Congressional Budget Office claims
U.S. facing economic peril due
to programs for Seniors
Dec.
22, 2003 – The rapid growth of the senior citizen population –
principal recipients of Social Security, Medicare and Medicaid – is
putting the U.S. in serious financial peril, according to the Long-Term
Budget Outlook just released by the Congressional Budget Office.
Social
Security is so large, and Medicare and Medicaid are expanding so
rapidly, that limiting the growth of defense, education and other
spending that Congress controls would not be enough for sound budget
policy, the report said.
The number of people
age 65 or older will double during the next 30 years, while the number
of adults under age 65 will grow by less than 15 percent.
Charts Below - 1.
Growth of 65+ population; 2. Growth of Social Security
As health care costs
continue to grow faster than the economy and the baby-boom generation
nears eligibility for Social Security and Medicare, the United States
faces inevitable decisions about the fundamentals of its tax and
spending policies. This Congressional Budget Office report looks at a
range of possible paths for federal spending and revenues over the next
50 years and combines them into various hypothetical scenarios.
Analysis of
those scenarios suggests the following conclusions:
> Driven by
rising health care costs and an aging population, spending on
entitlement programs— especially Medicare, Medicaid, and Social
Security —will claim a sharply increasing share of the nation’s
economic output over the coming decades.
Unless
taxation reaches levels that are unprecedented in the United States,
current spending policies will probably be financially unsustainable
over the next 50 years. An ever-growing burden of federal debt held by
the public would have a corrosive and potentially contractionary effect
on the economy.
> As the
U.S. tax system is currently configured, revenues will increase as a
share of gross domestic product. Under current law, taxpayers will face
higher rates, with detrimental consequences for work, saving, and
economic growth.
> Fiscal
policy could be financially sustainable if the growth of health care
costs slowed significantly from historical rates. But even in those
circumstances, tax revenues would probably need to be higher than they
have been in the past.
> If
taxation is restricted to the levels that prevailed in the past, the
growth of entitlement spending will have to be substantially reduced.
Restricting the growth of outlays for defense, education,
transportation, and other discretionary programs would not be enough to
ensure fiscal sustainability.
> Likewise,
economic growth alone is unlikely to bring the nation’s long-term
fiscal position into balance. Moreover, issuing ever-larger amounts of
debt or dramatically raising tax rates could significantly reduce
growth.