urban institute nonprofit social and economic policy research

Can Faster Economic Growth Bail Out Our Retirement Programs?

Read complete document: PDF


PrintPrint this page
Share:
Share on Facebook Share on Twitter Share on LinkedIn Share on Digg Share on Reddit
| Email this pageE-mail
Document date: March 19, 2008
Released online: March 19, 2008

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

This publication is also available in PDF format.


Abstract

Government analysts portray a bleak fiscal future as the retirement of baby boomers and soaring health costs push up expenditures on Social Security, Medicare and Medicaid much faster than projected tax revenues. Some argue that the analysts' economic growth projections are too pessimistic. This analysis argues that official growth projections are quite reasonable, but even if they are too pessimistic, faster growth will accelerate Social Security costs because of the program's structure and health costs are also likely to grow more rapidly. Faster growth will, however, ease the pain associated with necessary reforms.


Can Faster Economic Growth Bail Out Our Retirement Programs?

As baby boomers reach retirement age and health care costs increase, spending on entitlement programs will escalate and put enormous pressure on the federal budget. Numerous commissions and individual researchers agree current fiscal policy is unsustainable. Is faster economic growth the solution?

About half of federal expenditures outside of defense and interest are devoted to people age 65 and up. The elderly population is growing rapidly and life expectancy continues to increase, lengthening periods of retirement. Meanwhile, the number of taxpayers will grow relatively slowly because of low birth rates since the mid-1960s.

Population aging alone is expected to cause Social Security, Medicare, and Medicaid costs to rise by about 3.5 percent of the gross domestic product (GDP) by 2030. Add the soaring health expenses per capita and the cost of the three programs rises by about 6 percent of GDP. If other government programs maintain the same share of GDP and the overall federal tax burden remains at roughly today's level—which slightly exceeds the average of the past 50 years—the national debt in the hands of the public will skyrocket from 36 percent of GDP in 2007 to 100 percent of GDP in 2030. Without fiscal reforms, the debt-GDP ratio will continue to accelerate until collapsing confidence in domestic and foreign capital markets brings the process to an abrupt halt.

See the full publication in PDF format.

 



Topics/Tags: | Retirement and Older Americans


Usage and reprints: Most publications may be downloaded free of charge from the web site and may be used and copies made for research, academic, policy or other non-commercial purposes. Proper attribution is required. Posting UI research papers on other websites is permitted subject to prior approval from the Urban Institute—contact publicaffairs@urban.org.

If you are unable to access or print the PDF document please contact us or call the Publications Office at (202) 261-5687.

Disclaimer: The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders. Copyright of the written materials contained within the Urban Institute website is owned or controlled by the Urban Institute.

Email this Page