* suspending sales of nonmarketable debt (savings bonds, state and
local government series, and other nonmarketable debt);
The reduction in benefits need reflect only slightly more than the nonmarketable debt
no longer created by the federal government and its interest.
Likewise, when a trust fund runs a deficit, the government must buy back the nonmarketable debt using surpluses from elsewhere (should they exist), borrow from the public, or raise taxes.
Figure 2 shows the evolution of total (gross) federal debt, publicly held government debt, and nonmarketable debt since 1960, along with the CBO's projections through 2010.
The practice of issuing nonmarketable debt to trust funds was motivated by a desire to assure the public that the benefits that have been promised under specific programs will be forthcoming.
This is more than 12 times larger than the $855 billion in nonmarketable debt held by the OASDI trust fund in FY 1999.
Assuming that the debt shrinks according to the Congressional Budget Office's July 2000 projections, that Fed holdings grow at the same rate as they did between 1989 and 1999 (an 8.5 percent compound annual growth rate), and that nonmarketable debt
remains a constant 11.0 percent of the public debt, Fed holdings would grow to 25 percent of the total in 2002, 50 percent in 2005, and close to 100 percent in 2007.
Actions taken in the past include suspending sales of nonmarketable debt
, postponing or downsizing marketable debt auctions, and withholding receipts that would be transferred to certain government trust funds.
* suspending sales of nonmarketable debt
(savings bonds, state and local government series, and other nonmarketable debt