Does Social Security increase the national debt? It depends on how you define “debt.”

The national debt is, well, monumental. Currently, it’s north of $34 trillion.

There are all kinds of ideas for shrinking the government’s annual budget shortfall and minimizing its impact on the overall national debt. There are also varying views on which federal spending actually contributes to deficits. What’s the fiscal effect of Social Security, for example? When it comes to understanding whether Social Security contributes to the national debt, the analysis can get a bit squishy.

If you’re a politician, though, try not to touch it. The issue has been a bit of a third rail in American politics.

Marketplace’s Nova Safo spoke with senior Washington correspondent Kimberly Adams to learn more. The following is an edited transcript of their conversation.

Nova Safo: So when politicians talk about the national debt, Social Security spending often comes up as playing a big role. Why is that?

Kimberly Adams: Almost 70 million Americans receive Social Security benefits, and that program pays out about $1.5 trillion a year. But that is more than the program brings in from payroll taxes. So, according to Romina Boccia at the Cato Institute, the federal government has to use deficit spending to close that gap.

Romina Boccia: Social Security has added more than $110 billion to the national debt in 2023. And will add more than $500 billion to the national debt by 2033, because in order for Treasury to continue to pay full benefits, it has to raise money by issuing new bonds.

Adams: She mentions 2033 there because that’s one of the estimates for when the Social Security trust fund will run out.

Safo: And yet Social Security can’t run a deficit or add to the debt, isn’t that right?

Adams: Right. According to the law, Social Security cannot create debt or add to the deficit; it has its own separate budget. And the Social Security Administration, along with many researchers and progressive politicians, say the program doesn’t contribute to deficits at all. But the whole issue kind of turns on how you define “add to the deficit.” Right now, the Social Security shortfall is being filled by spending down past surpluses in that Social Security trust fund I mentioned. Doug Arnold has written a bunch of books on Social Security and is a professor emeritus at Princeton. He says the past surpluses in the trust fund are invested in special Treasury bonds.

Doug Arnold: And as Social Security needs them and will need them in the coming years, then Social Security will redeem those Treasurys, just as I would do in retirement, or as a pension fund would do, or as an ordinary investor.

Adams: The issue here is that to pay back those bonds, when Social Security redeems them, the federal government has to take on new debt — basically taking the debt held by the Social Security program and turning it into debt held by the private market. So, depending on whether you consider the Treasury Department paying its bond obligations as driving deficits or not, that’s what’s pretty much going to determine where you land on the question of whether Social Security is a big driver of the national debt.

Safo: So it’s a matter of what the definition of “debt” is?

Adams: Yeah, something like that.