Social Security and the U.S. Federal Budget

Social Security’s receipts and expenditures are part of government activities; therefore, they are viewed as part of the entire federal budget. Social Security receipts equal approximately 26 percent of all federal receipts and about 23 percent of all federal expenditures.

Even though Social Security is part of the overall (also known as unified) federal budget, it receives special treatment within the federal budgeting process because of its size, its importance, and its funding source (the dedicated payroll tax). Special rules apply when Congress considers and acts on changes to Social Security financing and benefits. Social Security is generally exempt from budget process rules. This special treatment means Social Security is considered off-budget.

In addition to off-budget treatment, Social Security is part of a special class of programs for which Congress does not make a decision on the annual funding level for benefit payments. The number of people entitled to a benefit and the size of those benefits determines the funding level. However, Congress makes annual decisions on how much the Social Security Administration may spend on running the programs. Also, Congress may change the program rules, thereby altering the number of people entitled or the size of benefits.

Although Social Security is officially off-budget, documents from the Congressional Budget Office (CBO) and the Office of Management and Budget (OMB) continue to show the unified budget (which contains all federal receipts and expenditures, including Social Security), as well as budget totals excluding Social Security. These entities emphasize unified budget totals, because persons interested in the impact of government on the economy need to know the total income, expenditures, and borrowing of the government.