The Washington Post has no idea how Social Security works
Let's start with a thought experiment. Suppose you want to purchase some U.S. Treasury bonds to add to your investment portfolio. And why not? Apart from cash, treasuries are the safest and most liquid financial instrument on the planet. Unlike cash, they pay interest.
When you buy treasuries you're effectively loaning money to the U.S. government. For each purchased bond, you fork over some money—conceptually the bond's "face value"—which the government takes and uses to fund its agencies, operations, projects, wars, whatever. The government gets to use your money for some some specified length of time, making periodic interest payments to you of a specified amount. When the bond reaches maturity after a predetermined number of years, it is retired and the government returns your money—the amount you loaned it initially—to you.
That's how bonds work.* The government takes your money, uses it, pays you interest while it's using it, and then gives your money back. (Corporate bonds are similar. When you buy a corporate bond, you're loaning money to a corporation, to build a factory, a pipeline, or some such.)
As a holder of treasuries you're one of the government's creditors. The government is a debtor that owes you money—the amount you loaned it. Treasury bonds you hold are part of the U.S. government's debt.
Here's where our thought experiment gets weird. Suppose, upon your bond's maturity, instead of returning your principal as promised, the government says: Sorry, the money has been spent. Hope you understand.
In the context of U.S. government debt, that would be absurd.†
But not too absurd for the Washington Post. In an editorial that egregiously misrepresents how Social Security is financed, the Post's editorial board said:
"Politicians have told seniors that they are simply getting back the money they paid in, but that’s not true. The government already spent the payroll tax money retirees paid during their careers. The money retirees receive today is funded by a combination of taxes on workers, who are on average poorer than retirees, and debt. It is a strange sense of morality which says that because the government lied to past generations it is bound to continue lying to current and future generations."
It's hard to know where to begin with this stupendously ignorant string of nonsense. Maybe we should start by saying that the money retirees receive today is emphatically not funded partially by "debt." The Post's claim about that is egregiously false. Social Security has always had its own dedicated funding stream, and still does: the "payroll tax" ("FICA" on your W-2). The government does not borrow money to fund Social Security.
Quite the contrary, in fact. Like you when you bought your Treasury bonds, Social Security is actually one of the government's creditors, a reality that turns the Post's narrative completely on its head. That's because for many decades, going back to the 1980s, the Social Security system deliberately and by design collected more in payroll taxes than was needed to pay current benefits at the time. (That strategy was designed by Alan Greenspan and the commission he chaired, and was enacted into law by Congress.)
The excess taxation was done in order to accumulate a large "trust fund" surplus that would be needed down the road to pay benefits when the large glut of baby boomers, which was moving like an enormous demographic bubble through the system, ultimately retired. If nothing had been done, current payroll taxes alone would be insufficient to pay benefits, so the trust fund surplus was created to augment them. That's what's happening now.
So what's the disposition of all those excess funds deliberately collected since the 1980s? It's a question the Post completely botches.
Those accumulated excess payroll tax receipts flowing into the trust fund had to be somehow invested until they were eventually needed, decades later. So Social Security did something sensible: It loaned the money to the government, through the purchase of special issue government bonds, created for that very purpose. (The trust fund's bonds can't be traded on the financial markets.)
That's not the only imaginable investment approach that could have been chosen, but there's nothing inherently wrong with it. The bonds pay a competitive interest rate. And lots of people, businesses, and other governments loan money to the U.S. government. Social Security's doing so is exactly analogous to what you did when you loaned money to the government when you purchased your Treasury bonds.
But the Washington Post's editorial board smells a rat. "The government already spent the payroll tax money retirees paid during their careers," complains the Post.
Already spent? That's the Post's way of saying the trust fund loaned money to the government, and the government went and spent it on stuff! Now it's gone. Too bad about that.
That's the very same sort of absurdity we uncovered in our thought experiment above, in which the government declined to refund your Treasury bond's purchase price on maturity, on the grounds that the money had been spent. (And why wouldn't it be spent? The government had no reason to borrow your money in the first place if it didn't intend to use it.)
Our example was contrived, but the Post extends the absurdity, out in the light of day, to the money loaned to the government by the trust fund. The money is gone—spent, alas, by a feckless government. Perhaps the Post thinks the money should have been stuffed under a mattress.
The Post, which is clearly out of its element, compounds its mistake. With the trust fund money spent and gone, the only recourse, reasons the Post, is to fund Social Security benefits by borrowing even more money. Good money after bad. At least we assume that's the reasoning behind the Post's false claim that Social Security is funded by "debt."
It's an age-old canard, advanced by persons who have no business opining on things they don't understand. Even persons who really ought to know better make this fundamental mistake. Which, by the way, is ample cause for despair about whether society more generally can reason its way to true conceptions of reality—a capability that's sorely needed to manage our joint affairs.
You might be wondering—the Post is surely wondering—how it can be that the money you loaned the government, and the money the trust fund loaned the government, was spent but still paid back. But isn't that how it is with loans? The money is used. Spent. To buy things. A house, for example. But the loan is ultimately paid back. If it wasn't, then it wouldn't be a loan.
You pay off your own debt by working and earning a living. The government pays off its debt by collecting taxes and issuing new debt, as needed, to replace the old.
Maybe it's the issuance of new debt that has the Post's panties in a bunch. Maybe that's why it falsely said that Social Security is partially funded by debt. Fear not: We can think our way through this easily enough.
The definitive proof that Social Security isn't funded by debt is to put on your accountant's visor and look at the government's books. Because the Social Security trust fund is an actual creditor (and a rather large one) of the U.S. government, the government's obligations to the trust fund are duly itemized in the official accounting of the U.S. national debt, which is the sum total of money the government owes to all its creditors. All those special issue bonds (presently over two trillion dollars worth) held by the trust fund are thus part of the debt, and you can look it up.
So when the trust fund needs to redeem (sell) some of its bonds to pay Social Security benefits, what happens? Here's what. The government issues new Treasury bonds and sells them to the financial markets to raise the needed funds. This is new debt. Don't panic. The government then uses the funds from its bond sales to buy back some of the trust fund's bonds—old debt—effectively retiring them while giving Social Security the money it needs to pay benefits. With those old bonds retired, the government now owes less money to the trust fund than before. Thus the trust fund's share of the national debt is reduced in the official accounting. The increase in the national debt thanks to the issuance of the new Treasury bonds, and the decrease in the national debt thanks to the retirement of some of the trust fund's bonds, cancels exactly. The overall national debt remains entirely unchanged. Meanwhile, the trust fund has been used to help pay benefits, exactly as designed. As those benefits are paid the trust fund's balance declines, exactly as you'd expect.
Somebody should tell the Washington Post's editorial board.
If you didn't get it, let me state it again: Even though new Treasury bonds are issued to cover trust fund redemptions, the size of the national debt remains completely unchanged through that maneuver, because bond issuance and bond retirement cancel. Social Security doesn't increase the debt, and never has. As I have previously explained, Social Security has never added a penny to the debt. It's entirely self-funded through the payroll tax. And it's never failed to pay any promised benefits, which means it's always been solvent and the trust fund's assets are real. Some benefits are paid by current payroll tax receipts, with the rest paid by payroll tax accumulations in the trust fund.
None of this is to say that the government doesn't partially fund itself with deficit spending. Of course it does. Whether that's good, bad, or indifferent is a completely separate question. It has nothing to do with Social Security or its finances. There is nothing more inherently wrong with the trust fund loaning money to the government than with you loaning it money through your purchase of Treasury bonds for your own portfolio. They're basically the same thing.
And by the way, if the trust fund didn't loan its money to the government, the government would easily fund itself by selling additional Treasury bonds. The notion that the trust fund is a nefarious enabler of deficit spending is ridiculous. The arrangement was chosen because Social Security has to invest its funds somewhere.
Also by the way, although the benefit formula isn't completely straightforward, there's a sense in which seniors really are "getting back the money they paid in," which the Post said, above, is "not true." At a minimum, all the money "paid in" is used for its intended purpose, and no additional money of any kind has been used. Not bad for a program that's almost a century old.
Way back in 2005, a person who considered himself wise in the ways of the world, government, and finance told me that "Social Security is broke - period." He also said the trust fund "for all practical purposes does not exist" (I wonder if his bond portfolio exists?) and that "everyone knows the budget is currently balanced with that money."
And that's the problem, now and then: Everyone knows.
It turns out that what "everyone knows" is just an unexamined prejudice, and always has been. Somehow even our best journalistic enterprises have not taken the trouble of finding out and explaining accurately. How can that be? As empirical intellectual exercises go, this is not nearly one of the hardest. It really is quite possible to understand how it all works.
Realizing that Social Security's critics were doing a lot of yammering but weren't ever actually explaining anything, and having had enough of the mindlessness being constantly flung about, I decided to go to the trouble of finding out for myself. The result was a 2013 piece that explains Social Security's funding in considerable detail. It describes how Social Security was originally conceived as a "pay as you go" system, but that the future retirement of the baby boomers necessitated enhancements made long in advance of that eventuality. The Post may not realize it, but it worked. Along with much else, my piece also explains the difference between the "deficit" and the "debt"—something people routinely misunderstand, as did my "wise" commentator above. If you want to have a basic understanding of how Social Security works, and how we got to this point, it's still a good read.
I maintain that understanding how the system actually works is a basic prerequisite for deciding how to extend its ability to pay benefits far into the future, as it always has in the past, with such obvious benefit to citizens. That's a topic of considerable and increasing urgency, one that, as far as I can tell, nobody important seems to be thoughtfully engaged with. Certainly nobody with a large megaphone is explaining it to the public at large.
Footnotes
*Mine is an idealized simplification that ignores Treasury auctions, primary dealers, secondary markets, the buying and selling at discounts and premiums as market interest rates change, and so forth. But it's conceptually correct and useful for purposes of this discussion.
†With bonds there's always a theoretical risk of default, but with U.S. Treasury bonds that risk is negligible.
Copyright (C) 2026 James Michael Brennan, All Rights Reserved
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