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The Savings and Investment Provisions
in the GOP "Contract With America"
American Council for Capital Formation
January 1995
Introduction
ACCF President Mark Bloomfield, accompanied by ACCF Chief Economist Dr.
Margo Thorning, testified on January 24, 1995, as invited lead witnesses
at a House Ways and Means Committee hearing that examined the saving and
investment proposals in the GOP "Contract With America": the
Neutral Cost Recovery System, capital gains tax reductions, and the American
Dream Savings Account. The executive summary and full text of the ACCF's
testimony are presented here.
Executive Summary
1. Overview. We commend the emphasis the GOP "Contract With
America" has placed on the need to increase saving and investment.
The saving and investment provisions of the Contract will, if enacted,
go a long way toward reducing the burden on capital formation imposed
by the Tax Reform Act of 1986 (TRA). We also applaud Chairman Archer and
members of this Committee for their commitment-which we share-to enacting
the Republican Contract in such manner as to be revenue neutral in the
aggregate, thus not increasing the federal deficit.
2. Trends in U.S. Capital Formation. Saving and investment
spending in the United States in recent years compares unfavorably with
that of other nations and with our own past experience. From 1973 to 1991,
gross nonresidential investment as a percent of Gross Domestic Product
(GDP) was lower for the United States than for any of our major competitors.
Over that period, the growth rate of the stock of U.S. business capital
declined significantly.
3. Link Between Investment and Growth. Allocating increases
in output to three sources-growth in the capital stock, labor supply and
multifactor productivity-Harvard Professor Dale Jorgenson found that increases
in the capital stock contribute most to increases in output. Growth in
labor input is the next most important source, and multifactor productivity
growth plays a subordinate role, Professor Jorgenson concluded.
4. Impact of TRA. Although TRA substantially reduced
corporate and individual tax rates, the Act's capital cost recovery provisions
raised effective tax rates and capital costs for productive and pollution
control assets. Capital costs increased because of the loss of the investment
tax credit, lengthening of depreciable lives for many assets, creation
of a comprehensive corporate alternative minimum tax (AMT), and increases
in capital gains taxes.
5. Capital Formation Provisions. The savings and investment
provisions of the GOP Contract are an important first step toward reducing
the bias against capital formation in the tax code:
- Neutral Cost Recovery System. NCRS increases depreciation
deductions to allow the equivalent of expensing for property with recovery
class of ten years or less and allows indexing for inflation for longer-lived
property. While true expensing for assets would be preferable, enactment
of NCRS would represent a positive move toward this goal.
- Capital Gains Tax Reductions. The Contract's comprehensive
capital gains proposal satisfies three criteria: (1) It makes economic
sense by lowering the high cost of capital, reducing the bias against
high-risk capital, and ameliorating the taxation of inflationary gains;
(2) It is fair to all income groups and sectors of the U.S. economy;
and (3) It would not reduce total tax revenues and might, in fact, be
a revenue raiser because of "unlocking" and important macroeconomic
consequences.
- American Dream Savings Account. This proposal to expand
individual retirement accounts (IRAs) would be an important tool to
increase the low U.S. saving rate. IRA reform enjoys strong bipartisan
support in Congress, and President Clinton has proposed expanding the
tax-deductible IRA. Noted economic scholars have found that such targeted
retirement saving programs stimulate new saving.
6. Conclusion. The hard fact is we can no longer afford
the luxury of government economic policies that reward consumption, discourage
saving and investment, overregulate American business, and penalize economic
growth. Enactment of the GOP Contract's tax reform provisions would help
move the United States toward a tax system which is more neutral toward
saving and investment and would pave the way for a more fundamental tax
restructuring.
ACCF Statement
Introduction
My name is Mark A. Bloomfield. I am president of the American Council
for Capital Formation (ACCF). I am accompanied by Dr. Margo Thorning,
our chief economist. The ACCF represents a broad cross section of the
American business community, including the manufacturing and investment
sectors, Fortune 500 companies and smaller firms, individuals, and associations.
Our board of directors includes cabinet members of prior Republican and
Democratic administrations, former members of Congress, prominent business
leaders, and public finance experts. We appreciate this opportunity to
present testimony on the impact of the tax provisions in the Republican
"Contract With America."
To encourage a constructive debate on the Contract's saving and investment
proposals, our affiliated public policy think tank, the ACCF Center for
Policy Research, has prepared three special reports for today's hearing:
"Questions and Answers on Capital Gains," "Questions and
Answers on IRAs," and "The Impact of the Alternative Minimum
Tax on Investment and Economic Growth."
We commend the emphasis the GOP Contract places on the need to increase
saving and investment. The saving and investment proposals in the GOP
contract-the Neutral Cost Recovery System (NCRS), capital gains tax reductions,
and expansion of Individual Retirement Accounts (IRAs)-will, if enacted,
go a long way toward addressing the burdens on capital formation imposed
by the Tax Reform Act of 1986 (TRA). Almost ten years after the enactment
of the TRA, it is clear that U.S. tax policies toward saving and investment
must be revised if we are to increase real wages for U.S. workers and
retain our leading role in world affairs. We also applaud Chairman Archer
and members of this committee for their commitment-which we share-to enacting
the Republican Contract in such manner as to be revenue neutral in the
aggregate, thus not increasing the federal deficit.
Trends in U.S. Capital Formation
Investment spending in the United States in recent years compares unfavorably
with that of other nations as well as with our own past experience. From
1973 to 1991, gross nonresidential investment as a percent of Gross Domestic
Product (GDP) was lower for the United States than for any of our major
competitors (see Table 1). The U.S. saving rate averaged 4.8 percent over
the 1973-1991 period, compared to 19.1 percent in Japan and 10.7 percent
in West Germany. Even more disturbing is the fact that net annual business
investment in this country has in recent years fallen to only half the
level of the 1960s and 1970s. Net private domestic investment averaged
7.4 percent of GDP from 1960 to 1980; since 1991 it has averaged only
3.0 percent (see Table 2).
Reflecting the reduced share of GDP being invested each year, the U.S.
capital stock has also grown more slowly. In the three decades prior to
1980, the total capital stock grew at 4.0 percent per year; in the 1980s
and 1990s, the rate fell to 2.7 and 1.4 percent respectively (see Table
3). The stock of equipment, which many experts regard as critical for
strong productivity growth, has increased only about half as fast since
1980 as in previous decades. Industrial equipment stocks, which grew at
an average rate of 4.3 percent over the 1950-1979 period, increased by
just 1.2 percent annually in the 1980s and 0.1 percent since 1990.
Link Between Investment, Productivity Increases, and Economic
Growth
The importance of investment in plant and equipment for economic growth
is emphasized in a new book by Harvard Professor Dale Jorgenson.1
Professor Jorgenson's book, Productivity: Postwar U.S. Economic Growth,
analyzed economic growth between cyclical peaks in the business cycle
over the 1948-1979 period. Allocating increases in output to three sources—growth
in the capital stock labor, supply, and multifactor productivity—Professor
Jorgenson found that increases in the capital stock contribute most to
increases in output (see Figure 1).2
In 1979, the output of the civilian economy stood at almost three times
the level of output in 1948. Capital and labor inputs together contributed
2.6 percent per year to the output growth rate of 3.4 percent from 1948
to 1979; capital's share was 1.5 percent compared to 1.1 percent for labor.
Thus, these two inputs accounted for more than three-fourths of output
growth, Professor Jorgenson stated. By contrast, multifactor productivity
increases (efficiency gains) during this period contributed 0.8 percent
per year, or only 24 percent of output growth. Growth in capital input
is the most important source of growth in output, growth in labor input
is the next most important source, and multifactor productivity growth
plays a subordinate role, Professor Jorgenson concluded.
Studies by Harvard Professors Bradford De Long and Lawrence H. Summers,
now on leave at the U.S. Department of the Treasury, concluded that investment
in equipment is perhaps the single most important factor in economic growth
and development.3 Their research provided strong evidence that
for a broad cross section of nations, every 1 percent of GDP invested
in equipment is associated with an increase in the GDP growth rate itself
of one-third of one percent-a very substantial social rate of return.
Investment's key role in advancing technological progress and productivity
growth is also stressed in recent research by New York University Professor
Edward N. Wolff.4 He argued that U.S. labor productivity growth
rates are depressed by the recent slower growth in the capital-to-labor
ratio-from a peak of 2.0 percent per year in the 1950s to 1.2 percent
per year in the 1972-1992 period. He emphasized that the effects of the
decline in U.S. capital-labor growth are perhaps even more pernicious
than they appear at first glance. First, an increasing capital-labor ratio
will increase labor productivity through capital deepening. Second, there
appears to be an important and significant interaction effect between
capital investment and technological advance.
Thus, a slowdown in capital formation may doubly hurt labor productivity
growth-directly by slowing down the rate of capital deepening, and indirectly
by slowing down the rate of technological advance. His research also shows
that U.S. labor productivity growth lags behind our competitors; OECD
countries outstripped the United States during much of the 1950-1990 period.
He noted that countries such as Japan and Germany, which experienced strong
productivity growth in the 1970s and 1980s, showed significant gains in
their capital-to-labor ratios. Our competitors' gains in capital-to-labor
ratios are a direct result of their higher levels of investment.
Implications of Lagging Investment and Slow Growth in Labor Productivity
for
Current and Future Living Standards
Real family income in the United States has been nearly stagnant since
the mid-1970s and in recent years has actually fallen. For example, real
median household income was $39,869 in 1989; income has declined in each
subsequent year, and in 1993 stood at $36,959. These trends have not only
made it harder to maintain living standards but have also jeopardized
our future economic health and our ability to remain the principal leader
in international affairs. In addition, looming in the future is the need
to finance the retirement of the baby boom generation. Research by Stanford
Professor B. Douglas Bernheim, commissioned by the ACCF Center for Policy
Research, our public policy think tank, shows that current saving by members
of the baby boom generation is seriously inadequate.5 The typical
baby boom household saves at only one-third the rate required to finance
a retirement standard of living comparable to that enjoyed before retirement.
Tax Policy and Capital Costs
The user cost of capital is the pretax return on a new investment that
is required to cover the purchase price of the asset, the market rate
of interest, inflation, risk, economic depreciation, and taxes. This capital
cost concept is often called the "hurdle rate" because it measures
the return an investment must yield before a firm will be willing to start
a new capital project.
Economists are in broad agreement that capital costs are affected by tax
policy. For example, Stanford Dean John B. Shoven estimated that about
one-third of the cost of capital is due to taxes.6 In other words, hurdle
rates are 50 percent higher than they otherwise would be due to the tax
liability on the income produced by the investment. Thus, the higher the
tax on new investment, the less the investment that will take place. Although
TRA substantially reduced corporate and individual income tax rates, the
legislation's capital cost recovery provisions raised effective tax rates
and capital costs for productive and pollution-control assets. Capital
costs increased because of the loss of the investment tax credit, lengthening
of depreciable lives for many assets, creation of the corporate alternative
minimum tax (AMT), and increases in the capital gains tax.
The corporate AMT has an especially pernicious effect on the cost of capital.
TRA created a comprehensive AMT system separate from, but parallel to,
the regular tax system. Under the AMT regime, taxable income is modified
by an intricate series of "adjustments" to income, including
depreciation. A high level of investment is a major reason firms become
AMT taxpayers. Depreciation allowances for firms paying the AMT generally
are much less favorable than for those for firms paying the regular corporate
income tax (see Table 4). Today, a significant proportion of large U.S.
companies pay the AMT rather than the regular income tax. Yet a high level
of investment is exactly what is needed for increasing economic growth;
thus, AMT reform should be given high priority. (For additional background,
see The Impact of the Alternative Minimum Tax on Investment and Economic
Growth, a special report prepared by the ACCF Center for Policy Research
for this hearing.)
The impact of TRA on U.S. industry can be illustrated by the following
example relating to the present value of the capital cost recovery allowance
when a corporation purchases new equipment. For example, the present value
of the deductions for investment in modern and competitive continuous
casting equipment for steel production under the strongly pro-investment
tax regime in effect from 1981 to 1985 was close to 100 percent, according
to a study by Arthur Andersen & Co. prepared especially for today's
testimony. In contrast, under current law the present value of the capital
cost recovery allowance for that same investment today is only 81 percent
for a corporation paying the regular income tax. And if a corporation
is subject to the corporate AMT, as many major steel companies are, the
present value is only 59 percent (see Table 4).
The Arthur Andersen study also shows that the United States lags behind
many of our major competitors in capital cost recovery for equipment that
is technologically innovative, is crucial to U.S. economic strength, or
helps prevent pollution. Capital cost recovery provisions for pollution-control
equipment are much less favorable now than prior to TRA's passage. For
example, the present value of cost recovery allowances for wastewater
treatment facilities used in pulp and paper production was approximately
100 percent prior to TRA. Under regular TRA income tax, the present value
for wastewater treatment facilities dropped to 81 percent; for AMT payers,
the figure became 63 percent. Scrubbers used in the production of electricity
fared even worse. Prior to TRA, the present value was 90 percent. Today,
the present value is only 55 percent; for AMT taxpayers the figure drops
to 42 percent. As is true in the case of productive equipment, loss of
the investment tax credit and lengthening of depreciable lives both raise
effective tax rates.
According to estimates by Dr. Joel Prakken of Laurence H. Meyer &
Associates, the user cost of capital for most types of productive equipment
would now be about 15 percent lower had TRA not been enacted (see Figure
2).
The Republican Contract and U.S. Economic Growth
Reforming and restructuring the U.S. federal tax system to reduce the
multiple taxation of saving and investment inherent in the income tax-and
promoting investment and higher living standards-is high on policymakers'
1995 agenda. The saving and investment proposals in the "Contract
With America" will, if enacted, go a long way toward addressing the
burdens on saving and investment imposed by TRA.
Neutral Cost Recovery System (NCRS)
The Republican Contract's proposal to increase depreciation deductions
to allow the theoretical equivalent of expensing (i.e., immediate write-off)
for property with recovery classes of ten years or less and to index longer-lived
property for inflation will be important steps forward in reducing the
bias against saving and investment for firms paying the regular income
tax.
Under NCRS, the present value of capital cost recovery allowances of,
for example, assets used to produce continuous casting equipment for steel
production, rises from 81 percent under current law to 95 percent, not
far below the equivalent to expensing (see Table 4). Firms paying the
AMT also fare much better under NCRS. For example, the present value of
depreciation allowances rises to 93 percent for equipment used for producing
continuous casting equipment, compared to 59 percent under current law.
However, short-lived equipment comes closer to the ideal of expensing
under NCRS than do assets with recovery classes longer than ten years.
For example, net present value for scrubbers used in electricity plants
would rise from 55 percent under current law to only 69 percent under
NCRS (see Table 4). Thus NCRS does not provide a "level playing field"
among assets with short and long lives. Another possible drawback to NCRS
is that cash flow for short-lived assets is reduced in the early years
of an assets' life due to the switch from 200 percent declining balance
method of depreciation to the 150 percent method. However, the fact that
NCRS is voluntary and can be elected on an asset-by-asset basis should
minimize this concern for companies that tend to give more weight to cash
flow compared to net present values in evaluating investment projects.
The ACCF has long advocated expensing as the optimal way of leveling the
playing field for all types of assets. While true expensing, which would
allow in the first year a complete write-off for the purchase price of
an asset, is preferable in many ways to NCRS, such an expansive change
in tax policy may not be affordable at present.
In sum, NCRS is a positive move toward real expensing for investment and
ameliorating much of the AMT's negative impact on new investment.
Capital Gains Tax Reductions
The GOP "Contract With America" contains three capital gains
incentives. First, individual and corporate taxpayers could exclude 50
percent of their capital gains from taxable income. The new effective
capital gains tax rates would be 7.5 percent, 14 percent, 15.5 percent,
18 percent, and 19.8 percent for individuals, depending on the tax bracket.
Corporations would be subject to a top effective capital gains tax rate
of 17.5 percent. Second, the basis (the original cost) of capital assets
would be indexed for inflation occurring after 1994. Third, individual
taxpayers could deduct losses on sales of principle residences.
Capital gains tax reform should satisfy three criteria. First, it should
make economic sense by lowering the excessively high cost of U.S. capital,
reducing the bias against high-risk capital, and ameliorating the taxation
of inflationary gains. Second, it should be fair to all income groups
and sectors of the U.S. economy: Main Street and Wall Street, middle-class
investors and farmers, new entrepreneurs and retiring businessmen, and
individual investors and businesses alike. Third, it should not reduce
total tax revenues and, in fact, it might be a revenue-raiser because
it would unlock existing capital gains and would have important macroeconomic
consequences.
On all three counts, the capital gains proposal in the Republican Contract
measures up and should be enacted. (This is further documented in Questions
and Answers on Capital Gains, a special report prepared by the ACCF Center
for Policy Research for this hearing.)
To those who favor a truly level playing field over time for individual
and business decisions to save and invest, stimulate economic growth,
and create new and better jobs, capital gains (and other forms of saving)
should not be taxed at all. This view was held by top economists in the
past and is held by many mainstream economists today.
This is primarily because the income tax hits saving more than once-first
when income is earned and again when interest and dividends on the investment
financed by saving are received, or when capital gains from the investment
are realized. The playing field is tilted because the individual or company
that saves and invests pays more taxes over time than if all income were
consumed and no saving took place. Taxes on income that is saved raise
the capital cost of new productive investment for both individuals and
corporations, thus dampening such investment. As a result, future growth
in output and living standards is impaired.
Low capital gains taxes not only treat savers more fairly but also help
hold down capital costs. Public finance economists refer to the tax on
capital gains as a tax on retained income, which funds a large part of
business investment. The higher the capital gains tax, the more difficult
it is for management to retain earnings (rather than pay out dividends)
to fund real investment in productive projects. Research by Stanford Dean
John Shoven, Ohio State Professor Patric Hendershott, and Dr. Allen Sinai,
chief global economist at Lehman Brothers and a highly respected economic
forecaster, indicates that a cut in the capital gains tax rate to a range
of 15 to 20 percent would reduce the cost of capital by 4 to 8 percent.
Favorable tax treatment of capital gains is especially important in encouraging
the "start-up" of new but risky enterprises, which provide significant
dynamism and growth to the U.S. economy. Much of that start-up money comes
from friends and relatives of the entrepreneur. Most of their return is
likely to be in appreciated stock; thus, low capital gains taxes makes
them more willing to risk their savings.
Dr. Sinai's research in the past has shown that when macroeconomic "feedback"
effects as well as unlocking of unrealized capital gains are estimated,
a substantial reduction in capital gains taxes results in new and better
jobs, as well as increased capital formation, stronger economic growth,
and federal tax revenues that are significantly larger than under current
law.
Specifically, capital gains tax reductions would:
- raise real and nominal gross national product,
- increase capital spending and capital formation,
- increase employment,
- raise stock prices,
- increase household net worth,
- lower the cost of capital for business and increase business profits,
- shift business financing from debt to equity,
- draw a larger portion of household investment into equities,
- shift the financing of business activity away from debt to equity,
and
- induce portfolio allocations by households toward equity.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) were developed in the 1970s to encourage
individuals to save for retirement. The 1981 tax cut expanded IRAs so
that any wage earner could contribute up to $2,000 annually to an IRA;
a couple with two wage-earners could contribute $4,000. A couple with
a nonworking spouse could contribute $2,250. Contributions were tax deductible
and taxes on funds accumulating in an IRA were deferred until withdrawn.
Individuals had to be 59 1/2 years of age to withdraw funds from IRA accounts
without penalty.
TRA curtailed IRAs so that contributions are not fully deductible except
for workers without employer pensions, families with annual incomes under
$40,000, and individuals with annual incomes under $25,000. These income
limits are not indexed.
The Republican "Contract With America" offers a new "American
Dream Savings Account" (ADS) which allows a nondeductible annual
contributions of up to $4,000 for a married couple ($2,000 for an individual)
and provides indexation for inflation. If the ADS were held for five years,
the taxpayer could withdraw funds without penalty for retirement, first-time
home purchases, and college or medical expenses.
IRA reform enjoys bipartisan support. For example, President Clinton has
also proposed such reform, expanding tax-deductible IRAs as part of his
"Middle-Class Bill of Rights" and permitting the use of the
money before retirement to pay for the purchase of a first home, education,
catastrophic health costs, or the care of an elderly parent. The administration
proposal raises the current tax-deductible IRA income limit from $40,000
(phasing out at $50,000) to $80,000 (phasing out at $100,000). The administration
proposal also allows individuals the option of the "back-loaded IRA"
in which after-tax saving is put into an IRA but the proceeds are exempt
from tax when withdrawn.
Prominent public finance economists and scholars such as former Council
of Economic Advisers Chairman Martin Feldstein, Treasury Undersecretary
Lawrence H. Summers, and Professors David A. Wise of Harvard University,
James M. Poterba of Massachusetts Institute of Technology, Steven F. Venti
of Dartmouth College, Jonathan Skinner of the University of Virginia,
and Richard A. Thaler of Cornell University have concluded that IRAs-especially
tax-deductible IRAs-do in fact result in new saving.
Nearly a dozen scholarly studies, using a variety of data sources and
employing several different statistical approaches, have examined whether
targeted saving vehicles such as IRAs and 401(k)s affect saving. For example,
Professor Venti's recent testimony before a Senate Finance Subcommittee
examined saving data from a Survey of Income and Program Participation
for three different age groups (families reaching age 60 to 64 in 1984,
1987, and 1991). Professor Venti found a striking increase in saving the
longer the family has been exposed to the targeted retirement programs-IRAs,
401(k)s, and Keoghs (see Table 5).
The growth in IRA and 401(k) asset balances is astounding, Professor Venti
noted. The typical member of the youngest family-those with nine years
of exposure to targeted retirement saving programs-has nearly three times
the targeted retirement assets of the oldest cohort. There is a comparable
increase in total assets as well. In contrast, among families without
IRAs, 401(k)s, and Keoghs, the youngest families have only about 75 percent
of the financial assets of the older families ($1,691 vs. $2,247). Professor
Venti concluded that since total financial assets, including balances
in IRAs and 401(k)s, were much larger for the younger cohort (the families
with the longest exposure to IRAs) in 1991 than for the older cohort in
1984, targeted retirement saving programs did stimulate new saving over
the period.
Another reason that IRAs can be an important tool in increasing the low
U.S. saving rate is that they encourage the self-control required to abstain
from consumption. According to Professor Thaler, IRAs help people save
by making it more difficult to "get to" the money than if it
were left in an open bank savings or checking account.6Professor
Thaler explains that households allocate funds, implicitly or explicitly,
into categories, or "mental-accounts." Some funds-for example
those in cash or a checking account-are designated for current consumption.
Others-for example those in a savings account-are for "rainy days"
or "special occasions." Self-control and mental-accounts come
together because the latter vary in how "tempting" they are
to invade. Money in a person's wallet is more tempting to spend than money
in the checking account, which in turn is more tempting than the savings
account. Less tempting are funds explicitly set aside for retirement,
such as money in an IRA plan. Once this concept is factored in, IRAs can
increase saving even if (as some critics charge) all the money put into
IRAs would have been saved anyway. By putting funds into a less accessible
account, the IRA increases long-term saving. (For additional background
on IRAs, see Questions and Answers
on IRAs, a special report prepared by the ACCF Center for Policy Research
for this hearing.)
Conclusion
The pendulum may be about to swing away from the tax policies of the last
decade, especially the substantial increase in the economic tax burden
on saving and investment, and back toward progrowth policies. The hard
fact is that we can no longer afford the luxury of tax policies that reward
consumption, discourage saving and investment, overregulate American business,
and penalize economic growth.
The Republican Contract's tax reform proposals for neutral capital cost
recovery, capital gains tax reductions, and IRA expansion have started
a dialogue that is likely to result in a substantial reduction in the
bias against saving and investment in the U.S. tax code. These provisions
would help move the United States toward a tax system that is more neutral
toward productive capital formation and pave the way for more fundamental
tax restructuring.
Notes
1. Dale Jorgenson, Productivity: Postwar U.S. Economic Growth (Cambridge,
Mass.: MIT Press, 1995).
2. Jorgenson's analysis uses multifactor productivity, which relates output
to inputs of both labor and capital. The traditional productivity measure
commonly found in popular articles is labor productivity, which relates
output to labor input alone.
3. J. Bradford De Long and Lawrence Summers, "Equipment Investment
and Economic Growth," Quality Journal of Economics 106:445-502.
4. Edward N. Wolff, "Capital Formation and Productivity Growth in
the 1970s and 1980s: A Comparative Look at OECD Countries," in Tools
for American Workers: The Role of Machinery and Equipment in Economic
Growth (Washington, D.C.: ACCF Center for Policy Research, March 1993)
pp. 46-76.
5. B. Douglas Bernheim, Do Households Appreciate Their Financial Vulnerabilities?
An Analysis of Actions, Perceptions, and Public Policy. Special Report
(Washington, D.C.: American Council for Capital Formation Center for Policy
Research, August 1994).
6. Richard H. Thaler, "Self-Control, Psychology and Savings Policies,"
Testimony presented to the Senate Finance Subcommittee on Deficits, Debt
Management, and Long-Term Growth, December 7, 1994.
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