This research consists of three projects. The first concerns the impact of demographic changes on the demand for various types of government spending with age-specific benefits. While the consequences of an aging U.S. population for the Social Security and Medicare trust funds has received substantial attention, the consequences for other categories of government spending, in particular spending on primary and secondary education, are relatively unstudied. This project uses data on the composition of government spending in states, as well as in individual school districts, to study the effect of the population's demographic composition on the level of public spending. The results will provide insights on alternative explanations for declining popular support for public education. A second project focuses on the effect of tax subsidies and tax-related regulations on employer-provided health insurance and other employee benefits. One aspect of this analysis is a study of how individuals who are eligible for Flexible Spending Accounts (FSAs) use these accounts. These accounts are closely related to "Medical IRAs," which have recently attracted substantial popular attention. The extent to which employees use FSAs, and whether they make reasonable estimates of their annual medical expenses in funding these accounts, should provide important information to decision-makers about Medical IRAs. The final project considers the impact of taxation on individual portfolio decisions. Using the rich variation in tax rates provided by the 1986 Tax Reform Act, and data from the 1983, 1992, and 1995 Surveys of Consumer Finances, the research examines what effect, if any, changing tax rules have had on the types of assets held by households in different tax situations. The resulting estimates will provide a basis for assessing the inefficiencies associated with tax-induced distortions in portfolio choice.
