At about 5 percent of the nation’s Gross Domestic Product (GDP), Social Security is a significant portion of the economy. As Social Security relates to the economy, it is important to understand that while the government is providing these benefits to Americans these same Americans are spending their benefits that stimulate the economy. The National Academy of Social Insurance released a recent report, found below, that examines Social Security’s role in GDP and shows how much Social Security is expected to account for the country’s GDP in the future.
Social Security as a Share of the Economy
Because more people will receive benefits, Social Security will grow faster than the total economy, or gross domestic product (GDP). How much faster will it grow as a share of the economy?
Social Security benefits amounted to 5 percent of GDP in 2016. By 2035, Social Security benefits in current law are projected to be 6.1 percent of GDP. That is an increase of 1.1 percentage points over the current cost of the program.
How does that 1.1 percentage point increase compare with past changes in national spending when the baby boomers were children? Public spending for education grew about twice as much as the projected increase in Social Security. Public education spending – by local, state and federal governments – grew from 2.5 percent of GDP in 1950, just before boomers began to enter kindergarten, to 5.3 percent of GDP by 1975. This was an increase of 2.8 percentage points.
Many proponents for reducing Social Security benefits say it is the only way for Social Security to sustain the ability to pay benefits to Americans, but they never provide the entire story. If benefits are cut so too is the stimulus beneficiaries contribute to the economy.
