Aging and the Macroeconomy Long-Term Implications of an Older Population (2012) / Chapter Skim
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This shift will have broad macro economic implications as well as important fiscal consequences for government programs that help support older persons, particularly Social Security, Medicare, and Medicaid. Because population aging is a gradual process, the social and economic challenges that it poses rarely attract the immediate and focused attention of the policy process.
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Social Security, Medicare, and Medicaid are on unsustainable paths, and failure to remedy this situation raises a number of economic risks. Health care costs per eligible person have been growing substantially faster than per capita income for decades, and if this pattern continues, it will interact with population aging to drive up public health care expenditures strongly.
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These assets, when invested, could help enhance productivity and generate asset income and thus improve living standards. However, the committee was unsure how such an increase in private assets holdings would be related to a likely increase in public debt as the population ages.
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While population aging is likely to result in a larger fraction of national output being spent on consumption by older persons, this does not pose an insurmountable challenge provided that sensible policies are implemented with enough lead time to allow companies and households to respond. The ultimate national response will likely involve some combination of major structural changes to Social Security, Medicare, and Medicaid, higher savings rates during working years, and longer working lives.
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