The Economist, December 29th, 2010

FROM the moment they entered the workforce in the 1960s, baby-boomers
began to shape America’s economy and politics. They will do the same as
they leave. The first of the estimated 78m Americans born between 1946
and 1964 turn 65 in 2011, the normal age for retirement. As their ranks
swell in coming years, the burden of financing their retirement will
mount. So will their electoral importance.

Retiring boomers will squeeze the economy from two directions. The
number of people enrolled in Medicare (federally funded health care,
available from the age of 65) will grow from 47m in 2010 to 80m in two
decades’ time. Enrolment in Social Security (federally funded pensions,
available from the age of 62-67, depending on your birth year) will grow
from 44m to 73m. The cost of the two programmes will grow from 8.4% of
GDP in 2010 to 11.2% by 2030. Meanwhile, as boomers retire, the
workforce will grow more slowly, as will the taxes to finance their
benefits. The pensioner-worker imbalance and health-care inflation,
which is driving up the bill for Medicare and Medicaid, the federal
health benefit for the poor, will send the budget deficit into the
stratosphere.

Both Barack Obama and Republicans in Congress claim that reforming
such entitlements is a priority. But a demographic snag lies in the way.
In the next two decades people aged 65 and over will rise from 17% of
the voting-age population to 26% (see chart 1). Since the old vote more
readily, their actual share of the electorate will be some three
percentage points higher, reckons Robert Binstock, a political scientist
at Case Western Reserve University in Cleveland.

In the past the political priorities and voting preferences of the
elderly were much like everyone else’s. Mr Binstock says this may be
because ideological, economic or national-security issues loomed larger
than greybeard ones, such as pensions. Or it may be because politicians,
terrified of political retribution, avoided anything that would offend
the old.

Advocacy groups, especially the almost 40m-member AARP (formerly the
American Association of Retired Persons), have exploited this fear.
Their support helped George Bush create the Medicare drug benefit in
2003, and their opposition helped kill his proposal for private Social
Security accounts a few years later. In December, while most of
Washington was transfixed by the tax deal between Mr Obama and the
Republicans, AARP took aim at a scheduled cut in Medicare fees to
doctors. After 100,000 of its members wrote, e-mailed and phoned,
Congress voted almost unanimously to override the cuts, despite the $15
billion price tag.

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