Aging into red ink: Dearth of workers is driving the debt trajectory

Congress is operating at a sprinter’s pace this week to get the One B i g Beautiful Bill across the finish line. The fiscal hawks in both chambers are pushing for deeper spending cuts but, aside from some relatively minor cuts to Medicaid, most of the heated debate surrounds categories of outlays that won’t bend the spending trajectory downward. Economist Paul Krugman, among others, has stated that the US government is “an insurance company with an army” and this characterization is instructive. Cutting discretionary programs around the edges won’t change the big picture. The real drivers of spending remain entitlements, social security in particular. The trust fund is projected to run dry in the next decade, triggering automatic benefit cuts unless something changes. Recently, the Social Security Trustees releaser their annual report on the status of the program, and as predicted, the results were not good. The Social Security Trustees estimate the Social Security Old-Age and Survivors Insurance (OASI) trust fund will deplete its reserves by 2033 – after which beneficiaries will face an immediate cut in benefits. Social security worked beautifully when workers far outnumbered beneficiaries, as was the case in the beginning years of the program. As the baby boomer generation retires, this ratio gets increasingly daunting. In 2010, one year before the first baby boomers turned 65, there were 53 million Social Security beneficiaries and today there are 67 million beneficiaries, a 25% increased. The number of workers only increased by 9%. By the end of this century, the ratio is projected to decline to 2.1, with 230.7 million workers and 110.4 million people collecting benefits .