Facing the Age Wave.

• Author: Greifer, Nick
• Position: Review

Wise, David A., ed. Stanford, California: Hoover Institution Press, 1996. (120 pp)

Reviewed by Nick Greifer, Senior Policy Analyst, Research Center, Government Finance Officers Association, Chicago, Illinois.

Facing the Age Wave is a near apocalyptic forecast of the early 21st century. It predicts three major crises resulting from an increasingly elderly population: 1) insufficient national savings that threatens long-term economic growth; 2) insufficient personal savings for retirement that could lower the living standards of the elderly; and 3) unabated growth in health care costs. The book's policy prescriptions require federal action, but it will interest state and local as well as federal policy makers who have an interest in these issues.

Only 114 pages, the book provides a concise review of the policy implications of an elderly America. It provides, to varying degrees, useful descriptions of what the resulting problems will be and their expected causes. The authors' policy solutions will likely engender considerable debate (e.g., whether additional savings incentives or other proposals are the best way to increase long-run economic growth). Overlooked among the solutions are likely attempts by the federal government to "solve" its long-term budgetary problems by imposing new costs upon state and local governments. For example, many of the current proposals to reform Social Security require state and local participation.

David Wise and John Shoven address the first topic in chapters one and three. While they ably demonstrate the demographic shift that is expected to occur, they do not adequately answer the "so what" question: what if national savings do not increase? Observers such as the Wall Street Journal (December 21, 1998) report that the problem may not be significant, and that it may be one largely of inaccurate government statistics. The authors argue that insufficient savings will dampen economic growth, but do not put forward a menu of options for increasing growth (e.g., investment in transportation infrastructure or improvements to elementary and secondary education). Instead, they focus on one option only: lowering estate taxes primarily for upper-income Americans.

2. Douglas Bernheim focuses on the narrower issue of personal retirement savings. He sketches a convincing portrayal of inadequate savings for retirement. To a large degree, this is driven by a secular trend of longer retirement caused by early retirement and...