Peter Orszag

• CEO at Lazard

This Policy Brief argues that embracing the deep uncertainty about interest rates and other key parameters determining a country’s fiscal position requires a new approach in fiscal policy. It proposes retaining fiscal discretion exercised after making the budget adjust more automatically and rapidly in areas where there is broad consensus that doin...

It is likely that 2021 will be a dynamic year for US health care policy. There is pressing need and opportunity for health reform that helps achieve better access, affordability, and equity. In this commentary, which is part of the National Academy of Medicine's Vital Directions for Health and Health Care: Priorities for 2021 initiative, we draw on...

Older Americans have experienced dramatic gains in life expectancy in recent decades, but an emerging literature reveals that these gains are accumulating mostly to those at the top of the income distribution. We explore how growing inequality in life expectancy affects lifetime benefits from Social Security, Medicare and other programmes and how t...

Mortality gradients by education and income have been rising in the United States and elsewhere. However, their impact on Social Security progressivity has received relatively little attention, and the impact on Medicare has received effectively none. This paper uses the Future Elderly Model to estimate the effects of increased mortality gaps on th...

In this election year, U.S. national spending on health care will reach $2.8 trillion, or about 18% of total spending on all goods and services. This high level of spending reduces our ability to invest in other important parts of the economy and also adds to our unsustainable national debt. There is wide agreement that we must find ways to bend th...

This paper incorporates retirement saving incentives into the Tax Policy Center microsimulation model and analyzes the distributional effects of current tax preferences for saving. As a share of income, tax-preferred saving incentives provide the largest benefits to households with income between $75,000 and $500,000, roughly the 80th to 99th perce...

Many middle- and low-income Americans retire without having accumulated sufficient savings to enjoy a comfortable retirement. Low retirement saving is not primarily due to a lack of eligibility for tax-favored retirement accounts, but rather to a lack of take-up. The low take-up, in turn, can be explained primarily by inertia and incentives. People...

After nearly a century of failed attempts, comprehensive health care reform was enacted on March 23, 2010, when President Barack Obama signed the Affordable Care Act (ACA). In attempting to modernize and improve a large part of the health care system, it may be one of the most ambitious and consequential pieces of legislation in U.S. history. Altho...

Federal statistics are integral to the adequate evaluation of public policy planning and performance in the United States. The Obama administration has determined that empirical science, including statistics, will be at the foundation of the president’s policy agenda. However, to be useful, federal statistics must be reliable, relevant, timely, and...

Madam Chair and Members of the Subcommittee, thank you for the opportunity to present the fiscal year 2009 budget request for the Congressional Budget Office (CBO). I recognize that the agency's request this CBO's mission is to provide the Congress with timely, objective, nonpartisan analyses of the budget and the economy and to furnish the informa...

Peter Orszag and Philip Ellis write that a variety of evidence suggests that there are opportunities to constrain health care costs without incurring adverse health consequences. Dr. Peter Orszag discusses the rising cost of health care and the potential for slowing the growth by undertaking and applying comparative efficacy studies. Dr. Orszag is...

Peter Orszag and Philip Ellis write that the United States' financial health will be determined primarily by the growth rate of per capita health care costs. Yet discussions of health care reforms have not seriously addressed the issue of how to slow growth in spending.

This testimony presents the Congressional Budget Office's (CBO's) analysis of the costs of two alternatives for the use and disposal of nuclear fuel. For the past 50 years, the nuclear waste produced at reactors across the United States has largely been stored at the reactor sites. That practice, however, has been deemed untenable for the long run....

At the request of Chairman Spratt, the Congressional Budget Office (CBO) has totaled the funding provided through fiscal year 2007 for military and diplomatic operations in Iraq and Afghanistan and other activities associated with the war on terrorism, as well as for related costs incurred by the Department of Veterans Affairs (VA) for medical care...

This paper uses data from the largest tax preparer in the United States to estimate the impact of the "saver's credit," a US federal program providing financial incentives to encourage retirement savings, on the decision to contribute to an IRA. It finds significant, but very modest, effects. This is contrasted with results from a field experiment...

Under reasonable projections, the unified budget deficits over the next decade will average 3.5 percent of GDP. Compared to a balanced budget, the unified budget deficits will reduce annual national income a decade hence by 1 to 2 percent (or roughly $1,500 to $3,000 per household per year, on average), and raise average long-term interest rates ov...

This article 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. We provide new calculations suggesting a 5 percent chance that aggregate mortality risk could "ex post" raise annuity costs for private insurers by as much as 5-10 pe...

Each year the federal individual income tax delivers over $500 billion worth of incentives intended to encourage socially beneficial activities. Despite their efficiency rationale and substantial price tag, relatively little attention has been paid to the question of what is the most efficient form for these tax incentives. Currently the vast major...

We analyze a randomized experiment in which 14,000 tax filers in H&R Block offices in St. Louis received matches of zero, 20 percent, or 50 percent of IRA contributions. Take-up rates were 3 percent, 8 percent, and 14 percent, respectively. Among contributors, contributions, excluding the match, averaged $765 in the control group and $1100 in the m...

Since the origins of income tax in 1913, the federal government has subsidized retirement saving relative to other saving. In 2003, the present value of the federal revenue loss from new contributions to employer pensions exceeded $184 billion (Office of Management and Budget, 2004, Table 18.4). Despite the magnitude of these revenue losses and the...

When the poor succeed in building up a few assets, they often find themselves disqualified from badly needed government programs. Confusing rules about IRAs and 401(k)s plus conflicting state regulations make retirement saving particularly challenging.

Every country adopting individual pension accounts has encountered significant problems of one sort or another. The authors of this [Policy Forum][1] argue that these problems arise at each stage of the retirement saving process: participation and contribution, asset accumulation, and withdrawal. The problems that have been encountered at each of t...

The three tiers of retirement income and security are Social Security; private savings, accumulated by families and individuals in a variety of forms (e.g., bank accounts and mutual funds); and tax-favored retirement savings. The focus of this chapter is the final tier. Though the government tries to promote pension saving by offering a variety of...

Under traditional formulations, lower capital income tax rates reduce the user cost of capital and stimulate investment. The traditional approach, however, implictly or explicitly considers a revenue-neutral reduction in capital income taxation. We extend the traditional approach by considering a reduction in taxes that generates an increase in the...

Social Security is one of America's most successful government programs. It has helped millions of Americans avoid poverty in old age. To be sure, the program faces a long-term deficit and is in need of updating. But Social Security's long-term financial health can be restored: the projected deficit is small enough that it can be eliminated through...

All of the provisions of the landmark tax cuts enacted in 2001 and 2003 are scheduled to expire by the end of 2010. This paper analyzes the economic effects of making the tax cuts permanent. We describe the recent tax cuts and the proposals to make them permanent, and explore the consequences of making the tax cuts permanent with regard to the fisc...

Social Security is one of America’s most successful government programs. It has helped millions of Americans avoid poverty in old age. To be sure, the program faces a long-term deficit and is in need of updating. But Social Security’s long-term financial health can be restored: the projected deficit is small enough that it can be eliminated thr...

Brookings-Wharton Papers on Urban Affairs 2005 (2005) 99-145 Higher Education Plays a critical role in supporting macroeconomic growth and, for individual students, represents a gateway to future economic success. Higher education also exerts significant influence on a regional and local basis, in terms of both economic and civic development. For e...

Households have experienced an expansion of financial opportunities over the past several decades. Expanded financial opportunities, such as the democratization of credit and new lending approaches, can yield benefits in terms of household economic security. However, the financial crisis that began in 2007 has powerfully illustrated that expanded f...

Empirical studies of per capita income convergence across countries have proliferated in the past decade. The purpose of this paper is to build upon that literature by examining demographic, rather than economic, convergence. In this paper, we examine whether fertility rates have been converging across countries. Our results indicate that fertility...

This paper reviews the financial position of Social Security, presents a plan for saving it, and discusses why Social Security revenue should not be diverted into individual accounts. Our approach preserves the value of Social Security in providing a basic level of benefits for workers and their families that cannot be decimated by stock market cra...

The President's Commission to Strengthen Social Security proposed three reform plans. Two, analyzed here, restore actuarial balance in the absence of individual accounts. One achieves this balance solely through benefit reductions. The other uses new dedicated revenue to cover one-third of the actuarial deficit, reducing benefits to close the rest....

This paper provides new evidence that sustained budget deficits reduce national saving and raise interest rates by economically and statistically significant quantities. Using a series of econometric specifications that nest Ricardian and non-Ricardian models, we obtain evidence of strong non-Ricardian behavior in aggregate consumption. Consistent...

The effects of fiscal policy on the economy have received substantial attention in academic and policy circles. We review this literature in light of recent policy debates and new research and obtain three results. First, other things equal, deficits reduce national saving and future national income, even if international capital inflows avert an i...

Rich Democracies Political Economy, Public Policy, and Performance. Harold L. Wilensky. University of California Press, Berkeley, 2002. 923 pp. $85. ISBN 0-520-23176-7. Paper, $45. ISBN 0-520-23279-8. Capping some 30 years of comparative research, Wilensky addresses the question of what taxing, spending, and public policies mean for the well-being...

Transforming Social Security's delayed retirement credit into a lump-sum payment rather than an increased monthly payment would likely encourage more workers to defer retirement and benefit claiming. The idea is thus worthy of further exploration. Several important design issues, however, must be addressed before policymakers give serious considera...

le budget, current practice falls short of what would be desirable. First, the budget uses assumptions defining current tax and spending policy that are widely regarded as unrealistic. Second, official budget projections employ a ten-year horizon. 2 Practical considerations make some such limit necessary, as projections become increasingly speculat...

In recent years, many public colleges and universities around the country have announced double-digit increases in tuition. The recession and the resulting squeeze on state revenues are the immediate causes. However, the short-term crisis should not be allowed to obscure a longer-term shift in state financing of higher education, which began more t...

The effect of fiscal policy on economic growth is a controversial and long-standing topic in economic theory, empirical research, and economic policy- making. It is at the heart of the policy debate surround- ing the sharp increases in official federal budget surpluses in the 1990s, the equally sharp decline in the fiscal outlook since January 2001...

Sunsets - or expiring provisions - have long been a feature of the tax code, but they changed dramatically in character and magnitude in recent years as policy makers aimed to hide the costs of recent tax cuts. Removing all the sunsets in the tax code would reduce revenue by almost $2 trillion over the next decade, more than the entire legislated c...

This Article analyzes the economic effects of the George W. Bush administration's tax policies. It describes the 2001, 2002, and 2003 tax cuts and the proposals to make them permanent, and then explores the consequences of making the tax cuts permanent on the fiscal status of the government, the distribution of after-tax income, long-term economic...

A good deal has been done to improve the safety of Americans on their own soil since the attacks of September 11, 2001. Yet there have been numerous setbacks. The Bush administration and Congress wasted at least six months in 2002 due to partisan disagreement over a new budget for homeland security, and as one consequence, resources were slow to re...

The Social Security earnings test is one of the least popular features of Social Security. It also is one of the most widely misunderstood. This issue in brief discusses how the earnings test functions and examines options for reform.

The Social Security earnings test reduces payments to beneficiaries whose labor income exceeds a given threshold. We investigate the impact of this rule by studying the significant changes in its structure over the past 25 years. We find that the earnings test exerts no robust influence on the labor supply decisions of men, although there is some s...

this paper examines the current budget outlook, the sources of changes in the outlook since January 2001, and adjustments to the official data that more accurately reflect the government's financial status

The President's Commission to Strengthen Social Security proposed three plans for reforming Social Security. All of them would create individual accounts financed by diverting funds from the Social Security Trust Fund. One of the three Commission proposals (Model 1) would not restore long-term balance to Social Security. This paper focuses on the o...

The Bush administration is said to be considering several new tax cuts, including increasing the deductible amount of capital losses, reducing capital gains tax rates, indexing capital gains for inflation, raising contribution limits for IRAs and 401(k)s, and reducing taxes on dividends. This paper examines the rationale and likely effects of these...

The President's Commission to Strengthen Social Security proposed three plans for reforming Social Security. All of them would create individual accounts financed by diverting funds from the Social Security Trust Fund. One of the three commission proposals (Model 1) would not restore long-term balance to Social Security. This analysis focuses on th...

This report examines the federal budget outlook and evaluates alternative fiscal policy choices. Official projections of the federal budget surplus have declined dramatically in the past year. Adjusting these measures for the treatment of retirement trust funds, realistic estimates of future tax and spending levels, and longer time horizons implies...

The President's Commission to Strengthen Social Security proposed three plans for reforming Social Security. All of them would create individual accounts financed by diverting funds from the Social Security Trust Fund. One of the three Commission proposals (Model 1) would not restore long-term balance to Social Security. This paper focuses on the o...

The Center on Budget and Policy Priorities is a nonprofit, nonpartisan research organization and policy institute that conducts research and analysis on a range of government policies and programs. It is supported primarily by foundation grants.

In this report, the authors trace the extent, causes, and implications of the recent rapid decline in short- and medium-term budget prospects. In May 2001, the Congressional Budget Office's baseline budget projected surpluses of $5.6 billion in the unified budget and $3.1 trillion outside of social security for fiscal years 2002 to 2011. By October...

Over the past decade, and especially over the past few years, climate change has emerged as one of the most important issues facing the international community. A global consensus now exists that climate change represents a significant potential threat to the world's well-being. But there is disagreement about how and when to address that threat. T...

In the aftermath of the recent terrorist attacks, the Federal Reserve reduced interest rates, and Congress approved a $40 billion spending package and an airline bailout program. The key issues facing economic policymakers are whether additional stimulus proposals should be approved, and if so, what form they should take. Spending initiatives aimed...

The National Taxpayers Union (NTU) recently released a report arguing that President Bush's proposed tax cut is far smaller than the 1981 Reagan tax cut and other historical tax cuts. 1 Some Administration officials and Members of Congress have echoed these claims and suggested this shows the proposed tax cut is of a responsible size. Careful exami...

In the wake of the terrorist attack on September 11, Congress and the Administration are debating the best way to stimulate the economy through spending and tax changes. The general principle that a stimulus package should include only temporary items—that is, items that sunset after one year—has been endorsed by the Democratic and Republican leade...

The book American Economic Policy in the 1990s, which has a publication date of Spring 2002 from MIT Press, is the outcome of a conference held at the Kennedy School in June 2001. It brought together leading policy-makers and economists, with the goal of providing a preliminary history of U.S. economic policy-making during the last decade. The book...

Empirical studies of per capita income convergence across countries have proliferated in the past decade. The purpose of this paper is to build upon that literature by examining demographic, rather than economic, convergence. In this paper, we examine whether fertility rates have been converging across countries. Our results indicate that fertility...

Aging populations are expected to put increasing strains on government budgets across the globe. At the same time, policy-makers recognize the substantial uncertainty surrounding estimates of pension costs several decades into the future. The purpose of this paper is to examine the implications of uncertainty over future pension costs for current d...

ored before the current rules were adopted, but the revenue estimate was similar to what would have resulted under the current system.) USEC is a domestic monopoly, which raises questions about the social benefits of its privatization. Perhaps more disturbingly, privatization seems to be endangering a key non-proliferation deal with the Russians un...

of the United States 1995 (Government Printing Office: Washington, 1995), Table 962, page 601.

The UK requires individuals with private pensions to annuitize by the age of 75. Using data on annuity rates over time, we calculate the financial cost of annuitization in terms of reduction in yield relative to alternative sources of wealth holding. We find that for a typical 65-year old male, annuitization typically involves a reduction in yield...

of the United States 1998 (Government Printing Office, Washington: 1998), Table 1340. 11 For further discussion of the simple rate of return comparison, see Peter R. Orszag, "Individual Accounts and Social Security: Does Social Security Really Provide a Lower Rate of Return?" Center on Budget and Policy Priorities, March 1999, http://www.cbpp.org....

Front-loading of charges on insurance products can impose considerable costs on consumers when policies lapse early. This paper develops a theory of the maturity structure of charges similar to that used to examine the term structure of interest rates, and applies it to the UK experience with individual accounts. We find that the implied term struc...

Aging populations are expected to put increasing strains on government budgets across the globe. At the same time, policy-makers recognize the substantial uncertainty surrounding estimates of pension costs several decades into the future. The purpose of this paper is to examine the implications of uncertainty over future pension costs for current d...

This paper summarises some results from a recent research project on UK annuity costs and market behaviour. Annunity costs are decomposed into two components: selection effects and pure administrative costs. We find that selection effects account for the majority – perhaps one-half to two-thirds – of total annuity costs for the typical individual,...

: The UK requires individuals with individual pension accounts to annuitize before the age of 75. Using a time series of annuity prices and quantities, we apply the methodology of Mitchell et. al. (1999) to examine the value of UK market annuity rates relative to theoretical values. We find that selection effects account for the majority -- perhaps...

this paper. But the U.K. experience vividly warns of potential dangers. In particular, our analysis of the U.K. data indicates that administrative costs may be surprisingly high in a system of decentralized accounts.

Since 1988, workers in the United Kingdom have been allowed to opt out of that nation’s Social Security system and into individual accounts. We link together existing sources on U.K. personal pension costs to form a comprehensive database on firm-level administrative and other costs within the U.K. system. Our analysis of that data, which 1

Empirical studies of per capita income convergence across countries have proliferated in the past decade. The purpose of this paper is to build upon that literature by examining demographic, rather than economic, convergence. In this paper, we examine whether fertility rates have been converging across countries. Our results indicate that fertility...

Many policy decisions involve discontinuous and irreversible shifts, often in the face of substantial uncertainty. This dissertation studies two types of regime shifts under uncertainty: stabilization from hyperinflation, and privatization of a government corporation. In both cases, policy-makers face decisions that involve uncertainty and irrevers...

This paper uses data from the largest tax preparer in the United States to estimate the impact of the "saver’s credit," aUSfederal program providing financial incentives to encourage retirement savings, on the decision to contribute to an IRA. It finds significant, but very modest, effects. This is contrasted with results from a field experiment sh...