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Macroeconomic Effects of Social Security and Tax Reform in the United States

  • Tamim Bayoumi
  • Dennis P. J. Botman
  • Manmohan S. Kumar

We use the IMF's Global Fiscal Model to evaluate recent proposals to reform social security and the tax system in the United States. Introducing personal retirement accounts is unlikely to yield significant macroeconomic benefits unless it spurs additional fiscal consolidation to prevent a large increase in government debt. Similar benefits are obtained if the social security surplus is placed in a lockbox while maintaining the same debt target. Lowering the taxation of investment income is beneficial, but only if the reform is revenue neutral. Debtneutral social security and tax reform in the United States has large positive effects on the rest of the world.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/208.

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Length: 22
Date of creation: 01 Nov 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/208
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  1. Tamim Bayoumi & Hamid Faruqee & Douglas Laxton & Philippe D Karam & Alessandro Rebucci & Jaewoo Lee & Ben Hunt & Ivan Tchakarov, 2004. "GEM: A New International Macroeconomic Model," IMF Occasional Papers 239, International Monetary Fund.
  2. Laxton, Douglas & Pesenti, Paolo, 2003. "Monetary rules for small, open, emerging economies," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 1109-1146, July.
  3. Christopher J. Erceg & Luca Guerrieri & Christopher Gust, 2005. "Expansionary fiscal shocks and the trade deficit," International Finance Discussion Papers 825, Board of Governors of the Federal Reserve System (U.S.).
  4. repec:cup:cbooks:9780521844956 is not listed on IDEAS
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