Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

AI Summary. US spending on old-age entitlement programs rose from about 6% of GDP in 2000 to almost 9% in 2023, and had it stayed at its 2000 share the 2023 primary deficit would have been roughly 0.8% of GDP rather than 3.3%. The authors attribute projected further growth to retiring cohort sizes, rising life expectancy, and rising health costs.

Lisa Dettling and Luke Pardue Aspen Economic Strategy Group
Date Posted:

The Baby Boom, greater life expectancy, and rising medical costs sharply increased federal deficits over the past 30 years. If elderly entitlements had stayed at their 2000 share of GDP, the 2023 primary deficit would be ~0.8%, rather than 3.3%, of GDP.

How much does old-age entitlement growth drive the federal deficit?

Core argument: US spending on old-age entitlement programs rose from 2.5% of GDP in the mid-1960s to about 6% in 2000 and almost 9% in 2023, and is projected to keep growing relative to GDP.

In the mid-1960s, spending on old-age entitlement programs was 2.5% of GDP. [It rose to] about 6% of GDP in 2000 to almost 9% in 2023, and is projected to continue to grow relative to GDP. If entitlements for the elderly had remained at their 2000 share of GDP, the 2023 primary deficit would be ~0.8% of GDP rather than 3.3%. The projected growth in these spending programs can be attributed to (1) the size of cohorts expected to enter into retirement (due to past fertility rates and immigration), (2) CBO’s expectation that life expectancy will continue to rise, and (3) rising health costs. Figure 4a shows that cohort sizes are the primary driver of the growth in old-age entitlement spending in the first ten years of CBO’s projections because the still relatively large cohorts born just after the baby boom in 1960–1970 are expected to enter retirement at that time (fertility rates were about 3, on average, from 1960–1970). After 2035, rising life expectancy is the main driver of growth, as the cohorts born in the 1970s and 1980s were much smaller than their predecessors (fertility rates were below 2 in that period). Second, figure 4a shows that if old-age dependency ratios were to remain at their 2024 level throughout the projection, old-age entitlement program spending would grow much more slowly, reaching only 9.8 percent of GDP in 2055 instead of 12.6 percent. Outlays continue to grow even without a rise in the dependency ratio because [per CBO] health costs for Medicare will continue to rise.

Takeaways by Macro Roundup® AI

  1. US spending on old-age entitlement programs rose from 2.5% of GDP in the mid-1960s to about 6% in 2000 and almost 9% in 2023, and is projected to keep growing relative to GDP.
  2. Had entitlements for the elderly stayed at their 2000 share of GDP, the 2023 US primary deficit would have been roughly 0.8% of GDP rather than 3.3%.
  3. If old-age dependency ratios held at their 2024 level, old-age entitlement spending would reach 9.8% of GDP in 2055 instead of 12.6%, with growth continuing because CBO expects Medicare health costs to keep rising.

Related Articles:

  • The Budget and Economic Outlook: 2026 to 2036 — The Congressional Budget Office projects the federal deficit will grow from $1.9tn (5.8% of GDP) to $3.1tn (6.7%) over a decade, above the 3.8% averaged over the past 50 years, with rising net interest costs driving much of the increase. Federal debt held by the public is projected to rise from 101% to 120% of GDP.
  • How Much Would Continued Low Fertility Affect the US Standard of Living? — Modeling of a rise in the total fertility rate from one to two finds it takes 41 years before the ratio of labor income to consumption needs across age groups exceeds its starting level. The authors argue this delay makes pro-natalist policies economically unappealing to older voters and short-horizon politicians.
  • Demographics, Wealth, and Global Imbalances in the Twenty-First Century — Because the elderly hold much more wealth than the young and on average do not draw it down much as they age, the authors' model projects no "great demographic reversal": population aging is estimated to push global rates of return down by about 1.07pp and raise global wealth from 456% to 498% of world GDP.
Showing 102 database articles primarily about Demographics