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Tax Policy and the Future of Social Security Reform

Monday April 2005


Dr. Edward C. Prescott Recipient, 2004 Nobel Prize in Economic Sciences W. P. Carey Chair of Economics, W. P. Carey School of Business, Arizona State University

Introductory Remarks: Dr. Michael Crow, President, Arizona State University

Social Security was created when the number of people paying into the system greatly outnumbered those receiving benefits. Now, however, the program is placing an increasingly onerous burden on the young. The ratio of workers to recipients has shifted from approximately 41 to one in the 1930s, to roughly three to one, today.

Younger workers are being told that their contributions or taxes must be increased to support the burgeoning elderly population. Moreover, they are being warned that the same benefits will not apply to them. They will have to work longer and they will receive less than the people whom they are supporting.

While once considered an inspired solution to the financial needs of elderly Americans, a heated debate has ensued to determine whether or not continuing Social Security, in its present form, is good public policy.

Our speaker, Dr. Edward C. Prescott, the 2004 recipient of the Nobel Prize in economic sciences, will discuss the correlation between tax rates and employment, and the implications for Social Security reform. He will show us how the labor supply responds to changes in tax policy, and how the application of this insight could greatly contribute to Social Security’s solvency.