Entitlement Spending and the Economy: Past Trends and Future Projections

Long-term economic forecasts project exploding government debt resulting from the boomer generation's retirement, demographic aging, and entitlement spending growth. In this AARP Public Policy Institute Issue Paper, John Gist and Satyendra Verma find that, although sobering, these forecasts are subject to large margins of error. They conclude that the demographic outlook represents a stern fiscal challenge to the nation, but one that can be managed through sound economic policies.

Policies to promote and sustain robust economic growth are critical to managing the growth of entitlement spending in the future. If future economic growth were consistent with that of the past four decades, the share of Gross Domestic Product (GDP) spent on the largest three entitlements would increase by only 1.5 percent of GDP, much smaller than that projected by current long-term forecasts. Despite the fiscal challenge posed by an aging society, our economic future, although influenced by demographics, can be molded by choices made by individuals and by society. (36 pages)