Some see Baby Boomers as a marketing opportunity, but not Alan Greenspan, chairman of the Federal Reserve Board. Greenspan warns they might crack the economy if the country does not prepare adequately. He made his remarks at a symposium sponsored by the Federal Reserve Bank of Kansas City.
The "elder dependency ratio," which is the ratio of older adults to younger adults, was temporarily stalled by the birth of the Boomers, but as that group ages, it will continue to rise precipitously. This means that the increasing financial burden created by the elderly will fall on the hands of the young.
The well-known expected shortfalls in the Social Security system will be minor next to the problems the country will encounter trying to support Medicare, Greenspan said. "The shortfalls in the Medicare program will almost surely be much larger and much more difficult to eliminate," he said. "Medicare faces financial pressure not only from the changing composition of the population but also from continually increased per-recipient demand for medical services."
Part of the solution is to boost primary and secondary school education in an effort to increase worker productivity, Greenspan said. Also, encouraging older workers to continue to work past the now-accepted retirement age of 65 will help ameliorate the problem, he said. "Changes to the age for receiving full retirement benefits or initiatives to slow the growth of Medicare spending could affect retirement decisions, the size of the labor force and saving behavior," Greenspan said. "In choosing among the various tax and spending options, policymakers will need to pay careful attention to the likely economic effects."