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Research Note #4:
Inter-Fund Borrowing Among the Trust Funds |
In the early 1980s the Social Security Trust
Funds had developed short-term cash flow problems, as a result of
the adverse performance of the economy during the "stagflation"
of the 1970s. As a stop-gap measure, Congress passed legislation
in 1981 to permit inter-fund borrowing among the three Trust Funds
(the Old-Age and Survivors Trust Fund; the Disability Trust Fund;
and the Medicare Trust Fund). This authority was to lapse at the
end of 1982. However, the 1983 Amendments extended the inter-fund
borrowing authority to the end of 1987. Under the law as amended,
all loans would have to be repaid by the end of 1989.
The inter-fund loans were required to be repaid with an amount of
interest equal to that which the loaning fund would have earned
had it had use of the money during this time. In other words, the
borrowing fund was required to make the loaning fund whole at the
end of the process.
This authority was used twice, once in November 1982 and once in
December 1982. The total amount borrowed was $17.5 billion. The
Old-Age and Survivors Trust Fund borrowed the money-$5.1 billion
from the Disability Trust Fund and $12.4 billion from the Medicare
Trust Fund. Repayment began in 1985 and the debt to the Medicare
Trust Fund was paid off by January 1986 and the debt to the Disability
Trust Fund was liquidated in April 1986. |
Larry
DeWitt
SSA Historian's Office
12/17/98 |
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