1. Public Transfers in NTA Countries Tim Miller Nov 5, 2007 Fifth Annual NTA Seminar and Workshop

2. Why isn’t Gretchen giving this presentation?

3. Public Transfers A look at patterns among countries. –Focus on individual countries. –While pattern of LCD is remarkably similar across countries, patterns of Public Sector Transfers are quite varied. –Do these differences reflect differences among the countries (e.g. policy differences) – or different estimation/classification methods among the country teams?

4. Looking at the large variation across NTA countries. We are all outliers!

8. Who pays for public transfers?

16. Who receives public transfers?

28. Education Spending: The Role of Public Transfers

33. Health Spending: The Role of Public Transfers

39. Rising health costs and the end of generational equity?

40. Some uses of Public Sector NTAs. International typologies. Budget forecasts. Intergenerational equity. Intragenerational equity (e.g., Gender, Education).

41. Illustrative long-range budget projections

42. Who makes long-range US budget projections? US Social Security Trustees. Annual forecasts since 1942. Time horizon of 50-75 years. US Congressional Budget Office. First forecast issued in 1996, in response to concerns about population aging. Time horizon of 50-75 years. Various academic studies. Mainly studying the unfunded liability of transfer systems like US Social Security and Medicare.

43. US Social Security Projections Projection Horizon is 50-75 years. “Action Horizon” is 20-30 (?) years. Government appears to respond when insolvency is projected to occur within 20- 30 years.

45. Use of long-range forecasts Period: Impact of population aging on public debt, tax and benefits levels. Issues of sustainability. Cohort: Net present value of public transfers by birth cohort. Issues of intergenerational fairness.

47. Current Fiscal Policy is Unsustainable

48. A Debt Limit Exists. Debt / GDP External Debt / Export Revenue

49. When reach debt limit… Must raise taxes or reduce benefits. Three scenarios: raise taxes, reduce benefits, or 50-50 split. Some evidence that historical response of governments has been 50-50 split.

50. Period effects of population aging

51. Intergenerational Equity

52. Thanks!