If action is taken soon, the nation can preserve Social Security and Medicare for future generations close to their current form, although not without lowering the rate of growth of benefits and/or raising additional revenues to finance them. Even under the low spending and revenues scenario outlined in Chapter 9, monthly Social Security benefits rise in real terms for most workers. That is, even if benefits are sharply reduced relative to current law, most future Social Security benefits will still be higher, after inflation, than today’s benefits.
For Medicare and Medicaid, it is more difficult to forecast future costs because of the many factors that drive health care spending, but benefits are likely to continue to cover at least the big ticket health care items for senior citizens. Thus, the fiscal challenges facing the United States by no means imply the devastation of these programs that have been so instrumental to the well-being of senior citizens and to reducing the proportion of seniors who live in poverty.
Although the demographic pressures facing the United States are serious, they do not look overwhelming, based on standard projections of labor force participation, future retirement ages, immigration, and other relevant factors (cf., Social Security Administration, 2009d). The U.S. challenge from this source is less formidable than that facing most other major industrialized nations—many of whom will see much greater imbalances between their working and nonworking populations and sooner than the United States.3
Given its relatively low current tax levels, in comparison with other industrialized countries, the United States has more leeway than most of its peers to raise revenues, should it take that route, provided that the tax system is reformed to make revenue collection more efficient and to promote economic growth.
Just as an ordinary household can meet its budget challenges by taking charge, gathering information, and seeking financial advice, the people of the United States and the nation’s leaders should feel empowered and moved to action, not to despair. The nation’s problems are not insurmountable, but the sooner action is taken the more likely is success.
One product of the committee’s study is a framework for analyzing and addressing the long-term budget challenge, presented in Chapters 2 and 3. We believe this framework can contribute to how people think about the fiscal challenge and, therefore, what solutions they will consider. Psychologists have studied the effects of framing on cognition (see, e.g., Kahneman,