[351] THE SHORT-RUN BEHAVIOR OF THE SOCIAL SECURITY TRUST FUNDS

The old-age, survivors, and disability insurance trust funds are now running a deficit of more than $5 billion per year. As recently as 1972, however, these trust funds were expected to be in surplus for some time. Simulations with an econometric model of the OASDI system suggest that this turnaround can be explained largely by economic developments unforeseen in 1972. The deterioration in the social security short-term financing picture is due in roughly equalparts to high unemployment and poor real wage growth. Inflation by itself has so far had little effect on the trust fund balances. The simulations also suggest that social security trust fund balances equal to approximately 60 % of yearly outlays should be kept on hand if the system is to be able to withstand a recession slightly more severe than the present one without having to raise taxes until unemployment falls below 6%. Successive reports of the trustees of the socialsecurity trust funds have presented a continually bleaker picture of the short-run financial health of the old-age, survivors, and disability insurance (OASDI) system. In the 1973 report the assets of the old-age and survivors insurance (OASI) trust fund were projected to remain at about 73 % of annual expenditures through 1977. Two years later, in the 1975 report, the trustees estimated that the assets of the OASI trust fund will equal only 41 % of the AUTHORS ’ 1VOTE: The authors benefited from comments and suggestions by Michae