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The Effect of the Current Ira Program on Federal Debt


  • Frank Caliendo
  • W. Cris Lewis


This article analyzes the long-term impact of the current individual retirement account (IRA) program on government debt. The initial work on this subject was conducted by Feldstein (1995), who argued that the traditional IRA has a favorable long-term effect on government debt. Yet, absent from the literature is any formal extension of Feldstein’s model to include the Roth IRA. Using modeling techniques similar to Feldstein, the Roth IRA is shown to have a negative long-term effect on government debt. The model includes personal and corporate tax revenue collections, the cost of government debt, the source of Roth IRA saving, the payment source of the taxes paid on Roth contributions, and optimal investment strategies. Aconceptual, newtype of IRA is proposed as a replacement for the Roth IRA.

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  • Frank Caliendo & W. Cris Lewis, 2004. "The Effect of the Current Ira Program on Federal Debt," Public Finance Review, , vol. 32(3), pages 331-351, May.
  • Handle: RePEc:sae:pubfin:v:32:y:2004:i:3:p:331-351

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    1. Auerbach, Alan J & Kotlikoff, Laurence J & Skinner, Jonathan, 1983. "The Efficiency Gains from Dynamic Tax Reform," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(1), pages 81-100, February.
    2. Jane G. Gravelle, 1994. "The Economic Effects of Taxing Capital Income," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262071584, January.
    3. Laurence S. Seidman, 1990. "Is a Consumption Tax Equivalent to a Wage Tax?," Public Finance Review, , vol. 18(1), pages 65-76, January.
    4. David Altig, 2001. "Simulating Fundamental Tax Reform in the United States," American Economic Review, American Economic Association, vol. 91(3), pages 574-595, June.
    5. Fehr, Hans, 1999. "Welfare Effects of Dynamic Tax Reforms," Beiträge zur Finanzwissenschaft, Mohr Siebeck, Tübingen, edition 1, volume 5, number urn:isbn:9783161470165.
    6. Homburg, Stefan, 1990. "The Efficiency of Unfunded Pension Schemes," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 640-647.
    7. Atkinson, A B & Sandmo, A, 1980. "Welfare Implications of the Taxation of Savings," Economic Journal, Royal Economic Society, vol. 90(359), pages 529-549, September.
    8. Gravelle, Jane G, 1991. "Income, Consumption, and Wage Taxation in a Life-Cycle Model: Separating Efficiency from Redistribution," American Economic Review, American Economic Association, vol. 81(4), pages 985-995, September.
    9. Kenneth A. Lewis & Laurence S. Seidman, 2000. "Transitional Protection During Conversion to a Personal Consumption Tax," Public Finance Review, , vol. 28(2), pages 99-119, March.
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