“Trust fund solvency is not a meaningful measure of the government’s ability to meet its future obligations.”

“There are no economic assets in the Social Security trust fund.”

“In the Federal budget, the term 'trust fund' means only that the law requires a particular fund be accounted for separately, used only for a specified purpose, and designated as a trust fund. A change in law may change the future receipts and the terms under which the fund’s resources are spent. In the private sector, trust fund refers to funds of one party held and managed by a second party (the trustee) in a fiduciary capacity.”

Trust funds are simply accounts labeled that way in law. The funds are established to record collections that are earmarked in legislation for the specific purposes for which the funds were established. Federal government trust funds differ from private trust funds in significant ways:

• Claims by private trust funds against future output are limited by the value of the funds' assets. By contrast, federal trust funds function as accounting mechanisms that record tax receipts, user fees, and other credits and associated expenditures. When receipts exceed expenditures, the government's books show trust fund balances. According to the Office of Management and Budget, "These balances are available to finance future benefit payments and other trust fund expenditures but only in a bookkeeping sense. These funds are not set up to be pension funds, like the funds of private pension plans. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large trust fund balances, therefore, does not, by itself, have any impact on the Government's ability to pay benefits."¹
• The beneficiary of a private trust fund usually owns the fund's income and often owns its assets. The trustee of a private trust fund has a fiduciary responsibility to manage the fund on behalf of its beneficiaries and cannot make unilateral changes to the provisions governing the trust. In contrast, federal trust funds are owned by the federal government.² They are created in legislation. Lawmakers can change the amount of receipts and payments flowing into and out of federal trust funds, add to or subtract from trust fund balances, alter the purposes of the funds, and even eliminate them altogether.
• Private trust funds are more likely to represent saving--that is, forgoing current consumption for future uses--than are federal trust funds. In that manner, the assets of private trust funds add to net national savings and thus promote growth, producing a return for the beneficiary and for the economy.
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