The Social Security Surplus and Public Saving

Abstract

The U.S. net national saving rate reached a postwar peak of 12.3 percent in 1965 and has since trended downward to 1.2 percent in 2007. Consequently, many analysts claim that saving is too low. Since 1983, the Social Security program has been in surplus, and the trust funds have been building up to pay for the retirement benefits for the baby boom cohort. Several recent studies have concluded that the increases in the trust funds have been more than offset by reductions in surpluses elsewhere in the federal budget. These studies therefore conclude that public saving has fallen as a result of the trust fund buildup since the mid-1980s. This study reexamines this issue. In the results, the authors cannot find evidence that the trust fund surpluses have had an impact on the rest of the federal budget.