Word: surpluses
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...surplus can be invested only in Government-insured securities. So far the trust fund has been used to buy Treasury issues -- in effect, financing part of the federal budget deficit. Legislators, however, have proposed using the money for everything from expanding current Social Security benefits to paying for housing for the homeless. Others clamor for a tax cut. Many Washington watchers fear that the Government will simply fritter away the reserve, leaving nothing to the future. Says Geoffrey Carliner, executive director of the National Bureau of Economic Research in Cambridge, Mass.: "As politicians see the trust fund build...
...development. Republican Congressman Bill Green of New York wants to invest the fund in public works like housing projects. Says he: "The future, albeit temporary, riches of the Social Security system offer us a genuine opportunity to deal with some pressing national needs." But critics charge that using the surplus for general governmental programs creates a demand that is hard to turn off once the need for the retirement funds is at hand...
...better strategy, says Democratic Senator Daniel Patrick Moynihan of New York, would be to save the surplus and, in the process, put the U.S. back on solid financial ground. His plan: continue buying Treasury securities. If Congress were actually to balance the budget, the Government could use the Social Security surplus to buy back gradually the nation's $3 trillion debt from its domestic and foreign owners. Instead of tying up their resources in Government IOUs, investors would have to funnel their assets into private industry. This would promote economic growth. The process, says Moynihan, "will put the federal budget...
Already, three other nations have faced similar surplus quandaries. Japan restricts excess retirement money to a reserve fund, which boosts the country's savings rate. The Canadian government lends its pension cushion to provinces to support schools and build roads, and Sweden's fund is used to finance mortgages and pay off debt. Lending the money can be a good idea, says Barry Bosworth, a senior fellow at the Brookings Institution, "if the loan goes to develop capital growth and productivity rather than consumption...
Other experts worry about just the opposite possibility: that the Social Security program will push the overall budget substantially into surplus. If Government revenues far exceed spending, less money will be available for businesses and consumers. That could produce a drag on the economy or even a recession. Already, says Robert DiClemente, a senior economist at Salomon Brothers, "many people are now paying higher ((Social Security and Medicare)) payroll taxes than income taxes." The thing to do, argues Robert Myers, chief actuary of the Social Security Administration from 1947 to 1970, is to cut the payroll tax so that...