Social Security Trust Funds as Contingency Reserves

摘要

The various purposes of trust funds, including to have a contingency reserve against the decline in tax revenues occurring during a recession, are explored. Attention is focused on the four different trust funds: old-age and survivor's insurance (OASI) disability insurance, hospital insurance, and supplementary medical insurance through which the financial activities of the U.S. social security programs are handled. An econometric model of the OASI insurance program is employed to explore the implications of the contingency rationale for the size of the OASI trust fund. It is assumed that the goal is to have a sufficient reserve to service, without a recession, slightly more than the present one, without having to raise taxes until unemployment falls below 6 percent. It is concluded that the OASI trust fund balance must be equal to about 60 percent of outlays at the time recession begins.