The Government We Deserve

Reforming Social Security Benefits

Gene Steuerle — Thu, 23 May 2013 14:09:12 +0000

Excerpt from “Reforming Social Security Benefits,” Testimony Before the House Ways and Means Subcommittee on Social Security. In this testimony, I would like to focus on the need for Social Security benefit reform regardless of the current imbalances in the system or the taxes raised to support the system. Why? Despite Social Security’s great success, its growth in lifetime benefits over time has been decreasingly targeted at its major goals. Even while programs for children and working families are being cut, combined lifetime benefits for couples turning 65 rise by an average of about $20,000 every year, so that couples in their mid-40s today are scheduled to get about $1.4 million in lifetime benefits, of which $700,000 is in Social Security. Continue reading →

IRS and the Targeting of the Tea Party and Other Groups

Gene Steuerle — Tue, 14 May 2013 21:36:31 +0000

To help clarify whether IRS incorrectly, unfairly, or illegally targeted the Tea Party and other conservative groups, here are the answers to a few basic questions. Continue reading →

When Policy Meets Statistics: The Reinhart and Rogoff Study on Excessive Debt

Gene Steuerle — Fri, 03 May 2013 12:00:59 +0000

Knowing how many of us economists toil away in obscurity on most research, I’m always intrigued by what catches the press’s and public’s attention. Take, for example, the significant attention paid to a 2010 study by Harvard economists Carmen Reinhart and Kenneth Rogoff that concluded that countries with debt levels above 90 percent of GDP began showing slower rates of growth. When Thomas Herndon, Michael Ash and Robert Pollin, scholars at the University of Massachusetts at Amherst, recently had trouble replicating Reinhart and Rogoff’s results, the debate played out in national news outlet. Unfortunately, this discussion quickly devolved from substance to politics to arguments ad hominem. Without getting into the extent to which I or others can validate Reinhart and Rogoff’s (R&R’s) original findings, I offer six cautions for anyone witnessing this or a similar statistical debate with significant policy implications. Continue reading →

Wealth Accumulation by Race Over the Life Cycle

Gene Steuerle — Mon, 29 Apr 2013 13:36:24 +0000

While the income inequality among different racial and ethnic groups is significant, it is nothing compared to wealth inequality. In 2010, whites had six times more average wealth than blacks and Hispanics ($632,000 versus $103,000). The income gap, by comparison, was twofold ($89,000 versus $46,000). In a recent study, several colleagues and I examine in more depth how these ratios are affected by wealth accumulation over a person’s lifetime. Early in wealth-building years (when adults are in their 30s), white families have 3.5 to 4 times the wealth of families of color. As adults age these initial racial differences grow both absolutely and relatively. Continue reading →

Should Social Security Taxes Affect All Wages? A Modest Rise Is Fine, but It’s Not a Panacea

Gene Steuerle — Fri, 19 Apr 2013 17:10:06 +0000

Arithmetic tells us we must either decrease the growth of Social Security spending or increase taxes as a share of gross domestic product. But we should do it with an eye on fairness, growth and efficiency. We’re all in this together, so higher-income families must give up something to deal both with Social Security shortfalls and those in the budget more generally. A modest increase in the wage base for Social Security has some justification since that base has eroded in recent years. But if extended too far, it exacerbates the squeeze on other government programs. Continue reading →

On Dementia, Cost-of-Living Adjustments, and the Right Way to Reform Programs for the Elderly

Gene Steuerle — Tue, 16 Apr 2013 15:11:42 +0000

While the increase in dementia among the elderly and the president’s proposal to change the index used to provide cost-of-living adjustments (or COLAs) to Social Security recipients have both received prominent headlines recently, the discussions have largely been independent of one another. Yet any principled attempt to reform our elderly programs, including Social Security, Medicare, and Medicaid long-term care, should consider them together. Continue reading →

Any Way You Look at It, Young Americans Have Less Wealth than Their Parents

Gene Steuerle — Tue, 09 Apr 2013 21:49:31 +0000

My colleagues and I recently published research showing that younger age groups are falling behind their parents in wealth accumulation and explaining the story behind our numbers. Some have raised questions about how we use our data, and I want to take some time to further explain our research. Our study shows that the average wealth, or net worth, of these younger age groups has fallen fairly dramatically relative to older age groups. In response, some have said that median wealth is more important than average wealth. In fact, both are important. Average wealth tells us how a group is prospering as a whole relative to other groups; median wealth tells us how some “typical” person might be doing. Continue reading →

On Popes and Presidents, Curiae and Cabinets

Gene Steuerle — Tue, 26 Mar 2013 15:45:33 +0000

Our proclivities toward worshipping our leaders might not be genetic, but they can certainly be traced through the ages. We like our kings…for a while. We believe that if we could concentrate power in the hands of someone who understands us, the world, and maybe even the heavens above, someone who can crush the opposing tribe or -ism or evil, someone who can make things “right,” then we, too, will be all right. I wonder how much this type of thinking sets up our popes and our presidents—our kings of today—for failure. It’s not simply that they are human and fallible, and, therefore, must disappoint our regal expectations. It’s that as chief administrators of vast bureaucracies, they fear delegating to others who, in failing, might threaten the trappings of the office Continue reading →

Extending the Charitable Deduction Deadline to Tax Day

Gene Steuerle — Tue, 19 Mar 2013 12:27:53 +0000

Extending the charitable deduction deadline is a move with precedent: the government has used it to encourage giving following a natural disaster. President Barak Obama signed a provision allowing charitable donations toward the Haiti earthquake made from January 11 to March 1, 2010, to be deducted on 2009 tax returns. President George W. Bush signed a similar law allowing donations for tsunami relief made through January 31, 2005, to be deducted in 2004. These provisions aim to increase giving at a time when need is critical. In reality, such temporary laws have limited effect because many do not know about these one-off incentives. Consider instead the marketing possibilities of more permanent incentives to allow charitable deductions made by April 15, aka tax day, to be applied to the previous year’s tax returns. Continue reading →

Lost Generations? Wealth Building Among the Young

Gene Steuerle — Fri, 15 Mar 2013 12:56:45 +0000

The young have been faring poorly in the job market for some time now, a condition only exacerbated by the Great Recession. Now comes disturbing news that they are also falling behind in their share of society’s wealth and their rate of wealth accumulation. Signe Mary McKernan, Caroline Ratcliffe, Sisi Zhang, and I recently examined how different age groups have shared in the rising net wealth of the U.S. economy. Despite the recent recession, our economy in 2010 was about twice as rich both in terms of average incomes and net worth as it was 27 years earlier in 1983. But not everyone shared equally in that growth. Continue reading →