Alicia Munnell

Alicia H. Munnell, Peter F. Drucker Professor of Management Sciences at Boston College, was formerly a member of the president's Council of Economic Advisers and Assistant Secretary of the Treasury for Economic Policy.

Recent Articles

We've Already Tried Private Accounts!

President Bush wants to “privatize” a portion of the Social Security program. As part of that debate, we should remember that our experience with 401(k) plans provides some evidence about how well such a program might work. The results to date are not encouraging and should serve as a blinking yellow light. 401(k) plans, which are tax-favored savings accounts, emerged in the 1980s as supplements to traditional employer-defined benefit pensions, where benefits are based on years of service and final salary. Individual 401(k) accounts, funded with employer and employee contributions, end employer liability for pension payments. Not surprisingly, 401(k)s have emerged as the dominant pension arrangement. And in the private sector, most of the responsibility for retirement security has moved from employer to employee. The supposed advantages of 401(k) plans for employees are twofold. First, workers with 401(k)s can take their full accumulations with them as they change jobs. This arrangement...

Future Retirees at Risk

Retirement security for middle-class Americans is at risk. First, the push to privatize Social Security has diverted attention from solving the program's financing problems. Second, unchecked reliance on 401(k) plans has made employer-provided pensions less reliable. Third, the president's "ownership society" initiative has led to policy proposals that undermine pension coverage and splinter the health-care system. Finally, massive budget deficits have now made it more difficult to fix Medicare and Social Security. Diverting the Social Security Debate Over the 75-year period for which the Social Security system's trustees are required to plan, Social Security in its present form will fall out of balance. It will have insufficient resources to pay for the benefits it has promised. We can restore balance with moderate changes to the program's revenues, its benefits, or the returns on its accumulated assets. But the longer the decision to do so is postponed, the greater the required...

Behind the Numbers: The Great Surplus Debate

Three views of what to do with the budget surplus.

Save It Alicia H. Munnell A booming economy, surging tax revenues, and three budget deals (1990, 1993, and 1997) have allowed the administration's Office of Management and Budget (OMB) to project budget balance this year and surpluses thereafter. The Congressional Budget Office (CBO) also projects surpluses, beginning in 2001. No sooner did surpluses appear on budgeteers' spreadsheets than tax cutters, highway builders, and a host of others attempted to claim them. President Clinton countered with his State of the Union call to "Save Social Security First." Although the President flagged the right priority, he missed a striking opportunity. He should have called for separating Social Security from the rest of the budget. The surpluses belong to Social Security; there are no surpluses in the rest of the budget. Taking Social Security out of the unified budget allows Social Security to increase the national savings rate and politically shores up the program ARE THE SURPLUSES FOR REAL?...

The Growth Puzzle

Productivity growth is the single most important determinant of our future standard of living. People can expect their real wages and their living standards to double every 28 years, or roughly once a generation, if capital investment and technological change allow workers to increase their output by 2.5 percent per year. But if output per worker grows at only 0.5 percent, children can expect living standards only slightly higher than those of their parents. In this regard, the numbers in recent decades look bad: Labor productivity growth in private businesses, excluding farms, declined from an average annual rate of 2.5 percent over 1948-69 to 2.0 percent over 1969-73, and then to 0.5 percent from 1973 to 1979. The recent numbers are somewhat better. Labor productivity growth has averaged 1.1 percent annually since 1979, but that rate is still well below the heights of the post-World War H period. If output increases only because more people or inputs are used in production rather...