We’ve all heard many different things about Social Security and its effect on the deficit. Well, it is not that complicated but it is a bit confusing so contradictory things can be said. One side (mostly Democrats) says Social security does not add to the deficit because such a large surplus was built-up and it is now being spend so we don’t need to worry for now but there are long-term problem. The other side (mostly Republicans) say there is a problem now and we need to correct it because it is contributing to the deficit.

Fact Check has had a series of articles about various claim on Social Security. Although they find inaccuracies on both sides, they have said on several occasions during the past few years that Social Security does contribute to the deficit.

So why the confusion? Often political claims are made to scare you into voting against the other guy. And quite often they are distortions or in some case outright lies. But in this case, both sides have some truth on their side. But neither tells the whole truth. Or at least that is how I look at it.

The fact is our government is paying our more than it takes in Social Security taxes. But the side that thinks this is not a problem points to Social Security having a cushion in saving from all those years of surplus. This is true, but as I see it, that is the confusing point.

The surplus is invested in US treasury bonds. Seems a reasonable thing to do as US treasury bonds are considered very safe investments. But when Social Security cashes these it, we need to borrow the money to pay Social Security for the bond.

So Social Security does contribute to the deficit.

But I guess you could say the same about any bond holder. Say Mr X has a US treasury bond. And the bond’s term is up and he cashes it and uses they money elsewhere. Is Mr X a contributor to the deficit? Say he decides to reinvest in treasury bonds. He will collect interest. That would also contribute to the deficit, too.

So is the fact that Social Security contributes to the deficit meaningful? Not in itself, I think. As we see in the above paragraph, paying our debts to investors also contributes to the deficit.

But it seems to me (but I am neither an economist or politician) that cashing-in US treasury bonds would increase the deficit but not cause an increase in the national debt. Confusing, isn’t it! The bond that was cashed it no longer a debt and even though we need to borrow to pay off the debt, the over all debt is the same. Of course interest is incurred in the new debt but it would have also been incurred with the old debt.

The real difference is we can chose to stiff our senior citizens but not other investors. If we refuse to pay back investors or pay them less than agreed, we go into default and nobody wants to lend us money (and we do need to borrow.)

But we certainly have a moral, if not legal, debt to seniors who have paid their taxes for years. The question is do we cut payments to them or adjust the system other ways. Remember this as we have our endless budget talks.