As America ages, the share of future gross national product needed to pay for Social Security, Medicare, and Medicaid has been rising slowly but steadily. But it is about to surge dramatically.
There are roughly 76 million baby boomers, and they are becoming eligible for Social Security at the rate of nearly 10,000 a day. By the year 2030, Social Security’s caseload will rise to 84 million people, up from 50 million today. Medicare will go from 44 million beneficiaries to 79 million.
One generation from now, this demographic tidal wave will lift the total costs of our entitlement programs up to and beyond the average share of our economy — 18 percent — that the entire federal government has needed since World War II.
In other words, absent entitlement reform, the federal government is on track to become little more than a giant ATM machine, collecting taxes from current workers and passing on benefits to retirees. Or we go multiple trillions of dollars deeper into debt, or we massively raise federal taxes. Clearly, this is an unsustainable trend.
None of us here today can forecast what reforms we may see on Social Security or medical entitlements, or when we’ll see them.
I do want to congratulate President Obama for committing himself to entitlement reform and to finding ways to make these programs solvent. Good luck, Mr. President. It will not be easy; just ask Bill Clinton or George W. Bush about their experiences with health care and Social Security. Entitlement reform involves intensely emotional value judgments — life and death issues in health care — and painful policy options — tax hikes and benefit cuts. So I am going to leave entitlement reform to our elected leaders. That is their job.
All that most of us can do as businesspeople and as informed citizens is to ask political leaders to have the courage to grapple with these very thorny issues and make some hard, unpopular calls. We can support those who do. But let’s face it: Real entitlement reform will likely take years, and we can’t forecast its outcome.
But one thing is very clear: No one is proposing any increase in Social Security benefits.
Excerpted from a speech given by Robert L. Reynolds President and CEO Putnam Investments, at the 401KWire.Com Influencers’ Summit 2009: DC-IO Partnership Washington, DC May 6, 2009. The full speech is embedded below.
