Off Budget: Definition and Examples

A Little-Known Way Congress Takes From the Social Security Trust Fund

social security
••• Off-budget expenditures allow Congress to "borrow" from Social Security to make the deficit seem smaller. Photo by Chip Somodevilla/Getty Images

Definition: Off-budget is the revenue and spending of certain Federal entities that Congress wants to protect from the normal budget process. "On-budget" includes these entities, and is the total amount reported in the Federal "unified" budget. Off-budget spending is excluded from budget caps, sequestration, and pay-as-you-go requirements. 


The three main entities that are off-budget are the Social Security Trust Fund, the U.S. Postal Service, and Fannie Mae and Freddie Mac.


Social Security has been funded by payroll taxes since 1937. By 1962, there were more Baby Boomers working than there were retirees needing benefits. This meant the Fund had more than enough money to cover its costs. It invested the surplus in special Treasury bonds that paid a guaranteed return.

This was done off-budget. Otherwise, all that revenue would have made it look like the government was flush with cash, and Congress would have spent it all. There would have been none left to fund Social Security benefits when the Boomers retired.

However, calling the revenue off-budget didn't really protect it. Instead, Congress worked with two budgets. The real budget was the unified, which included off-budget items like the Social Security tax revenue. The official budget was the on-budget, which didn't include Social Security revenue. Instead, Congress ran a what looked like a deficit, but which was actually funded by Social Security.

 Payroll tax receipts that go into the Social Security Trust Fund are considered "off-budget", but are nevertheless used as revenue in the unified budget.

Fannie Mae and Freddie Mac were taken over by the U.S. Treasury Department in 2008 to prevent their bankruptcy, which would have disrupted the entire U.S. housing industry.

Prior to that, they were government-sponsored agencies, which meant they operated like a business but were guaranteed by the government. This disastrous hybrid led to their destruction. They are both government agencies now, but remain off-budget because the take-over was supposed to be temporary. For more, see Fannie and Freddie Bailout. (Source: Brian Faler, "Fannie Mae and Freddie Mac to Be Kept Off-Budget," BusinessWeek, September 12, 2008)

The United States Postal Service became another quasi-government entity in 1970. It tries to compete with supper-competitive FedEx, UPS and Amazon to meet your shipping needs. However, Congress requires it to be revenue neutral. It is supposed to fund all its operations from its revenue, like a business. For this reason, President Nixon move it off-budget in 1974.

However, Congress uses the unified budget to set policy for the USPS. It requires the agency to fully fund the pension for its workers, and pay for any military service by its employees. Although those funds are off-budget in the official budget, they are available for spending in the unified budget, just like Social Security Trust Funds. (Source: "How the Post Office Is Being Destroyed by a Phony Budget Crisis," On the

For example at how the off-budget total is recorded, take a look at the FY 2014 budget. The widely-reported on-budget deficit for FY 2014 was $646 billion. The off-budget surplus was $19 billion, thanks to Social Security revenue. The true deficit was the $646 billion, since that was a debt owed to Social Security. However, Congress spent like it really had a $19 billion surplus. For more, see The U.S. Debt and How It Got So Big?

Understand the Current Federal Budget

Related Definitions