Laurence J. Kotlikoff

Professor of Economics, Boston University

3/4/2002
3/6/2002

If you feel that the current federal income and payroll taxes are high, how about doubling the current combined tax rate? This is what it would take now, according to Professor Laurence Kotlikoff, in order to guarantee the present young workers the same level of social security benefits that the current retirees receive. His estimate of a skyrocketing tax burden (assuming that the Social Security system and current productivity projections remain unchanged) is due to a massive demographic shift forthcoming in the U.S. and other developed countries. Professor Kotlikoff calls this expected societal transformation "The Coming Generational Storm." The analysis of its impact on present and future economies and its implications for public and private financial strategies has been the focus of his research, publication, and public service efforts.

Lawrence Kotlikoff (Ph.D. Harvard Univ. 77, B.A. Univ. of Pennsylvania 73) is Professor of Economics at Boston University, Research Associate of the National Bureau of Economic Research and Fellow of the Econometric Society. He served as Senior Economist on President Reagan's Council of Economic Advisors, has testified regularly before the U.S. Senate Finance Committee, the House Ways and Means and Budget Committees, and the Joint Economic Committee. He is currently a member of the Blue Ribbon Panel of the Joint Committee on Taxation. He has authored nine books and over one hundred articles in scholarly journals and volumes. His latest book Generational Policy: the Case of Argentina is forthcoming in the MIT Press; his Generational Accounting (Free Press, 1992) had a particularly significant effect on general readership and policy-makers.

Professor Kotlikoff is a leading authority in the economic analysis of the allocation of public and private resources between different generations. The term generational accounting, which he coined, has become a common identification for the problems associated with intergenerational transfers and welfare comparisons in academic and policy discussions. The importance of his pioneering work is underscored by the fact that the issues of generational accounting, such as funding Social Security and Medicare programs for the old and investing in education of the young have now become central to the public policy agenda. Indeed, the awareness raised by his work has had a significant effect on the accounting concepts applied in government fiscal policy. In particular, it influenced the approach to the determination of budget deficits by highlighting the trade-off between the current account and financial burden placed on future taxpayers, hence the need to account for implicit borrowing from future generations. Kotlikoff's generational accounts are now being computed by government agencies in the U.S. and over twenty countries around the world. He had made substantial efforts to educate policy makers and the general public on this novel approach to assessing fiscal policy. In addition to regularly testifying before the U.S. Congress, he has been a consultant to international financial institutions and government agencies in countries around the world. He has also written numerous op-ed pieces on matters of fiscal policy for The Financial Times, The New York Times and The Wall Street Journal, and other leading newspapers.

The focus of Professor Kotlikoff's Patten lectures, "The Coming Generational Storm," will be the fiscal crises facing the U.S. and its principal trading partners as the baby boom generation retires. The first lecture, entitled "The Emperor's New Clothes," describes the demographic transition, the long-term imbalances in our Social Security and Medicare systems, and the inherent inability of conventional fiscal accounting to assess any aspect of the nation's fiscal affairs, including the size of the government's bills being left for the next generation to pay. The second lecture, entitled "Do Cry for Me, Argentina", points out the severity of the nation's generational imbalance and the potential for Argentine-like solutions to emerge. Both lectures are intended for a generational audience.