Social Security is probably the most widely discussed, but least understood, government program. Confusion is pervasive even among policymakers. In a recent letter to President Obama, a group of self-described experts claimed Social Security cannot run deficits and does not contribute to the federal budget deficit.1 But contrary to such claims, the latest Social Security Trustees’ report shows Social Security will run annual cash-flow deficits until 2036.2 These deficits, which began in 2009, could add trillions to the federal debt held by the public and hundreds of billions in annual interest costs. How could the experts be so wrong? This commentary explains the arcane budgetary treatment of Social Security and addresses some of the most common trust fund fallacies.

Highlight:

By 2036, Social Security’s annual cash-flow deficits could increase the federal debt held by the public by more than $12 trillion and the annual interest payments to the public by more than $600 billion.

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