What would be the impact on the federal budget of diversifying the trust funds into stocks?
Investing trust fund assets in equities would have the immediate effect of decreasing the federal budget surplus (or increasing a deficit if there is one in that year). That s because current accounting rules consider stock purchases to be a federal outlay, just like spending on roads or tanks. In contrast, the current practice of investing excess payroll taxes in Treasury securities adds to the federal surplus (or reduces deficits). Under President Clinton s plan, the contributions to the Social Security trust funds from general revenues would be counted as government expenditures even when they were not used to buy stocks. The rationale for this rule is that those contributions would be earmarked to retire publicly held federal debt, substituting government-owned debt held by the trust funds in its place. The administration claims that its plan would reduce the share of publicly owned government debt from about 45 percent of the economy to just 7 percent by 2014a level last reached i
Related Questions
- How do you reflect budget adjustments on planning estimates for increases/decreases in federal funding when the amount of funds remains constant?
- Is it true that the federal balanced budget includes the operations of the Social Security trust funds, and would it balance without it?
- Why is income to the Social Security trust funds counted as a part of the federal budget?
