Social Security's first international investment allocation, so to speak, has gone to Kosovo. The war will jeopardize Social Security reform proposals, which include investing part of Social Security's assets in some fashion in equities.
Besides the tragic toll in human terms on all sides of the conflict, the war against Yugoslavia will be costly to economic programs throughout the federal budget, and has serious implications for the domestic and global economies.
The U.S. involvement in Kosovo will be financed from the federal budget surplus. In fact, the Social Security system in a sense will pick up the tab. That's because, at this time, the budget is still in deficit except for the surplus assets in the Social Security trust funds, which are included in the overall budget. The budget itself isn't expected to attain a surplus for several years.
The war shows no sign of quick or easy ending. It shows the great danger of entering into policies with insufficient thought as to their possible consequences: no provisions were made for thousands of refugees; no allowance was made for potential escalation with Russia; no consideration that a recalcitrant Serbian rulership might not bend easily.
The elation over the impending budget surplus a year ago was, as we warned then, premature. The forecast budget surplus and Social Security reform now appear likely to be casualties of the immense, costly issue of Kosovo.
