- The actions taken in the aftermath of the Great Recession allayed the economic burdens of the financial crisis, but the housing market still remains vulnerable to systemic problems that have not been effectively addressed.
- While access to credit was justifiably tightened following the financial crisis, evidence suggests that new restrictions and standards may be excessively hindering homeownership growth.
- Since 2008, the secondary mortgage market has seen a significant withdrawal of private capital and a greater involvement of Fannie Mae and Freddie Mac. Several proposals have outlined fundamental overhauls to restore the presence of private capital, but policymakers must reform the market to foster competition and accountability without sacrificing stability and liquidity.
- Growth in physical capital per worker has contributed the most to U.S. productivity growth.
- U.S. capital accumulation is increasingly dependent on foreign capital inflows.
- If future technology improvement occurs at its average historical rate, maintaining U.S. productivity growth will require more rapid capital accumulation, especially because worker efficiency appears likely to stagnate or decline.
- Workers’ performance on the job is related to all of their demographic and economic attributes, including education, age, family structure, gender, race, labor force status (full- or part-time work), peer group (birth-year), and others.
- The annual market-wide “effective labor input” depends upon the quantity (number of work hours contributed) and the efficiency (related to worker attributes) of individuals engaged in market production.
- Labor efficiency is projected to decline in the future and offset growth in labor quantity to slow growth of aggregate “effective labor input.” Official government analysts typically do not project changes in labor efficiency, thereby imparting a more optimistic outlook to budget projections.
As in many of the world’s developed nations, America is undergoing a momentous increase in the share of older individuals in the population, or “population aging.”
Population aging will continue throughout this century because of baby-boomer retirements, longer lifespans due to declining mortality, and fewer newborns from reduced fertility.
Sustained population aging will pose a significant fiscal challenge: How best to provide funding for adequately supporting older generations’ consumption and health care.
- The large premium that college degree holders earn relative to workers with only a high school diploma suggests that a better-educated workforce would increase U.S. output.
- Barriers to borrowing against future income, though, may make it difficult to acquire a college education, implying a potential role for using policy to increase access to college, especially if it is appropriately targeted.
- However, college education is costly, and the payoff is uncertain and realized only after a lengthy absence from the workforce. Optimal policy, therefore, aims to balance these costs against the potential benefits, requiring the explicit modeling of education attainment when making budget projections.
Improving citizens’ well-being requires increasing productivity over time – the efficiency of converting resources such as labor, land, and physical plant and equipment into useful goods and services.
U.S. productivity has slowed dramatically during the last decade, largely due to slower innovation and reduced growth of capital per worker.
The productivity slowdown will make funding government programs more challenging. Public policies that encourage additional capital accumulation and reward innovation could reverse at least some of the recent productivity declines.
- U.S. divorce rates remain high and the post-1970s marriage decline is continuing.
- The marriage decline is concentrated among those with fewer years of education.
- Low earnings and job insecurity induces single-parenthood with negative side effects on children.
- The United States experienced an unprecedented decline in mortality during the twentieth century, thanks to improvements in public health, medical advances, and behavioral changes.
- But mortality and life expectancy improvements have been uneven across age and socioeconomic status.
- Future changes in mortality will affect the federal budget outlook. However, projections of mortality and life expectancy are highly uncertain. This uncertainty creates additional risk for the nation’s transfer programs to the elderly, which already account for half of government outlays.
While some policymakers have blamed immigration for slowing U.S. wage growth since the 1970s, most academic research finds little long run effect on Americans’ wages.
The available evidence suggests that immigration leads to more innovation, a better educated workforce, greater occupational specialization, better matching of skills with jobs, and higher overall economic productivity.
Immigration also has a net positive effect on combined federal, state, and local budgets. But not all taxpayers benefit equally. In regions with large populations of less educated, low-income immigrants, native-born residents bear significant net costs due to immigrants’ use of public services, especially education.
- The American Family is changing in response to the pressures and opportunities facing young individuals.
- Many children today are being raised by single parents, which is associated with a lower transmission of skills to succeeding generations.
- Technological advances and public provision of social protection benefits appear to be contributing to the decline of the nuclear family.
- The demographic transition toward an older population is ongoing in America and Europe. The transition began earlier in Europe where fertility rates have declined much more. Will America follow in Europe’s footsteps?
- Procreation and family formation appears influenced by the social and economic conditions facing young adults. Younger American women appear to be postponing childbirth. Will this reduce future American TFR to still lower levels?
- Government policies influence the economic environment and affect fertility choices indirectly. Social Security and various retiree health programs have likely reduced fertility, making their own financing more difficult.
- The baby bust of the 1960s saw the U.S. total fertility rate (TFR) dip to just below the 2.1 live births per woman needed to prevent population decline.
- U.S. TFR fell again after the Great Recession of 2008-09, which eroded women’s and couples’ economic ability to bear and raise children.
- Large and persistent declines in European fertility to well below the 2.1 threshold is a worrisome precursor: America’s budget problem of funding elder-care would worsen if the U.S. TFR meets with the same fate as that of Europe.