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Abstract:
In this Article, I critically examine the assumption that the Social Security system faces a financing crisis and that the government can avert the crisis only by acting now to cut benefits or to raise taxes. The best conclusion we can draw from the current evidence is that the system is not doomed and that it is not necessary to institute immediate changes. We should, of course, continue to monitor the situation closely to determine whether future changes become necessary. This conclusion is further strengthened by the likelihood that any changes the government makes to the Social Security system today will be regressive, harming the middle class and the least fortunate in order to forestall a crisis that may never occur or that future progressive changes in policy will be able to address.

Social Security, Government Deficits

Abstract:
In the United States, it is common for legal scholars, economists, politicians and others to claim that we are selfishly harming "our children and grandchildren" by (among many other things) running large government budget deficits. This article first asks two broad questions: (1) Do we owe future generations anything at all as a philosophical matter? and (2) If we do owe something to future generations, how should we balance their interests against our own? The short answers are "Probably" and "We really are not sure."

Finding only general answers to these general questions, I then look specifically at U.S. fiscal policy and its effects on conventionally-measured living standards, exploring (using standard utilitarian and Rawlsian analyses) whether we are currently doing enough to secure the prosperity of future generations. It turns out that even pessimistic forecasts of economic growth are so promising that we could arguably either stop worrying about future generations' economic well-being or even enact policies to shift economic well-being from the future to today. The flaw in that reasoning, however, lies in the unequal distribution of our economic prosperity, with a gap between rich and poor that is profoundly troubling. Even if future growth turns out to be as high as current forecasts predict, there is a very real chance that the least among us will not see their living standards rise at all, even as the more fortunate ascend to untold levels of affluence.

I thus argue that a better approach to analyzing intergenerational issues is to view them as straightforward matters of distributive justice, focusing on how policies change the distribution of incomes across time as well as currently. Such an approach simplifies the analysis and allows us to protect the interests of our children and grandchildren in a more meaningful and long-lasting sense.

Future Generations, Intergenerational Justice, Distributive Justice, Social Security, Fiscal Policy, Budget Deficits, Utilitarianism, Rawls

Abstract:
Using a dataset of survey responses from University of Michigan Law School graduates from the classes of 1970 through 1996, I find that fathers tend to receive higher salaries than non-fathers (a "daddy bonus"). In addition, mothers earn less than non-mothers (a "mommy penalty"). There is also some statistical support for the inference that there is a penalty associated purely with gender (women earning less than men, independent of parenthood), another result that is unique to the literature.

Analyzing full- or part-time status as well as work hours also suggests a key difference between women and men. Those who take part-time status are almost entirely women who take on child-rearing duties, and they reduce their work hours by an average of approximately thirty percent. These statistical results are, however, significantly less reliable because of the very small numbers of respondents (male or female) who work less than full time.

Gender, Salary Differences, Parenthood, Child Rearing, Law Careers

Abstract:
Advocates of estate tax repeal often assert that family-run businesses and farms are broken up when heirs are unable to pay the estate tax. This claim has never been proven, but a recent Joint Economic Committee report claims to demonstrate that it is true. I assess the arguments and evidence presented in the JEC report and find that there is nothing in it that proves that the estate tax breaks up family-run businesses and farms. In fact, the most credible source cited by the report suggests that families might have adequate liquid resources to pay the estate tax or even that business owners do not bother to take advantage of opportunities to allow their heirs to pay the estate tax.

Estate tax, family businesses

Abstract:
There are bad deficits and there are good deficits. What makes a fiscal deficit good or bad depends on both the context in which the deficit is run and the reason that the deficit is rising. The belief that it is unquestionably foolish to adopt policies that directly or indirectly increase the government's annual borrowing on the financial markets - which is what it means to run a budget deficit - is not the universal truth that the current conventional wisdom might imply. Budget deficits are potentially dangerous and must be monitored carefully, but they are not always, inevitably, completely, and irreversibly horrific. Far from it.

Knowing that deficits are not evil incarnate raises some difficult questions, however, most notably whether it is dangerous for policy makers or economists to admit publicly that deficits might sometimes be the result of wise policy choices. While there is always a danger that such knowledge can be distorted and misused, I argue in this article that we have a responsibility to adjust our public discussion of budget deficits to admit that there are good deficits as well as bad. Enhancing the discourse requires us to remind ourselves what it is about budget deficits that can make them harmful, both in the long term and the short term, as a necessary step in understanding when deficits can be beneficial. Only then can we have a full and honest discussion of our taxing and spending policies.

Budget Deficits, Public Investment, Crowding Out, Fiscal Responsibility

Abstract:
This paper assesses current methods for evaluating the long-term viability and desirability of government activities, especially Social Security and other big-ticket budget items. I reach four conclusions: (1) There are several simple ways to improve the current debate about fiscal policy by adjusting our crude deficit measures, improvements which ought not to be controversial; (2) separately measuring Social Security's long-term balance is inappropriate and misleading; (3) the methods available to measure very long-term government financing (Fiscal Gaps and their cousins, Generational Accounts) are of very limited value in setting public policy today, principally because there is no reliable baseline of the government's likely future expenditures and receipts; and therefore (4) the government's current annual and 10-year deficit projections, while highly imperfect, are nonetheless the best measure available for assessing fiscal policy, especially compared with Fiscal Gaps and Generational Accounts.

Deficits, National Debt, Generational Accounting, Fiscal Gap

Abstract:
Transactions at non-equilibrium prices are false trades. Under standard assumptions, markets without false trading produce Pareto-efficient outputs. This paper demonstrates graphically the complications created when false trades occur, showing that quantities produced deviate from Pareto-efficient quantities except under unique conditions. In a general equilibrium framework, this spills over to cause Pareto-inefficient results in other markets as well. These observations call into question the use of standard supply-and-demand equilibrium theory as a starting point for policy analysis.

Tâtonnement, False Trading, Pareto Efficiency, Convergence, Disequilibrium

Abstract:
[Note: Earlier versions of this article appeared on SSRN under the titles 'Should We Adopt William Vickrey's Cumulative Averaging Income Tax System? Progressivity and Simplicity in Tax Reform,' and 'Should We Tax Average Income? Vickrey, Equity, and Tax Design.' They have been superseded by this version.]

Should tax liability be based on annual income or on the average of a taxpayer's income earned over the space of several years (or even a lifetime)? This article assesses proposals to replace the current method of computing taxes with a system that would allow taxpayers to smooth out their income tax liabilities by offsetting high-income years with low-income years. While the usual discussion of this issue revolves around supposed horizontal inequities, I show that it is not clear that the current system generates horizontal inequities at all; and even if it does, I suggest as a normative issue that these horizontal inequities alone are not sufficiently important to justify a change in the method of computing tax liability.

Looked at from a vertical equity perspective, however, I note that income averaging targeted toward lower income earners can be a helpful way to provide relief to workers who have uneven earnings patterns. I thus endorse a very limited averaging plan that would apply to the working poor and near-poor, allowing them to reduce their federal tax liability and to avoid losing EITC benefits due to temporary swings in income.

income averaging, cumulative averaging, averaging, Vickrey, horizontal equity, vertical equity, winner-take-all

Abstract:
This article reviews several familiar plans to alter the structure of taxation, including the flat tax, a VAT, and the USA Tax. With the significant exception of a simplified income tax system, every plan to replace the current U.S. federal tax system would move us in precisely the wrong direction. These plans would abandon income taxation entirely in an attempt to solve problems that do not exist, and they are based on a flawed ideal of a neutral tax code. The companion to these plans is an even more misguided set of proposals (some in the form of constitutional amendments) that could severely limit future fiscal policy.

Abstract:
In response to increasing calls for policies to raise the U.S. saving rate, proposals are once again being offered in Congress to change the tax base from income to consumption. Beyond the important issues of income distribution (that is, outright unfairness) inherent in such a plan, it would simply not work. Indeed, it is based on a fundamental mismeasurement of what counts as saving in the U.S. economy. The logical sequence underlying this proposal is wrong at two crucial points: lowering or eliminating taxes on saving is unlikely to increase saving, and higher saving would be unlikely to increase investment in any case (and would, more likely, decrease investment). The usual crowding-out logic is based on limited evidence and inadequate theory. Finally, the interaction between monetary and fiscal policy is currently perverse. Contractionary fiscal policy (which is what is implied by these proposals) will not be counter-balanced by timely and adequate monetary stimulus. The Federal Reserve is likely to wait too long to respond, either due to excessive caution about the effectiveness of the fiscal policy change or to take advantage of an opportunity to lower inflation still further before allowing the economy to recover.

Abstract:
Despite the oft-heard claims that current generations are stealing from future generations by running fiscal deficits, both theory and evidence suggest that this is either not true or not knowable. Intergenerational justice is not an appropriate lens through which to analyze fiscal issues, because there is no obvious starting point from which to build a moral consensus about whether current generations owe anything at all to future generations - and even if we do believe that we owe something to future generations, no one has offered a useful method by which we can determine whether we are doing enough for our progeny. Moreover, if we believe that future generations should be made better off than current generations ("I want my kids to be richer than I am."), even pessimistic forecasts indicate that future generations will be much wealthier than current generations, meaning that we are already being quite generous to our children and grandchildren. In addition, the recent significant decline in our economic prospects does not argue for a more contractionary fiscal policy in light of concerns about future generations. In fact, when times are bad, there is no conflict between the interests of current and future generations. Spending by the government helps to improve the economy, which encourages businesses to invest in future productivity. This virtuous cycle is even stronger if the government's spending is itself used to invest in future productivity.

Fiscal Policy, Deficits, Debt, Generations

Abstract:
As part of the George Washington Law Review's symposium "What Does Our Legal System Owe Future Generations? New Analyses of Intergenerational Justice for a New Century," participants discussed the nature of intergenerational obligations as they relate to fiscal policy. The panelists reached consensus that intergenerational justice is not an appropriate lens through which to analyze fiscal issues, because there is no obvious starting point from which to build a moral consensus about whether current generations owe anything at all to future generations, much less how to quantify any such obligation. In addition, even pessimistic forecasts indicate that future generations will be much wealthier than current generations, meaning that we are already being quite generous to our grandchildren. The discussion then turned to whether current fiscal policy should be changed. While panelists disagreed about how policies should be changed, there was at least apparent consensus that Social Security is either not a problem or at least not a major part of any long-term fiscal worries. Moreover, the biggest cause of any long-term distress is health care costs for all payers, not just for the federal and state governments.

Fiscal Policy, Deficits, Social Security, Generational Justice, Stimulus

Abstract:
This essay considers how spending by the federal government can improve long-term living standards. The familiar concept of "capital budgeting" separates government expenditures that into two categories: purchases of goods and services for current consumption and thus that provide no long-term payoff ("operating expenditures"), from those that and purchases of productive capital goods that do generate long-term payoffs ("capital expenditures"). Within that framework, I advocate expanding the range of possible public investments that would count as capital expenditures to include those that do not produce physical infrastructure but that nevertheless provide long-term economic benefits. Adding these items - such as spending on basic research, health care, nutrition, etc. - to the more traditional items in more a narrowly-defined capital budget, I use the term "growth budgeting" to describe a system by which the government can identify a larger number of the available long-term investments that could benefit posterity. I then discuss the possible abuses of such a system and advocate the creation of a Growth Budgeting Board, which would apply a disciplined growth budgeting approach to possible public investments and advise Congress on the most promising spending programs.

Deficits, Fiscal Policy, Public Investment

Abstract:
In this working paper, Resident Scholar Neil H. Buchanan statistically tests six alternative definitions of the federal budget deficit to determine if these definitions improve the results of econometric studies that use the deficit as an exogenous variable. Buchanan wishes to 1) evaluate how well Robert Eisner's conclusion that a price- adjusted deficit definition improves econometric results, and 2) compare alternative measures of the deficit. Buchanan's analysis begins with two definitions of the structural deficit published by the government: the Bureau of Economic Analysis's high-employment deficit, which is based on a constant standard of unemployment, and the Congressional Budget Office's standardized employment deficit, which is based on a varying standard of unemployment, namely, the NAIRU. He then compares two sets of price-adjusted structural deficit measures to the set of original definitions. Each original definition is adjusted by using two different calculations of a price effect intended to gauge the change in the value of outstanding government debt. One set of price-adjusted measures is obtained by subtracting the product of the year-end par value of outstanding debt and the annual rate of inflation from each of the original measures of structural deficits. The second price-adjusted set third set is obtained by subtracting a more complex derivation of a price effect, namely one that accounts for the timing of inflation's effect on prior debt.The results of initial regression analysis indicate that the method of adjusting for price effects is more important than the method of adjusting for cyclical effects. Using a variety of specifications, time periods, and data definitions, Buchanan's findings did not support the case that deficit spending stimulates GDP growth. However, a relationship was found between unemployment and the deficit, even when the non-price-adjusted measures of the deficit were used. The results of regressions using shorter, 15-year periods show a decline in the importance of price adjusting and a further weakening of the growth-deficit relationship compared to what was found in the initial regressions. The unemployment- deficit relationship, however, was stronger than in the full- period regressions.