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» Additional Resources
Commision on the Regulation of U.S. Capital Markets in the 21st Century Report
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Secretary Hutton's prepared remarks at The National Press Club.
Secretary Hutton's prepared remarks on British pension reform at The National Press Club.click to download (121k)
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The Political Economy of Government Issued Longevity Bonds
This working paper by Jeffrey Brown and Peter Orszag explores the trade-offs associated with government issuance of longevity bonds as a way of stimulating private annuity supply in the presence of aggregate mortality risk.click to download (170k)
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General Information Letter
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Progressivity and Government Incentives to Save
Conference on "Building Assets, Building Credit", November 24, 2003. As the baby boomer generation nears retirement, policy-makers seem to be increasingly focusing on the nation's system of tax-preferred retirement savings. The bulk of the policy changes that have been enacted in recent years, however, move the pension system in the wrong direction: They provide disproportionate tax benefits to high-income households who would save adequately for retirement even in the absence of additional tax breaks, while doing little to encourage lower- and moderate-income households to save more. This fundamentally flawed approach should be replaced with a progressive set of pension reforms, which would be more likely to raise national saving and to reduce elderly poverty.click to download (72k)
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Promoting 401(k) Security
Too many have lost much or all of their retirement savings because of imprudent overinvestment in employer stock, and many more are at risk of doing so in the future. Members of Congress have been rightly concerned about enacting new restrictions that would cause employers to stop offering retirement benefits. And they have been highly sensitive to polling in which, predictably, employees respond in the negative when asked whether they want government to take away their ability to choose investments. But there are legislative approaches that would limit workers' risk in 401(k) plans without precluding choice by employees or employers. This policy brief describes several such measures.click to download (164k)
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Reassessing the Fiscal Gap: Why Tax-Deferred Saving Will Not Solve the Problem
Tax Notes, July 28, 2003. It is by now conventional wisdom that the United States faces a sizable long-term fiscal gap. Under a wide range of scenarios, the projected costs of current spending programs substantially exceed projected tax revenues. The fiscal gap has important implications for future generations and should inform current policy choices. For example, many observers believe that the size of the fiscal gap implies that the tax cuts enacted over the past few years have taken the country in the wrong fiscal direction. Boskin (2003) suggests the conventional wisdom regarding the long-term fiscal gap is incorrect. He claims that estimates of the long-term fiscal status largely or entirely omit revenue from tax-deferred saving plans, and that the omissions are almost as large as the projected budget shortfalls over analogous time periods. Specifically, he calculates that existing and projected tax-deferred saving will generate net revenue with a present value of $12 trillion through 2040 and $17 trillion through 2050. He concludes that "The total size may well rival the 75-year actuarial deficits in Social Security and Medicare HI, plus the national debt. An analysis of the underestimation of-more accurately, failure to consider-the long-run budgetary impacts of deferred taxes suggests that they will offset a sizeable share of the projected budget deficit through mid-century." Boskin's results have understandably generated substantial attention. The implications, however, have been widely misinterpreted. This paper reassesses the long-term fiscal outlook in light of Boskin's findings.click to download (726k)
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Private Pensions: Issues and Options
TPC Discussion Paper No. 9, April 16, 2003. This paper provides an overview of the U.S. system of pensions and tax-preferred saving, examines the effects of current policies, and evaluates proposals for reform. In light of lengthening life spans, earlier retirement, and projected financial shortfalls in Social Security and Medicare, the financial status of the elderly in the future will depend heavily on private saving for retirement. The central goal of the private pension system should be to encourage or provide adequate and secure retirement income in a cost-efficient and equitable manner. The present system falls short of these goals. Pensions currently cost the U.S. Treasury almost $200 billion per year. Pension benefits are skewed toward more affluent households who would be more likely to be saving adequately for retirement even without pensions, and who disproportionately use pensions to divert other saving (rather than to raise their overall level of saving). Pension benefits are meager among middle- and lower income households who more often are not saving adequately for retirement, but for whom pensions do serve effectively to raise retirement wealth. Pension rules often allocate financial risks to workers, the group least well equipped to handle these issues. Pension rules are unduly complex. Reforms that raise contribution limits even further are unlikely to be helpful in promoting the goals noted above. Rather, pension reforms should focus on expanding benefits for middle- and lower income households, improving incentives and opportunities to diversify investments, increasing financial education, improving the structure and rules regarding cash balance plans, and simplifying and strengthening non-discrimination rules.click to download (123k)
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Transcript from John Edwards and Jack Kemp on the Saver's Society.
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