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My usual take is that the situation is never as bad (or as good in other cases) as the press leads us to believe.  Samuelson's job is to write articles that sell copies of Newsweek -- not to provide solid information.  It took him quite a while to figure out that, for example, GM's problems were more the fault of management than the UAW (not that the UAW isn't brainless, too).  I had been saying that for months when he finally got it together.

There's no doubt, in my mind, that the demographic shifts are going to pose a problem for governments, but, at the end of the day, it's likely going to lead to a combination of tax hikes, benefit cuts, and shifting of resources in government budgets, as Jerome mentioned.  (If there are fewer kids, you won't need to spend so much on education, and you can shift the savings to pensions.)  It's going to require belt-tightening, obviously, but it is, by no stretch of the imagination, some sort of catastrophic storm approaching.

The economy will adapt if the supply of workers becomes smaller.  Wages will rise, and businesses will shift resources to investments that will lead to higher productivity.  If more working-age people are needed, immigration can make up the difference.

And, as far as (say) the US is concerned, irresponsible fiscal policy (cough Bush cough) is more of a threat to pensions than the demographic shifts.  We're spending all of the Social Security surpluses, which are running at roughly $125-150b each year, and still borrowing over $400b to keep the government going.  And that's not even counting these "emergency" spending bills Bush calls for on Iraq and Afghanistan -- well in excess of $100b each year.

So what we should really be concentrating on is getting the budget back into balance, and into surplus, in order to give us some breathing room should we actually need to borrow in the future.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Tue Apr 4th, 2006 at 12:42:48 PM EST
I don't think you can put this one only on Bush.  We've been using that social security surplus to finance other governement spending for the past 30 years--I think the only exception being 3 years in the late '90's, and even then I think we were just not using all of the SS surplus.

Also, you may be a little too sanguine on the impact of SS and Medicare on the economy, say 15 years from now.  At least if we don't make policy changes, which we will have too.  But some of them may have to be pretty painful, if we continue to postpone addressing this issue.

by wchurchill on Tue Apr 4th, 2006 at 05:05:50 PM EST
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You can pin some of it on Clinton, since the budget was in deficit for most of his presidency (though he, unlike Bush, was paying it down).  The last two Clinton surpluses, though, did not involve spending any of the Social Security surpluses.  The total surplus was in excess of the Social Security side.

The vast majority of debt damage has been done under Reagan and Goerge W.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Tue Apr 4th, 2006 at 06:45:11 PM EST
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