BOOMERS VERSUS THE REST
February 2, 2009
America is graying. In 1960, only 1 in 11 Americans was 65 or older. Now it's 1 in 7; by 2030, it's expected to be 1 in 5. This aging could impose crushing costs on society, says columnist Robert J. Samuelson. Taxes may rise, other government programs -- from national parks to college grants -- may suffer and long-term economic growth may slow; yet, main victims would be today's young, who would pay higher taxes and receive fewer public services.
Already, the three major programs serving the elderly population -- Social Security, Medicare and Medicaid -- account for two fifths of federal spending. In 2008, that was $1.3 trillion out of total spending of $2.98 trillion. According to Samuelson:
- Higher spending on Social Security, Medicare and Medicaid could require massive increases in federal taxes -- about 50 percent from present levels by 2030.
- Paying for baby boomers' added retirement costs would require the elimination of most defense spending or most other domestic programs.
- State and local governments face parallel, though lesser, pressures; as their workers retire, spending on pensions and health benefits will swell, intensifying the need either to raise taxes or trim local services.
There is a way to cushion the shock, says Samuelson: make annual contributions sufficient to pay future benefits, says Newsweek. Studies suggest that state and local government pensions were about 85 percent funded in 2006, with wide variations:
- Wisconsin was 100 percent funded, Illinois only 60 percent, but the stock-market decline has been devastating.
- Through October, it reduced state and local government pensions by $1 trillion, or about a third.
- Another problem is that promised health care benefits are largely unfunded; in 2006, these long-term costs totaled $370 billion.
What looms is a huge transfer of income from younger workers to older retirees, says Samuelson.
Source: Robert J. Samuelson, "Boomers Versus the Rest," Newsweek, January 26, 2009.
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