U.S. budget deficits have increased substantially in recent years—rising as high as $3.13 trillion in fiscal year 2020. As partisan finger-pointing over the deficit and national debt continues, leftist social media accounts are forwarding the claim that Social Security and Medicare do not contribute to the deficit and that Republican tax cuts are to blame. A viral Facebook post from MoveOn quotes actress Valerie Bertinelli saying that “the drivers of the deficit ARE THE TAX CUTS REPUBLICANS HAVE BEEN GIVING BILLIONAIRES FOR DECADES,” and that “Social Security and Medicare are paid for by the taxes the REST OF US HAVE ALREADY PAID AND CONTINUE TO PAY.”
The federal deficit—the difference in any given fiscal year between government income and government expenditures—generally increases when taxes are cut. President Donald Trump’s signature 2017 Tax Cuts and Jobs Act (TCJA), for example, was projected by the Joint Committee on Taxation and the nonpartisan Congressional Budget Office to reduce federal revenues by about $1.5 trillion over 10 years, directly contributing to larger budget deficits. But tax cuts are far from the only driver of the national debt.
“Social Security and Medicare absolutely add to budget deficits. In fact, in 2024, the systems will spend $685 billion more than they collect in premiums, payroll taxes, and other dedicated revenues,” Brian Riedl, economist at the Manhattan Institute told The Dispatch Fact Check. “That $685 billion is absolutely included in the annual budget deficit.”
Social Security—which made up 21 percent of federal spending in fiscal year 2022—does not receive funding allocated by Congress, which often leads to confusion around how it contributes to deficits. Instead, the program taps into two trusts funded by a dedicated payroll tax. These trusts are legally restricted from borrowing, so the program can run a deficit only if that deficit is offset by prior surpluses.
“Social Security ran $3 trillion in total surpluses between 1983 and 2009, which gave the program permission to run $3 trillion in deficits from 2010 through 2034,” Riedl explained. “But those deficits still exist, and are counted in the annual deficit totals.” Social Security invests surpluses into special-issue U.S. Treasury notes, and it must redeem those federal bonds whenever it runs a deficit. The interest on these bonds is a direct contributor to government spending, and as such is also a direct contributor to the deficit. “Taxpayers transfer more than $100 billion annually in trust fund interest costs into Social Security—which also contribute to annual deficits,” Riedl said.
Medicare, like Social Security, also contributes to the deficit. Part A is funded through the Hospital Insurance trust fund, which—as with Social Security—is paid for primarily through payroll taxes. However, Medicare parts B and D are funded through a different trust—the Supplementary Medical Insurance trust fund—which draws most of its funding directly from general revenue authorized by Congress. “Medicare Part A is funded with a trust fund like Social Security, but Medicare parts B and D are funded roughly 75 percent by general revenues with no payroll tax or social insurance pre-funding whatsoever,” Riedl explained. In fiscal year 2022, Medicare spending made up 13 percent of all federal government expenditures.
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