Social Security:

The Trust Fund Reserve Accumulation, the Economy, and the Federal Budget

HRD-89-44: Published: Jan 19, 1989. Publicly Released: Jan 31, 1989.

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In response to a congressional request, GAO discussed the current financing plan for federal social security programs, and the relationship of social security trust funds to the federal budget and the national economy.

GAO found that: (1) current social security trust fund balances are below the levels generally considered adequate to deal with unforeseen contingencies; (2) sometime in the next decade the trust fund reserves are estimated to reach adequate contingency levels of 150 percent of annual outlays; (3) Congress established a mechanism to increase trust fund reserves to offset benefit payments to a higher number of retirees beginning in the next century; (4) the current unified budget masks the effect of trust fund surpluses on the total budget because it draws from trust fund reserves to cover the deficit in the budget for current operations; and (5) financing the total deficit, which was increased as a result of the current funding mechanism, relieves the effect of natural saving on productivity growth.

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