The stunning news from S&P’s “Global Aging 2010: An Irreversible Truth” just out today should send shock waves through Congress and the White House. If the administration is only focused on yesterday’s housing bubble, unemployment, and financial regulation, they’re in for a huge awakening. According to S&P’s analysis, the debt tsunami will explode in coming decades and has nothing to do with today’s crisis. S&P’s analysis led by Marko Mrsnik promises significant deterioration in public finances for OECD economies like the U.S. unless we undertake serious structural policy reforms. And guess what, this is not a result of any short term unforeseeable development; it’s baked into the longevity revolution of the past half century that has added as much as three decades some Americans’ lives.
According to the S&P analysis, “No other force is likely to shape the future of national economic health, public finances and national policies as the irreversible rate at which the world’s population is growing older…” In the U.S., that means the 78 million baby boomers who will be retiring will collecting Medicare and Social Security benefits at an accelerated rate and for a long duration. It is this underlying societal shift that will drive deficits for the U.S. and other countries to points barely considered today. S&P numbers take the debt from about 4.7% of GDP now to about 7.5% in the next decade or so. And, they will only grow from there. If we Americans want truly to enjoy the longevity science and medicine has brought, it’s time to force our political leaders to align public policy with the demographic realities staring us in the face.
Michael W. Hodin, PhD, Adjunct Senior Fellow at the Council on Foreign Relations and Executive Director of the Global Coalition on Aging