BABY BOOMER RETIREMENTS WILL STRAIN THE SYSTEM
November 16, 2005
As Congress and the White House struggle to trim up to $50 billion from the federal budget over five years -- just 3 percent of the $1.6 trillion in deficits projected for that period -- budget experts say the nation soon could face its worst fiscal crisis since at least 1983, when Social Security bordered on bankruptcy.
Budget watchdogs cite these looming problems:
- Prescription-drug coverage under Medicare takes effect Jan. 1; its projected cost, advertised at $400 billion over 10 years when it passed in 2003, has risen to at least $720 billion.
- The leading edge of the baby boom hits age 62 in 2008 and can take early retirement; the number of people receiving Social Security is expected to grow from 47 million today to 69 million in 2020, and by 2030 the Congressional Budget Office projects that Social Security spending as a share of the U.S. economy will rise by 40 percent.
- The bulk of Bush's 10-year, $1.35 trillion tax-cut program is set to expire at the end of 2010, but Congress is moving to make the reductions permanent; that would keep tax revenue at roughly 18 percent of the economy, where it's been for the past half-century -- too low to support even current spending levels.
- Baby boomers begin to reach age 65 in 2011 and go on Medicare; if it grows 1 percent faster than the economy -- a conservative estimate -- Medicare would cost $2.6 trillion in 2050, after adjusting for inflation; that's the size of the entire federal budget today.
Inaction could have these consequences, experts say: Higher interest rates. Lower wages. Shrinking pensions. Slower economic growth. A lower standard of living. Higher taxes in the future for today's younger generation. Less savings. More consumption. Plunging stock and bond prices. Recession.
Source: Richard Wolf, "As Social Security surges: Baby boomer retirements will strain the system," USA Today, November 15, 2005.
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