Fiscal Crisis Ahead

In my lecture in ec 10 today, I spoke about the long-run outlook for fiscal policy. (Summary: Ugly.) This Washington Post article is, therefore, timely:

Social Security, Medicare Trust Funds Sink
By MARTIN CRUTSINGER

The Associated Press
Monday, May 1, 2006; 5:43 PM

WASHINGTON -- The trust fund for Social Security will be depleted in 2040, a year before expected, and Medicare will exhaust its trust fund reserves just 12 years from now, trustees for the programs said Monday....

The trustees, who include the head of the Social Security Administration and three members of President Bush's Cabinet, painted a sober assessment of the health of the two programs in advance of the looming retirements of 78 million baby boomers.

"We do not believe the currently projected long-run growth rates of Social Security or Medicare are sustainable under current financing arrangements," the trustees said in this year's report....

Treasury Secretary John Snow, who is the chairman of the trustees' panel, told a news conference that the country faced a "looming fiscal crisis as the baby boom generation moves into retirement."