committee to look specifically at the nation’s fiscal issues. The committee’s report, Choosing the Nation’s Fiscal Future, outlined the long-term challenges of achieving a sustainable national budget and discussed a number of options for government spending and revenue policy that could lead to sustainability.

The fiscal problems facing our society are daunting. At the same time, it is imperative to understand how macroeconomic changes brought about by population aging affect fiscal imbalances. It is useful here to distinguish between the fiscal effects of aging—that is, effects involving changes in government revenues and expenditures driven largely by demographic change—and the macroeconomic effects of aging (see Box 1-1). The latter involve consideration of how factors such as savings rates, stock market exposure, productivity, consumption patterns, and global capital flows react to demographic shifts. These factors must be inputs to any analysis of the solvency of entitlement programs.

It also is important to note that the fiscal situation in the United States depends in no small measure on what happens in the rest of the world. The U.S. economy is integrated in the global economy, and population aging is a global, not merely a national, phenomenon. The last 30 years have witnessed important changes in the global economy with implications for workers’ job security, wages, and benefits. Globalization, driven by rapid

BOX 1-1
A Macroeconomic Perspective

This report takes a macroeconomic perspective on the ramifications of our aging U.S. population. Macroeconomics focuses on broad overall movements and trends in the economy, as opposed to microeconomics, which focuses on factors that influence decisions made by individual people and businesses. Accordingly, this report’s emphasis and its conclusions center on average or aggregate phenomena. The reader who is not familiar with this approach might find some assertions to be nonintuitive. For example, from a macroeconomic perspective one expects the postretirement cohorts of the population to have accumulated more assets than younger cohorts. This reflects the tendency of people to pay off their home mortgages as they age and to set aside resources for retirement, both of which increase their assets. It implies a rosy picture for the older population. However, within the overall older population there will be many individuals who have not accumulated assets for later life, as well as many who are spending down their assets in retirement in ways that they would rather not. Furthermore, the relative well-being of today’s older population might be quite different from that of previous and future cohorts. In reporting on aggregate behavior, the committee is identifying a variable (amount of assets) that affects the overall economy but not the very real individual stresses often associated with that variable.

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