Did President Regan Spend The OASI Funds on Defense?

© William Larsen

There is a myth going around President Regan spent the surplus Social Security funds on defense. Well it simply is not true and the following is proof. Social Security publishes the cash flow for each year since 1937. This can be seen in this Table . It is very clear from this table The Old Age Survivors Insurance Fund was running negative cash flows in 1980, 1981, 1982, 1983 and again in 1984. There were no surplus funds to spend on defense. Further more the surpluses from the previous years were already spent. I know the government is creative with its book keeping, but double spending the same dollars would be very creative

Another way to show this is to look at a chart. This shows several negative cash flows and steep at that. Starting in 1985 a surplus materialized, but even adding together the next six years does not amount to much. 11

This shows how ludicrous it is to think of OASI as being possible to save money to make up for reduction in the work force from 3.3 to 2.0 workers per retiree. Do you really think saving this amount each year will replace what 1.3 workers pay in OASI each year?

This reveals there was no effort on previous generations to fund OASI. They paid low FICA taxes and increased the unfunded liability to what it is today.

This represents the unfunded liability by age. It is obvious the paltry $27 billion in surplus does not even begin to make a dent in the unfunded liability.

The single largest contributor to the OASI fund balance is interest credited for past surpluses. What are we doing here? We pay a surplus so we can pay more general revenue taxes to pay the interest? Many people may be mistaking the defense build up for the deficits when in reality it was the interest on US Treasury Notes. The Government mortgage the future back in the 1937!

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