Editing Social Security Trust Fund (section)

== An economic perspective ==

===Overview===
The Trust Fund represents a legal obligation of the federal government to program beneficiaries. Under current law, when the program goes into an annual cash deficit, the government has to seek alternate funding beyond the payroll taxes dedicated to the program to cover the shortfall. This reduces the trust fund balance to the extent this occurs. The program deficits are expected to exhaust the fund by 2034. Thereafter, since Social Security is only authorized to pay beneficiaries what it collects in payroll taxes dedicated to the program, program payouts will fall by an estimated 21%.

{{quote box|width = 250px|quote=Gross federal debt consists of debt held by the public and debt issued to government accounts (for example, the Social Security trust funds). The latter type of debt does not directly affect the economy and has no net effect on the budget. |source= — [[Congressional Budget Office]]<ref name=CBO15>{{cite web| author = CBO | title=The Budget and Economic Outlook 2015-2025| url=https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/49892/49892-breakout-Chapter1.pdf |accessdate= July 21, 2015|publisher= [[Congressional Budget Office]]}}</ref>}}

The trust fund is expected to peak in 2021 at approximately $3.0 trillion{{Update inline|date=December 2024|?=yes|reason=did it?}}.<ref name="ReferenceA"/> If the parts of the budget outside of Social Security are in deficit, which the [[Congressional Budget Office]] and multiple budget expert panels assume for the foreseeable future, there are several implications:
*Additional debt must be issued to investors to obtain the funding necessary to pay this obligation. This will increase "debt held by the public" while simultaneously reducing the "intragovernmental debt" represented by the trust fund.
*CBO reported in 2015 that: "Continued growth in the debt might lead investors to doubt the government's willingness or ability to pay its obligations, which would require the government to pay much higher interest rates on its borrowing."<ref name=CBO15/>
*Other parts of the budget may be modified, with higher taxes and lower expenditures in other areas to fund Social Security.<ref>[http://www.ssa.gov/OACT/TRSUM/index.html Social Security Trustees-2012 Report Summary-April 2012]</ref>
*Debate regarding whether the proper [[debt-to-GDP ratio]] for evaluating U.S. credit risk is the "debt held by the public" or "total debt" (i.e., debt held by the public plus intragovernmental debt) will be rendered moot, as the amounts will converge substantially.

On the other hand, if other parts of the budget are in surplus and program recipients can be paid from the general fund, then no additional debt need be issued. However, this scenario is highly unlikely.

===Commentary===
Some commentators believe that whether the trust fund is a fact or fiction comes down to whether the trust fund contributes to national savings or not.<ref name="nber.org">{{cite journal
|last = Nataraj
|first = Sita
|author2=John B. Shoven
 |title = Has the Unified Budget Undermined the Federal Government Trust Funds
|journal = NBER Working Paper No. 10953
|year = 2004
|doi = 10.3386/w10953
|doi-access = free
}}</ref>  If $1 added to the fund increases national savings, or replaces borrowing from other lenders, by $1, the trust fund is real.  If $1 added to the fund does not replace other borrowing or otherwise increase national savings, the trust fund is not "real".  Some economic research argues that the trust funds have led to only a small to modest increase in national savings and that the bulk of the trust fund has been "spent".<ref name="nber.org"/><ref>{{cite journal |last1=Samwick |first1=Andrew A. |title=Social Security Reform in the United States |year=2000 |doi=10.2139/ssrn.233130|citeseerx=10.1.1.597.6747 |s2cid=59474480 }}</ref><ref>{{cite journal
|last = Feldstein
|first = Martin S.
|author2=Jeffrey B. Liebman
 |title = Social Security
|journal = National Bureau of Economic Research Working Paper 8451 (September)
|year = 2001 }}</ref><ref>{{cite news
|last = Greenspan
|first = Alan
|title = Economic Outlook and Current Fiscal Issues
|publisher = Testimony before the Committee on the Budget, U.S. House of Representatives
|date = March 2, 2005}}</ref> Others suggest a more significant savings effect.<ref>{{cite book
|last = Diamond
|first = Peter A.
|author2 = Peter R. Orszag
|title = Saving Social Security: A Balanced Approach
|publisher = Brookings Institution Press
|year = 2004
|location = Washington, D.C.
|isbn = 978-0-8157-1838-3
|url-access = registration
|url = https://archive.org/details/isbn_9780815718383
}}</ref>