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  5. Should America Save for Its Old Age? Fiscal Policy, Population Aging, and National Saving

Journal of Economic Perspectives

ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)

Should America Save for Its Old Age? Fiscal Policy, Population Aging, and National Saving

  • Douglas W. Elmendorf
  • Louise M. Sheiner
Journal of Economic Perspectives
vol. 14, no. 3, Summer 2000
(pp. 57–74)
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Abstract

We examine whether the aging of the U.S. population adds force to traditional arguments for boosting national saving and conclude--perhaps surprisingly--that it may not. Aging boosts the demands on future resources, but it also changes the rate of return the U.S. economy can expect from saving. We find that the net effect on desired saving is small: some specifications imply that present consumption should fall by a fraction of 1 percent; others imply that consumption should actually increase. Thus, it is optimal to allow future cohorts to bear much/all of the burden of population aging.

Citation

Elmendorf, Douglas, W., and Louise M. Sheiner. 2000. "Should America Save for Its Old Age? Fiscal Policy, Population Aging, and National Saving." Journal of Economic Perspectives, 14 (3): 57–74. DOI: 10.1257/jep.14.3.57

JEL Classification

  • E62 Fiscal Policy
  • H55 Social Security and Public Pensions
  • E21 Macroeconomics: Consumption; Saving; Wealth
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