Reference no: EM13977227

Suppose the elderly as a group manage to lobby Congress successfully for a one-time wealth transfer, “paid for” by a tax on younger workers. Assume the elderly have a remaining life-expectancy of 10 years (over which the transfer will be spread), and the workers have a 30 year remaining life expectancy (over which the tax burden will be spread). Assume also that the transfer is perfectly efficient such that the Transfer (X) = the Tax (T). a. What effect does this redistribution scheme have on consumption and savings patterns over BOTH cohorts’ lifetimes? b. Then consider whether such a scheme desirable from a broad societal perspective (i.e., does it benefit society as a whole)? Why or why not? That is, if you think the scheme is desirable, give an economic reason that explains how redistribution of pie slices makes the pie bigger. If it is undesirable, give an economic reason why not but then explain why such a scheme might nevertheless gain passage anyway?