November 23, 2014

FAQ: Why does the United States have “an aging population” and what does it mean for the federal budget?

The average age of Americans is increasing. With the end of World War II in 1945, the United States experienced a population surge known as “the baby boom.” Initially, this resulted in a younger population. As the baby boomers had fewer children than their parents, however, the population began growing “older.” Today Americans age 65 and older make up about 13 percent of the population. By 2035, that figure will grow to nearly 20 percent.

In the context of federal budgeting, an aging population is a policy dilemma because Social Security, Medicare, and Medicaid spending levels rise automatically with such population changes. Today there are three workers for every Social Security beneficiary. But as more baby boomers retire in the coming decade, there will be fewer workers to finance the growing pool of beneficiaries. The Social Security Administration estimates that in 2030 there will be only two workers to finance each beneficiary.

According to the Congressional Budget Office, aging will account for about 64 percent of spending growth in the major entitlement programs over the next 25 years. The aging population, combined with escalating health care costs, will produce unsustainable government spending levels unless lawmakers take steps to bring long-term costs and revenues in line with each other.