generation shouldering at least some of that burden, especially in light of the sacrifices that previous generations made to give us the prosperity we enjoy today. the choice of which generations should bear the burden of population aging has consequences for economic efficiency as well as for intergenerational equity. if we decide to pass the burden on to future generations - that is, if we neither increase saving now nor reduce the benefits to be paid in the future by social security and medicare - then the children and grandchildren of the baby boomers are likely to face much higher tax rates. a large increase in tax rates would surely have adverse effects on a wide range of economic incentives, including the incentives to work and save, which would hamper economic performance. alternatively, to avoid large tax increases, the government could decide to sharply reduce non - entitlement spending in the future. however, such actions might also have important social costs that need to be taken into consideration. sharing the burden of population aging if, as a nation, we were to accept the premise that the baby - boom generation should share at least some of the burden of population aging, what policy steps might be implied? as i have already noted, from a broad economic perspective, the most useful actions are likely to be those that promote national saving. perhaps the most straightforward way to raise national saving - although not a politically easy one - is to reduce the government ’ s current and projected budget deficits. to the extent that reduced government borrowing allows more private saving to be used for capital formation or to acquire foreign assets, future u. s. output and income will be enhanced and the future burdens associated with demographic change will be smaller. increasing private saving, which is the saving of both the corporate sector and the household sector, is likewise desirable. corporate saving, in the form of retained earnings, is currently at relatively high levels, but household saving rates are exceptionally low. 3 a broad - based increase in household saving would benefit both the economy and the millions of american families who currently hold very little wealth. unfortunately, many years of concentrated attention on this issue by policymakers and economists have failed to uncover a silver bullet for increasing household saving. one promising area that deserves more attention is financial education. the federal reserve has actively supported such efforts, which may be useful in helping people understand the importance of saving and to learn about alternative saving vehicles. psychologists have also studied how the framing of alternatives affects people ’ s saving decisions. for example, studies suggest that employees

of the disease and the effects of measures to contain it. until the public is confident that the disease is contained, a full recovery is unlikely. moreover, the longer the downturn lasts, the greater the potential for longer - term damage from permanent job loss and business closures. long periods of unemployment can erode workers ’ skills and hurt their future job prospects. persistent unemployment can also negate the gains made by many disadvantaged americans during the long expansion and described to us at our fed listens events. the pandemic is presenting acute risks to small businesses, as discussed in the monetary policy report. if a small or medium - sized business becomes insolvent because the economy recovers too slowly, we lose more than just that business. these businesses are the heart of our economy and often embody the work of generations. with weak demand and large price declines for some goods and services — such as apparel, gasoline, air travel, and hotels — consumer price inflation has dropped noticeably in recent months. but indicators of longer - term inflation expectations have been fairly steady. as output 1 / 3 bis central bankers'speeches stabilizes and the recovery moves ahead, inflation should stabilize and then gradually move back up over time closer to our symmetric 2 percent objective. inflation is nonetheless likely to remain below our objective for some time. monetary policy and federal reserve actions to support the flow of credit the federal reserve ’ s response to this extraordinary period is guided by our mandate to promote maximum employment and stable prices for the american people, along with our responsibilities to promote the stability of the financial system. we are committed to using our full range of tools to support the economy in this challenging time. in march, we quickly lowered our policy interest rate to near zero, reflecting the effects of covid19 on economic activity, employment, and inflation, and the heightened risks to the outlook. we expect to maintain interest rates at this level until we are confident that the economy has weathered recent events and is on track to achieve our maximum - employment and price - stability goals. we have also been taking broad and forceful actions to support the flow of credit in the economy. since march, we have been purchasing sizable quantities of treasury securities and agency mortgage - backed securities in order to support the smooth functioning of these markets, which are vital to the flow of credit in the economy. as described in the june monetary policy report, these purchases have helped restore orderly market conditions and have fostered more accommodative financial conditions. as