(Plus I am getting slaughtered on my March Madness brackets)
It is clear from comments that there are fatal errors in understanding the relation of 'deficit', 'debt', 'unfunded liability', and ' 'on' and 'off' budget in relation to Social Security. So let me start with some top down observations and then follow up when I get home with that 'links' thing (not that easy from an iPad-doable, not easy). Feel free to flood comments with 'WTH are you saying 'cause everyone knows---" type questions, maybe we can start a dialogue.
Let's start with apparent paradoxes. Social Security surpluses, not limited to cash surpluses but also accrued interest on existing Trust Fund balances are counted as such for the top line deficit/surplus number used by OMB and by CBO in legislative scoring. That is OMB treats them as 'receipts' even as that portion of interest not needed to pay benefits comes in the form of 'Special Issue' Treasuries that are not financed as such. At the same time all of those Special Issue Treasuries whether the product of borrowing any cash surpluses or simple creation by Treasury (your Paulite 'fiat money') are carried on the books of Treasury as part of the 'Intragovernmental Holdings' of the $14 trillion in 'Public Debt'.
Before going on in Extended let's sum that up. Total Social Security surpluses from all sources count as 'receipts' to OMB and CBO, as 'assets' to SSA, and as 'debt' to Treasury-all at the same time. Which begins to explain the all too typical conceptual confusion.
Okay which leads us to 'off-budget' and 'on-budget'. At various times various components of federal spending have been considered to have been legally 'on' or 'off' budget. This has never actually made much difference to the budget number reported to the public as THE budget deficit which has almost always been the 'unified budget' number however legally defined, nor does it align neatly with the difference between 'mandatory' and 'discretionary' spending in that most categories of the latter former are officially 'on budget', in fact under current law the only two categories of spending that are 'off budget' are the Post Office and the DI and OAS Insurance programs that together are known as Social Security. Of particular note is that Medicare Part A-Hospital, which is wholly financed out of FICA payroll in the same way OASDI is, is on-budget right alongside Parts B and D and the hybrid financed Part C. To repeat 'on' and 'off' budget don't map either with the distinction between 'mandatory' and 'discretionary' or that between 'general fund' vs 'dedicated revenues', these are three different animals. In fact most people would be better served just ignoring the whole concept of 'off budget', it doesn't aid any clarity to the debate to say the least.
Moving on. Opponents of Social Security love to claim that left un-fixed it just means handing huge debts to our grandchildren, in fact they like to total that 'debt' not just over the standard 75 year window but over the 'Infinite Future Horizon'. This is total bunk, properly considered Social Security has no unfunded liability, mostly because it is not in a legal sense a liability at all. Breaking it down:
Under current law Social Security has a current year revenue stream made up of FICA payroll tax and tax on benefits. This is supplemente as needed, but only if needed, by interest on the $2.6 trillion Social Security Trust Fund, and ultimately by the assets in those Trust Funds, almost exclusively held in Special Issue Treasuries. The key words being "as needed" and "ultimately". Because here is the mind-blower: if Social Security was ever restored to pure Pay-Go status ( which would take small tweaks on the FICA side) it would NEVER have to redeem it's principal and only have to draw down an estimated 45% of it's interest earning to pay benefits. The Trust Funds ARE NOT PENSION FUNDS in the way a State Retirement Plan or corporate pension plan generally are, in particular SS is not exposed to the gyrations of the market over the short to medium term, and while it is sensitive to long-term economic performance, the benefit formulas are set in a way that serve to buffer it against bad times while allowing beneficiaries to benefit from the good times that occur over their working lifetimes.
So what is this 'unfunded liability'? Well it is the theoretic gap between the current schedule of benefit costs and currently projected revenues under a shared set of economic assumptions whether measured in Present Value cash terms, or as a percentage of covered payroll or GDP going forward. Present Value continues to confuse me even after years of looking at these numbers but it seems to ask you to examine SS as if it were a pension fund and ask what extra balance it would need to fully finance scheduled benefits. But this is a screwy way to look at SS, there are Supreme Court rulings (see Flemming v Nestor) that held that retirees have no enforceable claim to any level of benefits, and indeed most 'reform' proposals seek to change the schedule, acknowledging that there is no legal liability at all. In fact under current law all $5 trillion plus of 75 year 'unfunded liability' or $17 trillion over the Infinite Future simply vanishes at Trust Fund Depletion, the 'liability' vanishes. Equally most or all of it would vanish with very small revenue tweaks on the front end, in this case eliminating the 'unfunded' piece. One way or another the gap WILL be addressed by the 2030s, projecting those numbers past 2085 just being an attempt to introduce really big,really scary numbers into the discussion to distract us from the real sizes of the fix needed to deliver real retirement security.
I expect this to raise more questions than it answered, heck that was the point. Over to you.