funds have balances, but the government will have to generate cash to pay benefits either by running a surplus in the rest of the budget—which would probably require cutting other spending or raising taxes—or by borrowing from the public.”

Sources: “The Impact of the Trust Fund Programs on Federal Budget Surpluses and Deficits,” CBO, November 4, 2002. “Social Security and the Federal Budget: The Necessity of Maintaining a Comprehensive Long-Range Perspective,” CBO, August 1,2002. “Federal Debt and the Commitments of Federal Trust Funds,” CBO, October 25, 2002, http://www.cbo.gov.

For a related story see, “Deficits Put New Pressures on Social Security and Medicare Trust Funds,” at http://www.tscl.org/NewContent/101680.asp.

Social Security, Medicare, and Civil Service Retirement Trust Funds in Fiscal Year 2003 (in billions of dollars)

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