better forward - looking economic decisionmaking by households and businesses. given the expertise on this panel and the ultimate responsibility of the congress and the president for the tax system, i would not presume to suggest the best specific path for reforming the tax system. however, past experience suggests that as the panel's work gets under way, one of the first decisions that you will confront is the choice of tax base ; possibilities include a comprehensive income tax, a consumption tax, or some combination of the two, as is done in many other countries. as you know, many economists believe that a consumption tax would be best from the perspective of promoting economic growth - particularly if one were designing a tax system from scratch - because a consumption tax is likely to encourage saving and capital formation. however, getting from the current tax system to a consumption tax raises a challenging set of transition issues. in 1986, tax reformers considered a consumption tax base and, despite the arguments in favor of such a system, they decided to enhance the comprehensiveness of the income tax system then in place. circumstances are different today, and the right choice will require assessing anew the tradeoffs between complexity, fairness, and economic growth. the choice of the tax base and other provisions of the code must also be taken in light of coming demographic changes. i believe that, as the baby boom generation begins to retire in a few years, it will become increasingly important for the nation to boost resources available in the future through greater national saving and enhanced incentives for participation in the labor force. the tax system has the potential to contribute importantly to those goals, and, at a minimum, tax reform should not hinder the achievement of those objectives. finally, fundamental, thoroughgoing tax reform will require tradeoffs among competing objectives and will create both winners and losers. in the past, these difficult choices were facilitated by bipartisan cooperation. in the 1954 reform, congressional support was bipartisan, and president eisenhower signed the legislation. in the 1969 reform, efforts were started under president johnson but were completed during the nixon administration. similarly, in 1986, president reagan worked with democratic congressional leaders to see reform through. i am confident that this panel can lay the groundwork for another historic reform and can get this process started off on the right foot. thank you for the opportunity to share some thoughts with you today. i look forward to the results of your deliberations.

requirements throughout the credit cycle and recently as a specialized tool to provide an analytical grounding for the decisions we have made on capital distributions during the covid event. then i will briefly review the recently released scenario for the 2021 test and discuss other changes for the upcoming stress testing cycle. the 2020 stress tests we now use stress testing in two important but different ways : to set capital requirements during normal times and to assess capital adequacy during exigent times. in march of last year, the board of governors finalized the stress capital buffer requirement, which uses the fed ’ s stress test results to set capital requirements for large banks, and by doing so, simplified our overall capital regime. while this new framework has the same goal as the previous comprehensive capital analysis and review ( ccar ) framework — using forward - looking analysis to help ensure that banks have sufficient capital to survive a severe recession while still being able to lend to businesses and household — it integrates our stress testing regime with our ongoing capital requirements so that large banks now have a single suite of dynamic and risk - sensitive capital requirements. while that framework is simpler, it is no less stringent than the ccar framework — a framework that 1 / 5 bis central bankers'speeches contributed to a more than doubling of the common equity ratio at banks between 2009 and 2019. at the time we made the stress capital buffer final last march, we estimated that the stress capital buffer would have further increased capital requirements for the largest and most complex banks. by design, the new framework better captures systemic risk by requiring those banks to establish a buffer to absorb losses they ’ d take in a severe recession in addition to their g - sib surcharges. it is useful here to pause and put stress testing in the context of bank supervision in general. both supervision and stress testing specifically have roles during normal times as well as times of stress, but those roles are somewhat different depending on the circumstances. like all supervision, stress testing conducted during normal times of solid economic growth and financial stability is aimed at helping ensure banks remain in safe and sound condition. we use it to set the capital buffers, which give firms incentives to hold capital during normal times, so they are prepared to weather downturns. during periods of economic and financial turmoil, the goals shift to understanding banks ’ exposure to the turmoil and to ensuring that banks can support households and businesses by continuing to lend. the modern bank stress testing regime was born in the solvency crisis of 2009