Time magazine has just published online the latest in the media’s unceasing stream of alarmed reports on Social Security, declaring that the next president will have to face up to “one of the largest financial issues facing the country: shoring up Social Security.”

Unfortunately, Time’s analysis is undermined by a glaring misstatement about the program’s fiscal condition. “Since 2010,” reports the author, Penelope Wang, an editor at large at Money magazine, the program has been “running at a deficit, with tax revenues falling short of the benefits being paid out.”

This is fundamentally incorrect. Social Security is not running at a deficit. It’s recording a surplus and has done so every year since well before 2010… Last year alone, its surplus was $51 billion…

Measuring benefits against “tax revenues,” as Wang does, reflects at best a fundamental misunderstanding of Social Security’s revenue streams. They comprise more than current payroll taxes, which presumably is what Wang means by “tax revenues.” They also include interest on Social Security’s Treasury bonds, which constitute an asset portfolio currently amounting to about $2.8 trillion, and income taxes on Social Security benefits.

It’s fashionable for conservatives and the misinformed to dismiss the bonds as merely “IOUs” from the government, but in fact they’re real assets — as real as the T-bonds in institutional and individual portfolios all over the world — and are backed by the full faith and credit of the US government. More important, they represent past payroll taxes paid by millions of American workers, but collected in excess of benefits paid out each year. The excess has been banked by lending it to the government, with interest, in the form of bond purchases. There’s no justification legally, morally or logically for treating those interest payments as somehow illusory or irrelevant to Social Security’s financial condition.

—Michael Hiltzik
How Did Time Magazine Get This Essential Fact About Social Security So Fundamentally Wrong?