Of the total federal expenditures in 1995, Social Security together with Medicare(federally founded health program aimed at helping the elderly, founded in 1965) was the largest, accounting for about 34 percent. In 2005 this figure is predicted to be as high as 39 percent. This is caused by the "graying" of America and the increased number of elderly who will collect benefits for a longer portion of their lives, coupled with a reduction of the number of workers available to pay for their benefits. Increasing costs of living and higher standards of living (as reflected in higher wages) also are consequences.
In short, if no action is taken in the interim, by approximately 2013 the federal government will have to raise taxes, increase the debt, print more money, reduce Social Security benefits immediately, or do some combination of those things to rectify the Social Security cash-flow imbalance. The surplus will be gone. The amounts needed by the Social Security system, even in the early years, are not insignificant. In 2015 experts believe that the government will have to find approximately $57 billion to meet its obligations. By 2020 the number will have grown to $232 billion.
The demographic makeup of America is changing. The share of the population over the age of 65 will continue to grow well into the next century. Today, approximately 13 percent of the population of the United States is over age 65. By 2030 that percentage will increase to more than 20 percent. Even more surprising, in less than 50 years, there will be as many Americans aged 80 and older as there are now people over 65.
People are also living longer; In 1900 life expectancy was 47 at birth, and if you lived to be 65, your life expectancy was suddenly 77. In 1993 it was 76 at birth and 82 if you turned 65. At the same time, retirement ages have sunken. So suddenly there were people living longer, on the government's payroll. Some people would then draw the conclusion: "If people live longer, they should work longer," but many elderly people are too tired, and to weak too work after a life span of just working.
As the "baby-boom" generation begins retiring, around 2010, America will have a greater proportion of elderly citizens than it ever has. Approximately 24 million people over the age of 70 live in the United States today. By the year 2030, twice as many - 48 million - will be alive. And spending on the elderly now accounts for one-third of the federal budget (34%) and more than one-half of all federal domestic spending other than interest. As the group makes up more and more of the population, its visibility and political influence will probably intensify.
The situation is caused by an increasing number of retiring Americans, the fact is that we are now living a great deal longer than did our grandparents. The makers of the Social Security system designed it with their present life spans in mind. When they created the program in 1935 and chose 65 as the retirement age, the average life expectancy of a child born in that year was only 61. Today, the average life expectancy is 76 years, and by 2030 it is expected to approach 80 years of age. As increasing numbers of Americans claim Social Security benefits and do so for a much longer period of time than was originally planned, and as fewer workers are available to support those transfer payments, the strain on the Social Security system threatens to rip the program apart.
This dramatic rise in the number of elderly American citizens will stress the Social Security System as well as other organisations designed to assist the elderly. Experts project that soon after the year 2000, the federal government will have to take serious steps to insure the continuation of the Social Security program: reduction of payments, taxation of benefits, an increase in the age at which people become eligible, or some combination of these strategies. If steps are not taken, not only are there increasing numbers of elderly people in the United States, but their life expectancies are increasing as well. Life expectancy at birth and at age 65 is increasing for both sexes. This means that Americans will be living longer in their elderly stage and will require a larger amount of money to support themselves after retirement.
This can be seen by theses figures. In the 1950s there were approximately eight working-age Americans for every person over 65 years old. By 2030, there will be just two working-age Americans for every person older than 65. Also, fewer workers will be available to support the increasing number of retirees.
The primary causes of the growth in Social Security that is projected to occur over the next several decades are not factors that can be controlled. The program's growth will be driven by the "graying" of America, an increasing cost of living, and a higher standard of living (as reflected in higher wages). Until serious reforms are undertaken, the American people will rightly lack confidence in the financial stability of Social Security.
As social welfare takes a larger and larger portion of the "American Pie", there will also have to be cuts in other areas. And I think that the defence expenses will be cut in the near future. I also think there will have to come new social welfare programmes, such as the one President Clinton has suggested. A harsher welfare system than before, where you only get welfare (not Medicare) for five years, then you need to get money from somewhere else. As Clinton puts it: "Welfare should not be a way of life, but a second chance.."
An institution which will grow significantly is "The Assisted Living Industry", those who are to take care of the elderly in the future. This will happen particularly because of the ageing of the American population, the dramatic increase in number of persons age 85 or older, and continued increase in the number of people who live alone due to the longer life expectancy for woman.