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America’s population is not as young as it once was.
An aging cohort of 74 million baby boomers is retiring and will be drawing benefits from our nation’s already-strained retirement programs, Social Security and Medicare.
Similarly, retiring government workers will strain underfunded state and local government pension and retiree health care programs.
As baby boomers leave the workforce, fewer younger Americans are taking their place.
The Wall Street Journal explains this, noting:
By 2017, there were 25 Americans 65 and older for every 100 people in their working years, according to new census figures released Thursday that detail age and race for every county. That ratio would climb to 35 retiree-age Americans for every 100 of working age by 2030, according to census projections released earlier this year.
Fewer working age Americans paying into the system brings Social Security ever closer to a crisis.
If left unchecked, this looming fiscal crisis will have serious consequences for all Americans, including younger generations.
An Aging Fiscal Crisis
In 2017, Social Security and health care spending on Medicare and Medicaid accounted for 45 percent of the federal budget. If left alone, these programs will consume 54 percent of the federal budget by 2028.
Social Security is already in trouble. Earlier this month, the Social Security trustees’ report revealed that this year, for the first time since 1982, the program’s costs will exceed its revenues.
As a result, Social Security will be forced to draw from its trust fund of nearly $3 trillion to cover benefits.
The trustees’ report also shows Social Security’s trust fund will be exhausted by 2034. If that happens, seniors’ benefits will automatically be cut. As the Wall Street Journal notes,
Social Security will no longer be able to pay its full scheduled benefits unless Congress takes action to shore up the program’s finances. Without any changes, recipients then would receive only about three-quarters of their scheduled benefits from incoming tax revenues.
States Plagued by Pension Woes
The federal problem of Social Security’s looming unsustainability is not the only fiscal challenge at hand: states are facing challenges of their own.
As baby boomers age and retire, employee pension costs will continue to swell.
A 2017 American Legislative Exchange Council report examining 280 state pension plans illustrates this point.
The report details states falling behind on pension funding, leading to massive unfunded liabilities. Among the worst is New Jersey, which has a funding ratio of only 25.7 percent of its future pension obligations.
USA Today notes,
The annual report from Pew Charitable Trusts finds that public worker pension funds with heavy state government involvement owed retirees and current workers $4 trillion as of 2016. They had about $2.6 trillion in assets, creating a gap of about one-third.
… While the study looks only at pension funds with major state government involvement, systems run by cities, counties, school districts and other local entities had similar problems. … The Chicago suburb of Harvey, a city with a history of underpaying its pension obligations, announced deep layoffs in its police and fire departments.
Larger cities and school districts across the country also have had service cuts or freezes over the years to pay the rising costs of their retirees.
State and local governments, at the forefront of this growing fiscal disaster, must make reforms to address growing employee pension costs.
If action is not taken, taxpayers will see either drastic cuts to services such as education, courts, public safety, and health care, or devastating tax hikes to cover their state’s pension obligations.
Embracing Immigration to Build a Brighter Future
Reining in spending will be one key to making these retirement programs both affordable and sustainable. Thankfully, there also is a positive, although partial, solution: immigration.
Immigrants could help meet the nation’s growing need for a younger workforce.
An analysis by the Pew Research Center concluded that growth in the working-age population in the United States over the next two decades will depend much on the arrival of future immigrants.
Immigrants create new businesses at an accelerated rate, meeting demands in the marketplace and building new job opportunities for others.
Even if just focusing on the Dreamer population, a CATO Institute study shows that DACA recipients, if allowed to remain in the United States, would add $350 billion to our nation’s economy in the next decade.
That’s why it’s so important we urge Congress to find a permanent legislative solution for Dreamers – one that provides certainty for them while preserving our nation’s security, without arbitrarily cutting legal immigration levels.
Congress must also address the future flow of immigration and ensure that America is properly prioritizing the admission of those who wish to contribute positively into our society in the future and adequately respond to the market signals of an aging labor force.
Americans cannot afford for Congress to continue delaying real solutions to these serious immigration concerns.
Likewise, Americans cannot wait and wonder whether the looming fiscal crisis will occur.
Congress should ensure Social Security and Medicare programs are placed on an affordable and sustainable path, and state and lawmakers should ensure their employee pensions and retiree healthcare programs are adequately funded.
Immigration can, and should, be a part of the solution.
Read the full article from the Wall Street Journal here.
© 2024 AMERICANS FOR PROSPERITY. ALL RIGHTS RESERVED. | PRIVACY POLICY
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