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Aging Population Poses Global Challenges

Health Care, Other Rising Costs to Strain Budgets in U.S. and Abroad

By Jonathan Weisman
Washington Post Staff Writer
Wednesday, February 2, 2005; Page A01

When President Bush delivers his State of the Union address tonight, his prescriptions for Social Security are likely to vault that issue to the front of the nation's political agenda. But Social Security's financial problems are a relatively small sliver of the far larger challenges posed by an aging population, economists say.

From untamed health care programs to military pensions, housing and heating assistance to coal-miners' benefits, programs for the elderly have proliferated and grown more generous, even in the face of an aging trend that demographers have long seen coming. In that light, the fight over Social Security marks only the beginning of a national debate over the cost of a graying society -- and the inevitable reallocation of resources that is sure to produce winners and losers, in the United States and around the world.

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Transcript: The Washington Post's Jonathan Weisman answered questions on his story on an aging planet.
A Graying Population As the U.S. population grows considerable older in the coming years, programs for the elderly are projected to consume an even larger share of federal tax dollars.
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"The question is whether we can support the elderly with a decent standard of living without imposing a crushing burden on the young," said Richard Jackson, director of the global aging initiative at the Center for Strategic & International Studies. "Whether we can is a real concern."

In just 10 years, spending on the elderly will total nearly $1.8 trillion, almost half the federal budget, according to new Brookings Institution and Congressional Budget Office projections. That is up from 29 percent in 1990 and 35 percent in 2000.

The bulk of that growth is spending on the federal government's two largest health care programs, Medicare and Medicaid. Their combined costs are projected to more than double, to a combined total of $1.2 trillion in 2015 from $473 billion last year. Social Security spending is expected to rise to $888 billion from $492 billion in that span.

To straighten out Social Security's financial problems, Bush will probably cut promised benefits for future retirees and divert up to a third of Social Security taxes to private investment accounts. The White House expects the investment gains in those accounts to mitigate -- if not erase -- the cuts in guaranteed benefits.

Bush has offered no plan to slow the sharper growth in federal health care spending beyond his hope that the prescription drug benefit he approved for Medicare will cut down on costly hospitalizations and surgeries.

Other countries are not likely to help foot the bill for the United States' aging population, as they currently do with the U.S. trade and budget deficits. The populations of Japan, Germany and other countries that have large pools of savings are aging even faster than the United States', and as they do, retirees will start to spend their nest eggs, sapping the capital that now helps drive business expansion and rising living standards worldwide, including in the United States.

China, because of its one-child policy, will face a demographic crisis of its own, and India, though growing fast, cannot hope to accumulate enough capital to help, international economists say.

No challenge "is as certain as global aging," said the Center for Strategic & International Studies in another recent study, "and none is as likely to have as large and enduring an effect -- on the size and shape of government budgets, on the future growth in living standards, and on the stability of the global economy and even the world order."

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