A letter from 232 multi-industry organizations, in conjunction with the U.S. Chamber of Commerce, is calling on President Obama and Congress to restructure the nation’s entitlement programs and put them on a path toward financial sustainability.
These organizations recognize that the country’s rising debt poses grave economic risks. In the letter, they cite that near the end of 2008, debt held by the public was around 40 percent of gross domestic product (GDP); this is close to the historical average of about 37 percent of GDP. According to the Congressional Budget Office, though, debt held by the public in 2012 had risen to 73 percent of GDP. The future looks worse still, as debt is projected to skyrocket to over 100 percent of GDP in less than 10 years.
This year,federal government spending outlays totaled $3.6 trillion, while total revenue fell short at about $2.5 trillion. Mandatory spending—on Medicare, Medicaid, Social Security, and other social programs—accounted for 62 percent of total spending in 2012, and it is expected to rise to 67 percent of spending over the next 10 years. The letter links the rising costs of entitlement programs tochanging demographics, noting that “unlike other aspects of the entitlement debates, demographics are facts.”
With an aging baby-boomer population, the worker-to-beneficiary ratio forMedicare will continue to fall. In 1965, at the start of the program, there were 4.6 workers to every Medicare beneficiary. But, in 2011, that number had fallen to 3.3 workers per Medicare beneficiary, and it is projected to fall further, plummeting to just 2.3 workers per beneficiary by 2030. This means fewer and fewer workers will be paying for the benefits of Medicare recipients. Combining that fact with rising health care costs, it becomes clear that Medicare as it is currently structured is unsustainable.
Social Security, already the nation’s largest spending program, will become only more expensive as the baby-boom generation retires. It is no secret that Americans are living longer and thus staying in retirement longer. In 1965, a 65 year-old retiree could expect to live 14.7 years longer, but in 2006, that number had risen to 18.6 years. Social Security is already running permanent deficits, and its finances will worsen without reforms.
As the letter states, these indisputable demographics make it quite clear that Congress and the President have a job to do: fundamentally restructure the entitlement programs to ensure they are a true safety net for Americans today, as well as for future generations of Americans.
The online version of the letter is availablehere, including the full list of signatories.