Which federal program took in more than it spent last year, added $95 billion to its surplus and lifted 20 million Americans of all ages out of poverty?
Why, Social Security, of course, which ended 2011 with a $2.7 trillion surplus.
That surplus is almost twice the $1.4 trillion collected in personal and corporate income taxes last year. And it is projected to go on growing until 2021, the year the youngest Baby Boomers turn 67 and qualify for full old-age benefits.
So why all the talk about Social Security “going broke?” That theme filled the news after release of the latest annual report of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, as Social Security is formally called.
The reason is that the people who want to kill Social Security have for years worked hard to persuade the young that the Social Security taxes they pay to support today’s gray hairs will do nothing for them when their own hair turns gray.
That narrative has become the conventional wisdom because it is easily reduced to a headline or sound bite. The facts, which require more nuance and detail, show that, with a few fixes, Social Security can be safe for as long as we want.
Let’s look at how Social Security taxes have grown in the last half century — a little-known tale of tax burdens shifted off the rich and onto workers. From 1961 through 2011, the year covered in the last Social Security report, Social Security taxes exploded from 3.1 percent of Gross Domestic Product to 5.5 percent.
Income taxes went the other way. The personal income tax slipped from 7.8 percent of the economy to 7.3 percent, with most of the decline enjoyed by people in the top 1 percent of incomes. The big drop was in the corporate income tax, which fell from 4 percent of the economy to 1.2 percent. Notice that the corporate income tax fell by 2.8 percentage points, an amount almost entirely offset by a 2.4 percentage point increase in Social Security taxes.