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In Spending Debate, Baby Boomer Issue Remains a Headache for Legislators

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In his fiscal 2014 budget, Obama addressed Social Security directly by proposing to slow the growth of the program’s cost-of-living raises by switching to the “chained Consumer Price Index,” a stingier measure of inflation.

When Congress created Medicare in 1965 to handle the health care needs of the older population, less than 10 percent of Americans were old enough to collect Social Security and the new medical benefit.

Since then, the share of Americans 65 and older has soared, from 9.3 percent in 1965 to 13.7 percent in 2012.

And as the number of retirees increases and expected life spans extend far beyond 65, the share of those who work and financially support the programs has been shrinking. In 1965 there were four workers for every retiree drawing benefits. By 2012, the ratio had fallen to 2.9-to-1.

This is only the beginning. As the retirement ranks of the baby boom generation grow, an expanding elderly population and the shrinking share of workers will put even more pressure on entitlement programs. Experts project that life expectancy will rise to 83 years by 2035, compared to 78 years in 1965. As the population ages, the ratio of workers to beneficiaries will plunge — to a projected 2.1-to-1 in 2035.

It’s this inexorable curve, a demographic reality often buried beneath the political debates about budget priorities, that presents the biggest, often unstated, challenge to lawmakers wrestling with the impact of entitlement programs in coming years.

Although the continuing increase in medical costs plays a role in the growth of Social Security and health care programs, “demographics is the bigger factor, hands down,” said Charles Blahous, a public trustee for the Social Security and Medicare Boards of Trustees.

Blahous, a senior research fellow at the free-market-oriented George Mason University Mercatus Center, said there’s not much doubt about the reliability of the population estimates. The profiles of populations run in enormous waves over long periods, and they’re the big drivers of broad economic trends.

“Over the next couple of decades, the plunging ratio of taxpaying workers to recipient beneficiaries is driven largely by historical fertility patterns, and those are in the books already,” Blahous said. “The baby boomers have already been born, they’re heading onto the rolls now, and they’re pretty much done having children.”

In its long-term budget outlook last year, the Congressional Budget Office identified demographics as the chief factor in the growth of Social Security and health care programs.

“Through 2022, the aging of the population will cause spending on the major health care programs and Social Security to rise significantly,” the CBO wrote. Aging “remains the more important factor” in cost growth for several decades.

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