Demographic Change, Generational Accounts and National Saving in the United States

The recently developed method of generational accounting facilitates detailed measurement of fiscal policy’s impact on the intergenerational distribution of resources. Earlier studies for the United States, using the Social Security Administration’s intermediate population projections, concluded that current U.S. fiscal policy embodies a significant generational imbalance. This paper examines the sensitivity of that imbalance to alternative population projections. In addition, following a framework for data organization suggested by the life-cycle hypothesis of consumer behavior, it analyzes the impact of the ongoing and projected demographic transition on national saving. The paper finds that the conclusion of imbalance is robust over a wide range of U.S. population projections involving alternative assumptions about fertility, mortality, and immigration. It also finds that the ongoing demographic transition may have contributed significantly to the decline in national saving during the 1980s. However, projected changes in the population’s age structure are not expected to generate a rebound in national saving.