Imagine you have a profligate relative, about 15 years away from enforced retirement, who keeps piling up debt instead of saving for old age. Whenever he does set up a plan to cut back on spending he can’t afford, it usually consists of spending more in the short run, with dubious resolutions about belt-tightening later. How he will manage to survive when he does retire is such an obvious cause for alarm, you keep thinking he will soon wise up. Instead, he keeps congratulating himself on the fact that his rate of borrowing has declined from recent peaks of extravagance.
Now consider that mythical relative known as Uncle Sam. The society he presides over is rapidly aging. The baby boomers, currently ranging in age from 49 to 67, are swelling the ranks of the retirees, and Generation X isn’t far behind. By 2038, there will be nearly 80 million U.S. residents age 65 and over, up from 45 million today. Over the same period, the population of people aged 18 to 64 will grow at a much slower rate. As a result, our population will tip toward the retirees, with 2.7 working-age persons for each senior in 2038, down from 4.4 today. And yet instead of preparing for the baby-boom budget bomb by running surpluses and using the funds to pay down the huge debt — a plan proposed by President Bill Clinton in 1999 — the federal government keeps incurring deficits, adding each year to the debt.
The nonpartisan Congressional Budget Office keeps warning that the federal budget is on an unsustainable path, recently projecting that the debt held by the public as a share of nominal gross domestic product could soar from the current 73% to 190% by 2038. (See my Cover Story, “What, Me Worry?” Sept. 30.) And yet, just like that profligate relative, the Obama administration has often claimed credit for bringing down the yearly deficit from unheard-of levels of more than $1 trillion to still-record levels of about half a trillion.
UNDUE CREDIT WAS ALSO bestowed last week on the budget deal officially labeled the Bipartisan Budget Act of 2013.