Reagan Errs in Claim That Social Security, Deficit Aren’t Linked

President Reagan has said repeatedly that Social Security, which is independently financed through its own trust fund, “is not part of the deficit problem.” But spending on Social Security, the focus of an intense budget debate in the Senate on Wednesday, does in fact directly affect the budget deficit.

Although Reagan was correct when he said that “if Social Security spending were reduced, you could not take that money saved and use it to fund some other program,” every surplus dollar in the Social Security fund actually reduces the federal deficit by an equal amount and is used to avoid federal borrowing elsewhere.

The surplus in the Social Security trust fund, along with similar surpluses in the trust funds for Medicare, highways, airports and others, is lent to the U.S. Treasury--cutting the amount it needs to borrow from the public to finance the deficit, which is expected to hit $227 billion in fiscal 1986 unless current law is changed.

“Of course, Social Security reduces the deficit,” one Administration budget official said in an interview. “It’s just not an issue.”

‘That’s a Problem’

But, when asked why Reagan often has emphasized that reducing Social Security outlays would not reduce the deficit, the official acknowledged: “That’s a problem for us, yes.”

Under the budget package disclosed last month by the White House and Senate Republican leaders, all but the poorest Social Security recipients would receive somewhat less than a full inflation adjustment, saving $2.5 billion from the deficit next year and about $20.9 billion over three years.

The proposal calls for Social Security beneficiaries to receive a minimum increase of at least two percentage points less than the inflation rate over the next three years, with a guarantee of at least a 2% increase each year.

If Congress eventually approves the limit on Social Security adjustments, the savings would add to the surplus in the Social Security fund, which stood at $27.1 billion at the end of 1984. Without any change in current law, the surplus is expected to increase to $120 billion by the end of 1989.