CBO Predicts Increasing Debt As Baby-Boomers Retire
July 25, 2014
The United States' entitlement system is unsustainable, warns Senator Rob Portman (R-Ohio) at the Wall Street Journal.
Indeed, a new report from the Congressional Budget Office (CBO) predicts a $40 trillion increase in debt over the next 20 years. In the CBO's "alternative" and more realistic forecast, the agency expects $10 trillion in debt over the next 10 years, followed by $100 trillion in the two decades after that. But even that forecast, writes Portman, is largely unrealistic, as it assumes that record low interest rates will continue, that Obamacare price controls will materialize and that the United States will not suffer another recession.
What is responsible for the deficit growth? Spending.
- Tax revenue has averaged 17.3 percent of GDP over the last half-century, a figure that the CBO expects will reach 18 percent within 10 years.
- Spending, on the other hand, has averaged 20 percent of the U.S. economy over the last 50 years. The CBO expects spending to reach 34 percent of the economy over the next 30 years.
Spending is rising because entitlements are rising:
- A full 10,000 baby boomers retire each day and begin collecting benefits from Social Security and Medicare.
- In 1960, five workers supported every retiree's benefits. In 2030, only two workers will fund every retiree.
- Due to rising health care costs, the average couple retiring in 2015 will have paid $140,000 to Medicare, yet will receive $430,000 in Medicare benefits.
Social Security and health care entitlements must be reformed, writes Portman. He suggests adjusting the retirement ages, means-testing for benefits and creating a patient-centered health care system that reduces health care costs in order to make these programs sustainable.
Source: Rob Portman, "Heading Off the Entitlement Meltdown," Wall Street Journal, July 21, 2014.
Browse more articles on Economic Issues