67 over the next two decades, the ratio of the number of years that the typical worker will spend in retirement to the number of years he or she works will rise in the long term. a critical step forward would be to adjust the system so that this ratio stabilizes. a number of specific approaches have been proposed for implementing this indexation, but the principle behind all of them is to insulate the finances of the system, at least to a degree, from further changes in life expectancy. sound private and public decisionmaking will be aided by determining ahead of the fact how one source of risk, namely demographic developments, will be dealt with. the degree of uncertainty about whether future resources will be adequate to meet our current statutory obligations to the coming generations of retirees is daunting. the concern is not so much about social security, where benefits are tied in a mechanical fashion to retirees ’ wage histories and we have some useful tools for forecasting future outlays. the outlook for medicare, however, is much more difficult to assess. although forecasting the number of program beneficiaries is reasonably straightforward, we know very little about how rapidly medical technology will continue to advance and how those innovations will translate into future spending. to be sure, technological innovations can greatly improve the quality of medical care and can, in theory, reduce the costs of existing treatments. but because medical technology expands the range of treatment options, it also has the potential of adding to overall spending - in some cases, significantly. as a result, the range of possible outlays per recipient is extremely wide. this uncertainty is an important reason to be cautious - especially given that government programs, whether for spending or for tax preferences, are easy to initiate but can be extraordinarily difficult to shut down once constituencies for them develop. in view of this upward ratchet in government programs and the enormous uncertainty about the upper bounds of future demands for medical care, i believe that a thorough review of our spending commitments - and at least some adjustment in those commitments - is necessary for prudent policy. i also believe that we have an obligation to those in and near retirement to honor what has been promised to them. if changes need to be made, they should be made soon enough so that future retirees have time to adjust their plans for retirement spending and to make sure that their personal resources, along with what they expect to receive from the government, will be sufficient to meet their retirement needs. i certainly

about and understanding regulatory and tax policy. but incentives also help motivate people in a variety of other settings, such as encouraging students to do their best in school, helping reduce traffic jams, or even nudging someone to save more or to exercise regularly. economics is a practical and powerful tool for understanding how we relate to each other. and that ’ s why what you do for your students is so important. like all teachers, you are helping prepare them for success in life. the knowledge you impart and the intellect and talents you help develop are tools that your students can use to achieve that success. economics teaches analytical and critical thinking skills useful to anyone. part of your students ’ success is their economic success as capable, creative, and productive members of the workforce and as consumers adept at managing their finances. your students benefit from this education, but so does everyone else in society. we all benefit when better - educated citizens support economic policies that help our nation prosper. we all benefit from the capability, creativity, and productivity of our workforce, because nothing is more important to a healthy and growing economy. responsible consumers skilled in managing their finances are better prepared to weather bad 1 / 2 bis central bankers'speeches times, and stronger household finances overall can help sustain economic growth and mitigate a downturn. stabilizing growth and mitigating a downturn, of course, are aspects of the federal reserve ’ s mission. monetary policy can be a powerful tool to achieve these ends, but, in truth, its powers are dwarfed by larger forces, such as the productivity of the american people and the strength of their finances. by educating students and supporting their future contributions to the economy as workers and consumers, all teachers, especially economics teachers, are furthering our goals at the fed, so let me offer my further thanks for making our job easier. to help support your work as teachers, the federal reserve board and the 12 reserve banks conduct programs, organize events, and publish books to spread knowledge of economics, financial literacy, and the role of the fed in promoting a healthy economy and financial system. you can find some of those resources at our websites : federalreserve. gov and federalreserveeducation. org. each of the reserve banks has community outreach and educational initiatives, and the outreach to economics teachers is coordinated by the system economic education group, which has been chaired by princeton williams. at the board of governors, for some years we have