The Baby Boom and Financial Doom – Time Magazine 12-24-12

Salient to Investors:

Fareed Zakaria writes:

  • Pete Peterson says the current deficit is not the problem, and is even in favor of additional stimulus spending. His overriding concern has always been the the massive structural deficits we face as baby boomers start retiring.
  • In 1900, 1 in 25 Americans was over 65. In 2030, 1 in 5 Americans will be over 65. In 1960 there were 5 working Americans for every retiree. By 2025, there will be just over 2 workers per retiree. In 1975, Social Security, Medicare and Medicaid was 25% of federal spending, today they are 40%, and within a decade, will be over 50%.
  • Federal spending on everything other than entitlements and defense has been steadily shrinking for decades. Cities and states are in a downward spiral. Medicaid is now the single largest item on state budgets and has grown by over 20% in each of the past 2 years, while spending on everything else is being slashed, from police and poverty programs to public education.
  • The Peter G. Peterson Foundation says by 2040 we will spend 10% of GDP on interest payments versus 1.4% today, and 4 times what we spend on education, infrastructure and scientific research.

Read the full article at http://www.time.com/time/magazine/article/0,9171,2131536,00.html.

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