Baby Boomer Tsunami: Impending Peril or Potential Opportunity?

2040 Institute, Immigration, Demographics, Baby Boomer, Tsunami

One demographic tsunami poised to hit the U.S. between now and 2040 is the aging of the Baby Boomers, born in the golden post-WWII years between 1946 and 1964.

A standard doom-and-gloom prediction as to the effects of this tsunami is captured by the sedately named “old-age dependency ratio”: the number of Americans 65 and older compared to those of working age (between 15 and 64).

The higher this ratio, the greater the number of oldsters drawing Social Security compared to and supported by struggling working-age Americans paying in. Too many oldsters or too few workers? The system creaks and collapses.

Take this scenario one step further: Some make the case that protecting Social Security as the Baby Boomer elephant heaves onto the oldster scale requires slashing other government supports. This thinking sets Social Security against other programs. It also pits one generation against another.

Lincoln Caplan, lecturer at Yale Law School, flat out disagrees. The title of Caplan?s current article in The American Scholar says it all: The Fear Factor: Long-Held Predictions of Economic Chaos as Baby Boomers Grow Old Are Based on Formulas That Are Just Plain Wrong.

Caplan throws out some intriguing and provocative challenges to the conventional wisdom that aging Baby Boomers represent impending economic peril:

  • Greater health and longevity have extended working lives and productivity.  Fewer workers now “retire” at 65.
  • Our current social paradigm fits an earlier age when people worked, had families, and died relatively young. This model robs us of the contributions older Americans can make and puts undue pressure on young adults and families.
  • Caps on Social Security contributions [the Social Security tax is paid only on the first $117,000 of annual income] give the economic “one percent” a relative free pass. If 90 percent of all earnings were taxed [the percentage used most recently by Congress], up to $217,000 of income annually would be subject to Social Security.

Caplan holds Social Security up as an example of “generational interdependence.”  This and other kinds of interdependence are, he says, “central to the American success story.”

Narrowly, Caplan calls for replacing the now-anachronistic old-age dependency ratio and upping the current caps on Social Security contributions.  More broadly, he endorses now-Senator Elizabeth Warren’s 2011 call to those of us who can to pay it forward to future generations.

Article in The American Scholar

by: Palma Joy Strand

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