Thursday, April 29, 2004
Book recommendation: The Coming Generational Storm
[George Will, "The third rail," Townhall, 4 March 2004.]
Anyone interested in or doubting the demographic shift that is on its way in this country and the impact it will have on federal and state health care programs should take a look at this recent release from MIT Press:
There is a mismatch between the Social Security and Medicare promises we have made to ourselves -- calls on the nation's future economic product -- and the ability of the economy to fund those promises when the 77 million baby boomers retire.
According to Laurence J. Kotlikoff of Boston University, the present value of the gap between promised outlays and projected revenues is $51 trillion -- more than four times the nation's annual GDP. Today the household wealth of Americans -- the value of their houses, 401(k)s, cars, refrigerators, toasters, socks, everything -- is about $42 trillion. In impeccable Greenspan-speak, the government's truth-teller said "significant structural adjustments'' will be necessary.
This much is widely understood: Raising the retirement age and some other benefit reductions (including taking the exaggeration of inflation out of cost-of-living computations) will be necessary because tax increases to fund current benefit schedules would cripple the economy.
It is axiomatic -- meaning, true outside of Washington -- that everyone is entitled to his own opinion but not his own facts. Here are some facts, many of them gleaned from a new book from the MIT press, "The Coming Generational Storm'' by Kotlikoff and Scott Burns of The Dallas Morning News.
By 2030, the boomers, who begin retiring in 2008, will have made America's population older than Florida's is today. America's population will have increased perhaps as much as 18 percent, its retirees 100 percent. Already the fastest rate of growth of any age cohort is of Americans over 85.
Today life expectancy at birth is 76, which is troublesome enough, but additional expectancy at 65 is 17 years -- and growing. For about 150 years the longest life expectancies have advanced about 2.5 years per decade. Most people start collecting Social Security at 62, so the year 2019 will be especially challenging because more American babies were born in 1957 -- 4.3 million in a population of 172 million -- than in any year in American history.
Today there are more than 100 million additional Americans, but there were fewer than 4 million newborns per year throughout the 1990s. In the 1950s the median age for women's first marriages was 20.3. By 2000 it was 25.1. This has meant a decline in fecundity, which affects the wager we have made on Social Security as an intergenerational compact -- children being able and willing to support the elderly.
On Jan. 31, 1940, a check, numbered 00-000-001, for $22.54 was issued to Ida May Fuller of Ludlow, Vt., making her the first recipient of recurring monthly Social Security payments. Then, in an act of dubious citizenship, she lived to 100, dying in January 1975, having received $22,000 in benefits. That did not matter because in 1940 there were 42 workers for every retiree. Today there are 3.2 to one. In 2030 there will be 2.2 to 1.
[George Will, "The third rail," Townhall, 4 March 2004.]
Anyone interested in or doubting the demographic shift that is on its way in this country and the impact it will have on federal and state health care programs should take a look at this recent release from MIT Press:
There is a mismatch between the Social Security and Medicare promises we have made to ourselves -- calls on the nation's future economic product -- and the ability of the economy to fund those promises when the 77 million baby boomers retire.
According to Laurence J. Kotlikoff of Boston University, the present value of the gap between promised outlays and projected revenues is $51 trillion -- more than four times the nation's annual GDP. Today the household wealth of Americans -- the value of their houses, 401(k)s, cars, refrigerators, toasters, socks, everything -- is about $42 trillion. In impeccable Greenspan-speak, the government's truth-teller said "significant structural adjustments'' will be necessary.
This much is widely understood: Raising the retirement age and some other benefit reductions (including taking the exaggeration of inflation out of cost-of-living computations) will be necessary because tax increases to fund current benefit schedules would cripple the economy.
It is axiomatic -- meaning, true outside of Washington -- that everyone is entitled to his own opinion but not his own facts. Here are some facts, many of them gleaned from a new book from the MIT press, "The Coming Generational Storm'' by Kotlikoff and Scott Burns of The Dallas Morning News.
By 2030, the boomers, who begin retiring in 2008, will have made America's population older than Florida's is today. America's population will have increased perhaps as much as 18 percent, its retirees 100 percent. Already the fastest rate of growth of any age cohort is of Americans over 85.
Today life expectancy at birth is 76, which is troublesome enough, but additional expectancy at 65 is 17 years -- and growing. For about 150 years the longest life expectancies have advanced about 2.5 years per decade. Most people start collecting Social Security at 62, so the year 2019 will be especially challenging because more American babies were born in 1957 -- 4.3 million in a population of 172 million -- than in any year in American history.
Today there are more than 100 million additional Americans, but there were fewer than 4 million newborns per year throughout the 1990s. In the 1950s the median age for women's first marriages was 20.3. By 2000 it was 25.1. This has meant a decline in fecundity, which affects the wager we have made on Social Security as an intergenerational compact -- children being able and willing to support the elderly.
On Jan. 31, 1940, a check, numbered 00-000-001, for $22.54 was issued to Ida May Fuller of Ludlow, Vt., making her the first recipient of recurring monthly Social Security payments. Then, in an act of dubious citizenship, she lived to 100, dying in January 1975, having received $22,000 in benefits. That did not matter because in 1940 there were 42 workers for every retiree. Today there are 3.2 to one. In 2030 there will be 2.2 to 1.
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