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Population Aging, Entitlement Growth, and the Economy

The aging of the baby boom generation, low fertility rates and increasing longevity are transforming the age structure of the United States. By 2030, the number of age 65+ Americans is expected to double, increasing from 12 percent to nearly one-fifth of the U.S. population.

This “graying” of America has caused alarm among many experts that the future cost of federal health and retirement programs will create huge federal deficits, dry up capital for investment, and jeopardize long-term economic growth. Spending entitlements–specifically Social Security, Medicare and Medicaid–are generally seen as the main factor driving this scenario.

This AARP Public Policy Institute Issue Paper shows that an aging population is not the primary cause of our projected fiscal problems, and it points to hopeful trends that may portend a more sustainable economic future. A future “train wreck” can be averted if we are able to maintain the same level of spending restraint in our health programs that we have already achieved in the past decade, we allow revenues to rise automatically without legislating additional tax cuts, and we make other attainable reforms to our health and retirement systems.

Concerted action in the near-term is critical to creating the conditions for continued economic growth while providing health and economic security for current and future generations of Americans, both in their working years and in retirement. (64 pages)