Fiscal Policy and Social Security Policy During the 1990s

Douglas W. Elmendorf, Jeffrey B. Liebman, David W. Wilcox

NBER Working Paper No. 8488
Issued in September 2001
NBER Program(s):Economics of Aging, Economic Fluctuations and Growth, Public Economics

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.

download in pdf format
   (327 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w8488

Published: Frankel, Jeffrey and Peter Orszag (eds.) American economic policy in the 1990s. Cambridge: MIT Press, 2002.

Users who downloaded this paper also downloaded* these:
Feldstein and Horioka w0310 Domestic Savings and International Capital Flows
Grossman w5109 American Fiscal Policy in the 1990's
Parker w7238 Spendthrift in America? On Two Decades of Decline in the U.S. Saving Rate
Mankiw w8471 U.S. Monetary Policy During the 1990s
Auerbach and Kotlikoff w3150 Demographics, Fiscal Policy, and U.S. Saving in the 1980s and Beyond
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us