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This collection of seven research papers (one by the editor), together with commentaries by distinguished discussants and an introduction by the editor, represents the proceedings of a 1989 conference held at the American Enterprise Institute. The authors and commentators are distinguished economists (including Alan Blinder of Princeton, James Buchanan the Nobel laureate, William Nordhaus of Yale, James Poterba of MIT, John Shoven of Stanford). The volume can be readily recommended to economists and others interested in either social security or federal budgeting. The high caliber of scholars involved indicates the excellent quality of the research reported.

The 1983 Social Security Amendments shifted the system's funding from a cash flow (pay-as-you-go) objective to a present value (advance funding) objective. The rationale for reserve surpluses was the aging of the baby-boom generation; this generation is expected to help pay in larger measure for its retirement. Previous generations were paid out of economic growth rather than out of forced saving. As the proportion of the U.S. population over 64 rises from 12.4% in 1990 to 22.5% in 2060, workers per beneficiary will fall from 3.3 to 1.8 [Weaver, p. 6]. Combined OASDI (retirement) and OASDHI (hospital insurance) reserves (in current dollars) will first rise from $475 billion in 1990 to $15.4 trillion in 2025; and thereafter decline to -$333.5 trillion in 2060, due largely to OASDHI costs from 2030, with OASDI also negative from 2050 [Weaver, p. 4, using an intermediate forecast]. The reserves will equal nearly 30% of projected GNP in 2018 [Munnell and Ernsberger, p. 85]. The interest income will help reduce the need for future tax increases.

Carolyn L. Weaver

Carolyn L. Weaver is a resident scholar at the American Enterprise Institute and director of AEI's Social Security and Pension Project. She has been a senior research fellow at the Hoover Institution and a member of the Economic Department and research associate of the Center for Study of Public Choice at Virginia Polytechnic Institute. From 1981 to 1984, she served as professional staff member on social security for the U.S. Senate Finance Committee. She also served as a senior adviser to the 1983 National Commission on Social Security Reform and as a member of the 1987-1988 Disability Advisory Committee, and the 1989 Public Trustees’ Working Group on the Measurement of Trust Fund Solvency. She is the author of “Crisis in Social Security: Economic and Political Origins”, as well as many articles on social security and political economy. Ms. Weaver received her Ph.D. in economics from Virginia Polytechnic Institute.