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INVESTMENT OF THE SOCIAL SECURITY TRUST FUNDS
United States. Congress, House, Committee on

Ways and Means, Subcommitterlein ofecial
Security,

MAR 1

4

XCHANGE & GIFT DIVISION

COPY

CONGRESS

HEARING

BEFORE THE

SUBCOMMITTEE ON SOCIAL SECURITY

OF THE

COMMITTEE ON WAYS AND MEANS

HOUSE OF REPRESENTATIVES

NINETY-SEVENTH CONGRESS

FIRST SESSION

OCTOBER 16, 1981

Serial 97-34

Printed for the use of the Committee on Ways and Means

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 1981

88-494 O

COMMITTEE ON WAYS AND MEANS

DAN ROSTENKOWSKI, Mlinois, Chairman SAM M. GIBBONS, Florida

BARBER B. CONABLE, JR., New York J. J. PICKLE, Texas

JOHN J. DUNCAN, Tennessee CHARLES B. RANGEL, New York

BILL ARCHER, Texas FORTNEY H. (PETE) STARK, California GUY VANDER JAGT, Michigan JAMES R. JONES, Oklahoma

PHILIP M. CRANE, Illinois ANDY JACOBS, JR., Indiana

BILL FRENZEL, Minnesota HAROLD FORD, Tennessee

JAMES G. MARTIN, North Carolina KEN HOLLAND, South Carolina

L. A. (SKIP) BAFALIS, Florida WILLIAM M. BRODHEAD, Michigan

RICHARD T. SCHULZE, Pennsylvania ED JENKINS, Georgia

BILL GRADISON, Ohio RICHARD A. GEPHARDT, Missouri

JOHN H. ROUSSELOT, California
THOMAS J. DOWNEY, New York

W. HENSON MOORE, Louisiana
CECIL (CEC) HEFTEL, Hawaii
WYCHE FOWLER, JR., Georgia
FRANK J. GUARINI, New Jersey
JAMES M. SHANNON, Massachusetts
MARTY RUSSO, Illinois
DON J. PEASE, Ohio
KENT HANCE, Texas
ROBERT T. MATSUI, California
DON BAILEY, Pennsylvania
BERYL ANTHONY, JR., Arkansas

JOHN J. SALMON, Chief Counsel
JOSEPH K. DOWLEY, Assistant Chief Counsel

ROBERT J. LEONARD, Chief Tax Counsel
A. L. SINGLETON, Minority Chief of Staff

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INVESTMENT OF THE SOCIAL SECURITY TRUST

FUNDS

FRIDAY, OCTOBER 16, 1981

HOUSE OF REPRESENTATIVES,
COMMITTEE ON WAYS AND MEANS,
SUBCOMMITTEE ON SOCIAL SECURITY,

Washington, D.C. The subcommittee met at 10:05 a.m. pursuant to notice, in room 1100, Longworth House Office Building, Hon. J. J. Pickle (chairman of the subcommittee) presiding.

[Press release announcing the hearing follows:

(Press release of Oct. 5, 1981)

Hon. J. J. PICKLE (D-TEX.), CHAIRMAN, SUBCOMMITTEE ON SOCIAL SECURITY OF

THE COMMITTEE ON WAYS AND MEANS, U.S. HOUSE OF REPRESENTATIVES, ANNOUNCED TODAY A HEARING ON THE INVESTMENT OF THE SOCIAL SECURITY TRUST FUNDS

Hon. J. J. Pickle (D-Tex.), Chairman of the Subcommittee on Social Security of the Committee on Ways and Means, U.S. House of Representatives, announced today that the Subcommittee will hold a hearing concerning the investment of the Social Security Trust Funds. This hearing will be held on Friday, October 16, 1981, at 10 a.m., in room H-137 of the Capitol.

The Social Security Act provides that the assets of the trust funds are to be invested solely in U.S. government obligations. The funds must be invested in special public-debt obligations of the United States except where the Managing Trustee (the Secretary of the Treasury) expressly determines that the purchase of other government securities is in the public interest. These “special issues” must bear an interest rate which is equal to the average market yield of all marketable interest-bearing obligations of the United States with maturities of four years or more.

Critics of the current investment policy assert that the trust funds are losing substantial amounts annually because they are earning less as a long-term investment than current short-term rates. It is not clear, however, if the investment policy were changed to allow the trust funds to take advantage of current shortterm yields, that the average return over an extended period would be greater than under current law. The current situation of short-term rates exceeding long-term rates is relatively rare and is likely to change in the future.

Even if a change in the investment policy could yield higher returns, it does not directly follow that this change should be made. Previous reports of the social security trustees and the various Advisory Councils concerning investment obligations indicate that it has been felt that since the trust funds represent long-term investments and obligations, they should be tied to long-term interest rates.

The testimony will assist the Subcommittee in determining the most appropriate investment policy for the Social Security Trust Funds. In its hearing the Subcommittee intends to invite the Secretary of the Treasury, who serves as the managing trustee of the Social Security Trust Funds, and other invited witnesses.

Chairman PICKLE. The Chair would ask the subcommittee to come to order.

If the witnesses will take their seats at the table, we will proceed.

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