How Does Fiscal Policy Affect the American Worker?
By John D. Mueller
Posted: Tuesday, July 25, 2006
American policymakers have begun preparing the public for fiscal policy changes, such as comprehensive reforms of the Federal income tax, Social Security, and Medicare systems that would profoundly affect the lives of American workers and their families. It is generally agreed that projected fiscal imbalances are unsustainable. Moreover, a chorus of analysts across the political spectrum has warned that the United States is on the brink of exactly the same demographic black hole that already has started to swallow Europe and Japan, characterized by falling fertility, chronic unemployment, and overstrained budgets.  [Read More]

Hey, Reagan Did That!
There's good precedent for President Bush's Social Security Commission.
By John D. Mueller
Posted: Friday, February 3, 2006
President Bush's proposal is the most practical step possible to cool the overheated partisan debate, break the congressional logjam, and in 2007 -- if it follows the timetable of President Ronald Reagan's similar commission -- deal with the three biggest long-term problems facing American families in decades.  [Read More]

Tax Americana
The latest reform plans fall short of the Reagan vision.
By John D. Mueller
Posted: Monday, November 14, 2005
The final report of President Bush's Advisory Panel on Federal Tax Reform reveals a Republican party shell-shocked by the hostile reception to its Social Security reform plans and deeply ambivalent about the direction to take on tax policy. The underlying drama, rarely acknowledged, is whether the party should move away from Ronald Reagan's approach to these issues.  [Read More]

Social Security Endgame
How the U.S. Can Avoid Europe's Demographic 'Black Hole'
By John D. Mueller
Posted: Thursday, September 1, 2005
Even those who voted for President Bush must concede that "erupting in political flames" aptly describes the Social Security initiative. Yet if President Bush squandered "political capital," the Democrats didnt gain any. The main danger now is that the two parties "decide not to decide": to find an "exit strategy," and "walk away from the table," as Fred Barnes and E.J. Dionne began urging their parties months ago. To do so would be to follow Europe and Japan in commmitting national suicide.  [Read More]

Social Security and Fertility
Discussion of Allan Carlson's Paper
By John D. Mueller
Posted: Wednesday, February 23, 2005
Commenting on a paper by Allan Carlson at the Family Research Council, EPPC Fellow John Mueller agrees that Social Security affects fertility: positively if the program is of modest size, but negatively if it grows too large. Fertility also affects Social Security: He shows that the program's entire expected deficit resulted from the drop in fertility caused by legal abortion.  The main problem for Social Security reform is to avoid the "societal death spiral" already engulfing Europe and Japan, which would be triggered either by allowing Social Security to mushroom under current law, or by extracting forced saving from workers with compulsory retirement accounts. The "death spiral" can be avoided if legal abortion is ended and Social Security balanced by cutting surplus payroll taxes now and  scaling back future retirement benefits in the same proportion. Available online in two formats: PowerPoint and PDF.  [Read More]

Taxes, Social Security and the Politics of Reform
A Reaganite plan for Reagan's heirs
By John D. Mueller, John Hood (respondent)
Posted: Monday, November 29, 2004
By putting income-tax and Social Security reform atop his second-term domestic agenda, President George W. Bush courageously zeroed in on the two most important fiscal issues facing American families for at least a generation. The basic choice is whether to retain the formula Ronald Reagan advocated and pursued in office—combining a broad-based, low-rate income tax with a pay-as-you-go Social Security system— or shift to taxing the narrower base of "consumption" at higher rates while replacing Social Security pensions with individual retirement accounts. Mueller explains why Reagan's is the most just, economically efficient and politically popular approach, and outlines a plan to implement it.  [Read More]

Comment on Martin Wolf's "We Need a Global Currency"
By John D. Mueller, Martin Wolf, James Stodder
Posted: Tuesday, August 3, 2004
Last month was the 60th anniversary of the conference at Bretton Woods, New Hampshire, that inaugurated the post-second world war international economic order.  The flood of analysis that this occasion brought forth has concentrated on that meeting's institutional progeny: the International Monetary Fund and the World Bank.  But a bigger question needs to be addressed.  It is whether floating exchange rates have proved to be the ideal replacement for the unsustainable adjustable exchange-rate pegs of the Bretton Woods monetary regime.  The answer is: no.  [Read More]

Rethinking the Flat Tax
Fundamental Pro-Family Reform
By John D. Mueller
Posted: Monday, April 14, 2003
This paper is divided into four parts. First, it examines the basic economics of the family in modern America. Second, using this simple "model" of family economics, it seeks to explain the basic facts about the distribution of income among families in the United States. Third, it argues that earlier tax reform plans—for example, Steve Forbes 1996 flat tax plan—failed politically because they ignored these economic realities of American families, and suggests that the same fate awaits any plan that repeats the mistake. Finally, this discussion will outline the "LBMC Plan,'' which has two parts: The first would replace the federal income tax and the corporate income tax with a flat tax on all spending in the economy (except for a tax credit based on family size which would rebate both the flat tax and Social Security payroll taxes up to the poverty level). This part of the plan amounts to treating all income the way President Bush is proposing to treat dividends: non-deductible when paid by businesses, and non-taxable when received by persons. The second part of the plan would balance the pay-as-you-go Social Security retirement system indefinitely (both getting rid of the current trust fund surplus and preventing future trust fund deficits) by cutting the payroll tax now by 20 percent, in exchange for a reduction in future benefits of up to 20 percent (prorated according to the number of years each worker receives the tax cut).  [Read More]

The Answer to Three Puzzles
Welfare Reform Lowered Unemployment
By John D. Mueller
Posted: Friday, July 23, 1999
Liberal Democrats, Congressional Republicans, and Alan Greenspan often disagree with one another. But they have one thing in common; all have been puzzled by the behavior of the U.S. labor market.   Liberals who had predicted the failure of welfare reform were surprised by its success. Republicans who watched the economy behave worse than they expected under President Bush, found it better than they expected under President Clinton. Federal Reserve Chairman Greenspan has been surprised that unemployment could fall further than he used to say was possible without an upturn in "core" inflation.   There is an obvious connection, but no one has yet drawn ii: an expansion of welfare under President Bush raised the so-called "natural" rate of unemployment and lowered national output; but welfare reform agreed to by Congressional Republicans and President Clinton in 1996 has lowered unemployment and raised national output. I stated this thesis in 1993 and 1994, before welfare reform was enacted. Now the evidence is available to prove it.     [Read More]

Summary of a New Study: Winners and Losers From "Privatizing" Social Security
By John D. Mueller
Posted: Wednesday, March 3, 1999
What would be the effects of "privatizing" Social Security?  Like many Reagan Republican conservatives, I began with the conviction that pay-as-you-go Social Security ought to be "privatized." But analyzing the facts and sifting the arguments turned me around. I was surprised to discover that Social Security is one of those cases, like national defense, in which the government is necessary to perform a role that the private markets alone cannot -- in this case, providing the "foundation layer" of retirement security. Social Security was never intended to grow so large as to "crowd out" investment in the private capital markets, or the even more important investment in raising and educating future citizens. But the current study clearly illustrates why moving in the opposite direction -- "privatizing" Social Security -- would be a big mistake.  [Read More]