NY Times: The Financial Time Bomb of Longer Lives

NewImage.jpgFor the first time in history, people 65 and over are about to outnumber children under 5 and are creating a Financial Time Bomb.

The New York Times reports that as we’re living longer and healthier lives than before, we’re faced with a question of how we fund the services governments provide.

In many countries, older people entitled to government-funded pensions, health services and long-term care will soon outnumber the work force whose taxes help finance those benefits. This demographic shift also means that the number of people living with dementia, whose treatment is estimated to cost $604 billion worldwide this year, is expected to more than triple, to 115 million, by 2050, according to a report this year by Alzheimer’s Disease International, a group representing 73 Alzheimer’s associations around the world.

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No other force is as likely to shape the future of national economic health, public finances and national policies, according to a new analysis on global aging from Standard & Poor’s, as the “irreversible rate at which the population is growing older.”

How are the most developed countries handling preparations for the boom in the elderly population — and for the budget-busting expenditures that are sure to follow?

For a majority, not very well.

The Financial Time Bomb of Longer Lives

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  • 75 years ago Congress decided minimum retirement benefits were the business of government. Then 30 years later, Congress decided that government should be in charge of retirement medical care as well. (Nine years later, Congress decided to oversee the insurance of defined benefit plans particularly multiemployer plans, a concern right now but somewhat of a minor concern.)

    History may yet frown on decisions to provide benefits without adequate funding mechanisms. In 1965 Congress also created Medicaid. With no funding source other than general taxes, Medicaid is not only draining the federal government but state governments as well. For many, Medicaid is now a necessity. Will health care become another drain on the American citizenry?

    In forty years (2050), most of us in the baby boom generation will not be here. By then the poor funding and poor population decisions of prior generations will come to fully roost. If not cleared up now, baby boomers will have passed away, leaving children, grandchildren, and great-grandchildren with massive debt. Will Social Security, Medicare, and Medicaid become the financial legacy of the Greatest Generation as part of the move to more socialist policies in the twentieth and early twenty-first centuries? The Party in power has shown neither the vision of Oklahoma born Senator Daniel Patrick Moynihan (D-NY) nor more importantly the will needed to put into place the “changes” needed.

    Even if the party in opposition takes over Congress, one cannot expect anything more than malaise and a lame duck Administration in its first term (unless the Republicans do the impossible tomorrow and gain the 2/3rds majorities needed in both chambers to override presidential vetoes). If the current party retains control, it seems it will be greatly weakened. The outlook for “change” in funding seems out of reach for at least 27 months.

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