This paper traces the changing role of the Council of Economic Advisers. In the 50 years since its creation, the CEA's focus has shifted from the design of policies to achieve full employment to one of advising on the much-enlarged spending and tax activities of the federal government. The CEA's original attention to achieving cyclical stability through fiscal policy diminished as economists changed their views about the inherent stability of the economy and the usefulness of fiscal policy. With the shift of macroeconomic policy to the Federal Reserve, the CEA's macroeconomic role has diminished but not disappeared. The rapid growth of government spending during the past five decades has greatly increased the role for the CEA in seeking efficient resource allocation.

This paper examines the effect of existing college scholarship rules on the incentive to save. The analysis shows that families that are eligible for college scholarships face "education tax rates" on capital income of between 22 percent and 47 percent in addition to regular federal and state income taxes. The empirical analysis developed here, based on the 1986 Survey of Consumer Finances, implies that these high tax rates have a powerful adverse effect on the accumulation of financial assets.

This paper shows that when earnings are uncertain the substitution of deficit finance for tax finance or the introduction of an unfunded Social Security program will raise consumption even if all bequests reflect intergenerational altruism. Thus, contrary to the theory developed by a number of writers, an operative bequest motive need not imply Ricardian equivalence. Since there is no uncertainty in the present analysis about the date of each individual's death, this conclusion does not depend on imperfections in annuity markets or on the existence of nonlump-sum taxes or other distortions. Rather it follows from the result derived below that, when future earnings are uncertain, bequests are uncertain and that consumption therefore rises more in response to an increase in current disposable income than to an equal present value increase in the disposable income of the next generation.