The federal government has been borrowing from Social Security since 1937, the year the first payroll taxes were collected. It was not a later policy shift or a quiet raid on the fund. The Social Security Act of 1935 required the Treasury to invest any surplus in interest-bearing federal securities, which is the legal mechanism people now describe as borrowing.1Social Security Administration. Social Security Act of 1935
The 1935 Act Built This In
The original statute created an “Old-Age Reserve Account” and directed the Secretary of the Treasury to invest any portion not needed for current withdrawals. The only permitted investments were interest-bearing obligations of the United States.1Social Security Administration. Social Security Act of 1935 From the program’s first dollar of surplus, the cash went into the Treasury’s general fund and the reserve received a bond in return.
The 1939 amendments replaced the reserve account with the Old-Age and Survivors Insurance Trust Fund and created a Board of Trustees, but the investment requirement carried over.2Social Security Administration. Financing Social Security, 1939-1949: A Reexamination When Congress added disability benefits in 1956, the new Disability Insurance Trust Fund was set up under the same rules.3Social Security Administration. Social Security Amendments of 1956: A Summary and Legislative History The current statute, 42 U.S.C. § 401(d), still tracks the 1935 language closely.4Office of the Law Revision Counsel. United States Code Title 42 – Section 401
How the Borrowing Actually Works
Social Security runs two trust funds: OASI, which pays retirement and survivor benefits, and DI, which pays disability benefits. Both are managed by the Treasury and funded mainly by payroll taxes.5Social Security Administration. Trust Fund Data
When payroll tax revenue exceeds what the program pays out, federal law requires the Managing Trustee to invest the surplus in special-issue Treasury securities available only to the trust funds.4Office of the Law Revision Counsel. United States Code Title 42 – Section 401 The cash mixes into the general fund and becomes indistinguishable from other government revenue. In exchange, the trust funds hold bonds backed by the full faith and credit of the United States, the same guarantee behind Treasury bonds owned by foreign governments and private investors.6Social Security Administration. Frequently Asked Questions about the Social Security Trust Funds
The rate on these securities tracks the average market yield on marketable Treasury obligations with four or more years to maturity.4Office of the Law Revision Counsel. United States Code Title 42 – Section 401 In 2025, those rates averaged about 4.3%.7Social Security Administration. Interest Rates on Social Security Investments In 2023 the trust funds earned roughly $67 billion in interest.8Social Security Administration. 2024 OASDI Trustees Report
Why It Feels Like Something Changed
The mechanism is old. The political fight is not. For much of Social Security’s early history, the trust funds were small and sometimes ran short: expenditures exceeded income in scattered years during the late 1950s, the early 1960s, and continuously from 1975 through 1981.9Social Security Administration. Trust Fund Operations There was little to borrow, so no one argued about it.
That changed in 1983. The OASI fund was months from insolvency, possibly as early as August of that year. A bipartisan commission chaired by Alan Greenspan recommended tax increases, benefit adjustments, and coverage expansions designed to build a large reserve before the baby boomers retired.10Social Security Administration. Greenspan Commission Report Congress passed the Social Security Amendments of 1983, and the trust funds went from near-zero reserves to accumulating tens of billions each year. By the late 1980s, annual surpluses regularly topped $40 billion.9Social Security Administration. Trust Fund Operations
Public awareness grew with the numbers. During the 2000 presidential campaign, Al Gore repeatedly promised to put Social Security in a “lockbox,” a metaphor for walling off the surplus from the rest of the budget. The investment rule had not changed. What changed was how much money was flowing through it and how closely voters were watching.
The Social Security Administration has directly answered the “worthless IOU” claim. The agency says the investments are backed by the full faith and credit of the United States and that the securities are “just as safe as U.S. Savings Bonds or other financial instruments of the Federal government.”6Social Security Administration. Frequently Asked Questions about the Social Security Trust Funds Safe to hold and easy to repay are separate questions, and the second one matters more as the reserves shrink.
The Direction Has Reversed
The surplus era that began after 1983 eventually ended. In 2010, Social Security’s annual costs first exceeded its non-interest income in decades, driven largely by the recession’s effect on payroll tax collections.11Social Security Administration. The 2010 Annual Report of the Board of Trustees The program briefly recovered, then crossed over for good by 2015.
Since then, the trust funds have been redeeming Treasury bonds to cover the gap between benefits and payroll taxes. Each redemption forces the Treasury to repay principal and interest from general revenue.6Social Security Administration. Frequently Asked Questions about the Social Security Trust Funds In practical terms, the flow of “borrowing” from Social Security stopped years ago. The government is now paying it back.
What Happens When the Reserves Run Out
According to the 2025 Trustees Report, the OASI Trust Fund is projected to be depleted in 2033. Continuing payroll taxes would then cover about 77% of scheduled retirement and survivor benefits.12Social Security Administration. A Summary of the 2025 Annual Reports
Depletion is not the end of Social Security. Payroll taxes keep coming in, and benefits keep going out, just at a reduced level unless Congress acts. Under current law, the program cannot pay more than its balance and incoming revenue allow, and it has no authority to borrow on its own. The Treasury bonds it holds are valid federal obligations with a spotless repayment record. Repaying them still requires the government to find the money somewhere, whether from taxes, spending cuts, or borrowing from the public.