The Financial Times has an article outlaying the financial crisis that will be generated by the aging population of the US. As the article states:
In just five years’ time, 77m "baby boomers" will start collecting Social Security benefits. In eight years they will start collecting Medicare benefits. By the time they are all retired in 2030, the US will have doubled the size of its elderly population but increased by only 18 per cent the number of workers able to pay for their benefits.
This demographic shift has dire consequences for the fiscal stability of the nation. Already, according to the government’s own Trustee’s Report on Social Security, the current liabilities to Social Security alone are $25 trillion over what they will be able to pay. Under the current system workers under the age of 27 will pay 100% of Social Security taxes, but will only recieve 72% or less of their promised benefits. The report also finds that the Social Security fund will begin running operating deficits by the 2018, and by 2042 the Social Security system will be insolvent unless significant reforms are made.
Medicare is in no better shape. Already the costs of the Medicare program are $271 billion for the fiscal year 2003. This cost will only increase as the 77 million members of the Baby Boom generation are added to the Medicare system. As with Social Security, reforms are needed to keep the system solvent for future generations.
For both of these critical programs there are plans for reform that would preserve benefits for current and future generations. In the case of Social Security allowing workers to shift payroll tax dollars to personal retirement accounts would help ensure the long-term solvency of the system while preserving benefits for today’s workers. In the case of Medicare, a system a model based on the Federal Employee’s Health Benefits Program, a program which currently serves the needs of 8.3 million current and former federal employees and their familes while providing superior choice and options for care.
These proposals would ease the crunch, although not eliminate it entirely. The current demographics of this nation will create further financial strain on entitlement spending – especially if Congress continues adding new entitlements like prescription drug benefits in Medicare. What is needed most is fiscal responsibility. Congress has been spending billions of government dollars on failed programs, wasteful spending, and pork projects that are directly impacting the fiscal solvency of this country. Uncontrolled spending represents the biggest long-term threat to the financial health of the country.
Adding to this problem is that it is not a partisan issue. Despite preaching government responsibility, the Bush Administration and Congressional Republicans have increased the size and scope of the federal government to the largest levels in American history. In a time when taxpayers are tightening their belts it is preposterous for the governent to be spending $400 billion on new Medicare entitlements when deficits are on the rise. Republicans are losing credibility with fiscal conservatives when they preach responsibility and then match the Democrats dollar-for-dollar in wasteful federal spending.
The article points out that with increase committments abroad from nation-building to anti-terrorism, America’s poor fiscal management at home could put American lives at risk in future conflicts. In order to preserve the fiscal health of this nation it is necessary to restrain government spending – or the war on terror could become a victim to the addiction to federal spending.