Treasury's Management of Social Security Trust Funds During the Debt Ceiling Crises

In response to a congressional request, GAO gave its opinion on the legality and propriety of the Secretary of the Treasury's management of the social security trust funds during the October 1984, and September to November 1985, public debt ceiling crises.

GAO found that: (1) although some of the Secretary's actions appeared to have been in violation of legislative requirements, the Secretary acted reasonably given the extraordinary situation; (2) Treasury may restore any interest lost because of failure to fully invest the normalized tax transfers (NTT); (3) to the extent that the trust funds' assets were kept uninvested to permit the payment of other government obligations or to restore cash balances, the trust funds were being used contrary to the statutory scheme; (4) the Secretary did not violate the statutory debt limit and did not usurp any borrowing powers; (5) there was no evidence that the Secretary redeemed securities or failed to invest funds for the purpose of avoiding general fund interest payments to the trust funds; (6) NTT amounts were not fully invested in interest-bearing Treasury securities at the beginning of September, October, and November 1985, but during that period, Treasury redeemed the trust funds' short- and long-term securities to meet social security benefit payments; (7) if adequate borrowing authority had been available during the period, it would not have been necessary to redeem any of the trust funds' long-term securities; and (8) the noninvestment of NTT amounts in September and October were not unprecedented, but the actions of November 1985, appeared to have no precedent.