"Is it fair to say," Sen. Merkley said, "that Social Security does not contribute to the national debt?"
"I don't think that's right, Senator," Elmendorf responded, before explaining the fiction of the accounting of the Social Security trust fund.
"The program is actually a drain on the budget today," Elmendorf said. Social Security does collect money from interest payments made to the Social Security trust fund, but "even taking the interest on board, in 2017, the combined trust funds will be running a deficit even including the interest payments they're receiving."
It could be that Democrats have entirely bought into their own line on Social Security, which would be troubling and runs counter to the facts. Prominent Democrats like Sens. Dick Durbin, Harry Reid, Jeanne Shaheen, and Chuck Schumer have all claimed in the past that Social Security is not a problem today. To be as fair as possible to the Democrats, they could have just been relying on outdated information. Before the recession hit in 2008, Social Security was scheduled to take in more money than it paid out nearly through 2020. The economic hit of the 2008 recession put such a hit on the federal budget that the timeframe moved up. Social Security bleeds red ink now.
"By 2023, there will be about 40% more people receiving Social Security and medicare benefits than there were last year," Elmendorf told the committee. "The biggest factor pushing up spending is the aging of the population."
The CBO director also said that the ramp-up in entitlement spending was possible over the last 40 years due to draw-downs in defense spending. The end of the Cold War saw the U.S. shifting money away from defense spending and toward domestic entitlement spending. "This country had an expansion in social security and health care programs paid for by a reduction in defense spending... that method of financing those programs isn't available on that order of magnitude."
In other words, the promised future level of benefits to an increasingly-retired American population will be difficult to sustain. Even if Democrats thought that tax increases are all that's necessary to fix the budget, the level of tax increase would of an unprecedented scale and scope in American history. It's true that European countries sustain this kind of a tax-and-transfer state, but that's a policy world never experienced in the United States before.
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