The NCPA finished the second quarter with significant achievements in the areas of tax and pension reform and continuing breakthroughs in elderly entitlements. Here is a brief summary.

For the second year in a row, the Social Security/Medicare Trustees Report did something that had previously never been done before: it published the total unfunded liability in both programs.  (A whopping $84 trillion at last count!)  This improvement in reporting is almost solely due to the efforts of the two private sector trustees: NCPA Senior Fellow Thomas R. Saving and Syracuse University economist John Palmer.  Over the strong objections of the New York Times, President Bush recently reappointed Saving and Palmer, and it was one of his best decisions.  The NCPA hosts an annual briefing following the Trustees Report release – allowing Saving and Palmer to explain the numbers without any government spin.
 
The reality may be worse than the Trustees’ forecast, however. A new NCPA study by NCPA Senior Fellow and Boston University Professor Laurence Kotlikoff shows that by mid-century, when today’s college students retire, government spending on Medicare and Medicaid will equal one-third of GDP if current trends continue. That is roughly equal to all government spending for all purposes today.

A recent U.S. Treasury report confirms the benefit of lower taxes on capital income.  Government tax revenues today are approaching their post-World War II average (about 18 percent of GDP), despite a 15 percent tax rate on capital gains and dividends.  As you know, a continuing issue before Congress is whether to extend these tax cuts indefinitely.  The NCPA will continue to play a very important role in that debate, as evidenced by recent changes in an opportunity to use Roth accounts for retirement saving.

The idea behind a Roth account is simple: pay taxes once and never pay again.  The Roth IRA was proposed by the NCPA and the U.S. Chamber of Commerce in the early 1990s and it became a core idea in the Contract with America in 1994.  Unfortunately, many taxpayers have been denied the benefits of this account.  But thanks in part to the educational efforts of the NCPA, that is about to change.  In 2010, all taxpayers will be able to pay a one-time tax and convert all their regular
IRAs into a Roth account.  In addition, employers can now offer Roth 401(k) accounts to their employees.

Looking to the future, our goal is complete reform of the nation’s retirement institutions.  The NCPA study “Ten Steps to Baby Boomer Retirement” shows that as 77 million Americans begin to face retirement, we are nowhere near ready for them.  Promises made under Social Security, Medicare and Medicaid are, of course, completely unfunded.  And private sector institutions are not much better – as millions of workers are discovering that their defined benefit pensions are unfunded and that employers are retrenching on post-retirement health care promises.

The NCPA has proposed a series of reforms that empower individuals and make retirement and health care benefits personal and portable.  Further, Congress is about to enact many of the elements of an NCPA/Brookings Institution 401(k) reform proposal – employees would be automatically enrolled in 401(k) plans and invested in diversified portfolios (unless they opt out).  In return, employers would receive a safe harbor against lawsuits as well as regulatory relief.

An NCPA Capitol Hill briefing on April 26 focused on these and other reforms. Prof. Kotlikoff, NCPA Senior Fellow and president of the Institute for Research on the Economics of Taxation Stephen Entin, and Brookings Institution economist J. Mark Iwry spoke. 

The NCPA continues to play a leadership role on health care reform.  Because of our work on Health Savings Accounts (HSAs), Modern Healthcare magazine profiled me in a cover story as one of four founding fathers of modern health care. Also featured were Paul Ellwood on Health Maintenance Organizations, Thomas Frist on for-profit chains and Lucien Leape on patient safety.  We also convened our second meeting of the American Health Policy Network, a group of high-level executives, business leaders and policy makers who meet periodically to discuss ways to improve the nation's health care system.

The NCPA has long believed in relying on sound science to make policy decisions about the environment.  Recently we spearheaded the substantive criticism of Al Gore’s controversial global warming movie.  The release of our study, Climate Science: Climate Change and Its Impact by NCPA Adjunct Scholar David Legates, director of the University of Delaware’s Center for Climatic Research, was especially auspicious and timely. The study's findings were the subject of news reports on Fox News, in the Washington Times, as well as in Greenwire and the Environment News Service and other news outlets.

Sen. Kay Bailey Hutchison previewed our new book, Leaving Women Behind: Modern Families, Outdated Laws, at a briefing sponsored by the Cato Institute.  Kimberly Strassel, senior editorial writer for the Wall Street Journal, Celeste Colgan and I coauthored the book. Strassel also spoke about the book at the Harvard Club in New York City, an event hosted by the Manhattan Institute – which is helping publish and promote the book.  Leaving Women Behind shows how our major economic institutions — including tax law, labor law, and employee benefits law, as well as Social Security, and retirement policies — reward families with a full-time worker and a stay-at-home spouse and by comparison punish every other arrangement. Strassel highlighted the book in a Mother's Day editorial for the Wall Street Journal.

The NCPA’s new Center for European Policy Analysis (CEPA) is building on the NCPA’s international experience in such areas as taxes, health care and social insurance to help Europe move beyond the 20th century welfare state and into a new era.  CEPA’s new study, Tipping the Scales - Why Central Europe Matters to the United States, explains why Central Europe matters to the United States and why U.S. policymakers should seek a deeper level of engagement with the region.

Our unique Debate Central Web site, one of the most popular resources on the Internet for high school debaters, has attracted 5.4 million hits this year and a record 384,000 visitors. The next school year’s topic will be “Resolved: The United States federal government should establish a policy substantially increasing the number of persons serving in one or more of the following national service programs: AmeriCorps, Citizen Corps, Senior Corps, Peace Corps, Learn and Serve America, Armed Forces.” In preparation, our site already has more than 700 links and suggestions for affirmative and negative cases.

Also during the second quarter, we launched a new lecture series, the Economic Policy Forum. Our first speaker was former Russian Economic Advisor Dr. Andrei Illarionov, who resigned from President Vladimir Putin’s government in protest. At the second forum in the series, 20/20 co-anchor John Stossel discussed his new book Lies, Myths and Downright Stupidity, and the myths surrounding public education.

These activities and events would not be possible without your support.  It makes our work possible. Please take a few minutes to read the enclosed report for a more in-depth look at the NCPA’s second quarter work.

Warm regards,

John Goodman
President

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