Fiscal Policy and Social Security Policy During the 1990s

91 Pages Posted: 28 Sep 2001 Last revised: 9 Nov 2010

See all articles by Douglas W. Elmendorf

Douglas W. Elmendorf

Harvard Kennedy School

Jeffrey B. Liebman

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

David W. Wilcox

Federal Reserve Board - Division of Research and Statistics

Date Written: September 2001

Abstract

This paper reviews the course of fiscal policy and Social Security policy during the 1990s. The 1990s witnessed two fundamental changes in U.S. fiscal policy: a dramatic improvement in the current and projected budget balance, and a shift to a new political consensus in favor of balancing the budget excluding Social Security rather than the unified budget. The dramatic improvement in the budget outlook stemmed both from favorable developments in the economic environment and from deliberate policy actions that reduced budget deficits and later did not spend down the surpluses. In contrast, the 1990s did not witness significant changes in Social Security policy, although alternative visions of Social Security reform received tremendous analytic and popular attention. The 1994-1996 Advisory Council on Social Security presented three reform plans that placed important emphasis on additional prefunding. Each involved some form of investment in equities either centrally, through the trust fund, or in a decentralized manner, through individual accounts. Late in the decade, with the emergence of on-budget surpluses, the possibility of general revenue contributions to the Social Security system came under serious consideration. In the end, President Clinton decided to pursue Social Security reform based on general revenue contributions to the trust fund and centralized investment in equities rather than creating individual accounts, but his proposal was not adopted.

Suggested Citation

Elmendorf, Douglas W. and Liebman, Jeffrey B. and Wilcox, David W., Fiscal Policy and Social Security Policy During the 1990s (September 2001). NBER Working Paper No. w8488. Available at SSRN: https://ssrn.com/abstract=285599

Douglas W. Elmendorf (Contact Author)

Harvard Kennedy School ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Jeffrey B. Liebman

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-495-8518 (Phone)
617-496-9053 (Fax)

HOME PAGE: http://www.jeffreyliebman.com

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

David W. Wilcox

Federal Reserve Board - Division of Research and Statistics ( email )

20th and C Streets, NW
Mailstop 153
Washington, DC 20551
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
40
Abstract Views
1,204
PlumX Metrics