The demographic of the old, particularly the baby boomer generation, will play a key role in upcoming policy changes, notes an article from the New York Times.
For decades, boomers’ retirement has been recognized as having monumental impacts on the economy. Contributing to the large-scale changes in the American population, aging boomers will carry more sway in fiscal debates in the coming months as they impact two central discussion issues: employment and spending.
The New York Times writes:
Far from the headlines, the debate over the budget deficit, taxes and employment is being driven by large-scale changes in the American population—and in this case, it’s not the new demographics of the young that are important, but rather the old demographics of the baby boom.
Consider the debate over spending. The Congressional Budget Office projects that id current policies continue, total federal spending will rise to 24 percent of gross domestic product in 2022.
The main reason expenditures are rising this decade is that spending on Social Security, Medicare and Medicaid is increasing by a whopping 3.7 percent of G.D.P. as the baby boomers age and retire. This demographic fact also has been driving increases in disability insurance payments as more knees give way and backs give out.
We need to accept the fact that we simply cannot revert to historical norms in government spending and keep faith with commitments made to millions of aging workers.
WIth more than 200,000 boomers exiting the labor force each month through retirement, the rule of thumb that the economy needs to add 10,000 jobs per month to keep up with population growth no longer holds. The new normal is 100,000, which is why 150,000 new jobs a month has brought the unemployment rate from 9.5 percent to 7.9 percent over the last two years.
Policy makers will need to acknowledge the new economics of the baby boomer demographic over the coming weeks as fiscal policy changes will be made. There will also need to be a perception shift, one that deals with the current country and economy as it stands today, rather than the one in the history books, notes the article.
Written by Jason Oliva