Why budget fixes can't wait

To pay for that shortfall, Smetters says, Social Security and Medicare taxes deducted from paychecks would need to double immediately.

The nonpartisan Congressional Budget Office puts the numbers in a slightly different way. In its gloomiest long-term forecast, the combination of Medicare, Medicaid, Social Security, and interest on the national debt could eat up half of gross domestic product, the nation's total output of goods and services, by 2050.

But forecasting is an inexact science. Many factors will influence the fiscal situation over coming decades, from birth rates to the health of older Americans. A positive trend, for example, is a steady decline in disability rates among seniors. That may mean that demand for healthcare doesn't grow as fast as longevity.

Other wild cards relate to the global economy. The US is far from the only nation with an aging population. But even as Europe, Japan, and others face their own entitlement challenges, some experts point to possible solutions.

A recent assessment by the investment house Goldman Sachs figured that by raising the eligibility age for retirement benefits, more people would stay in the workforce, boosting economic growth.

Over the next 20 years, this could boost incomes above current forecasts by 12 percent in major European countries, 11 percent in the US, and 7 percent in Japan. Anything that boosts economic growth would help nations meet their growing bills.

That's where China's saving habits could come in. Boston University's Kotlikoff and two German economists recently studied how the Chinese propensity to save a large share of income might affect the global economy - and entitlement burden - in this century.

Their paper had a whimsical but provocative title: "Will China eat our lunch or take us out to dinner?"

Its conclusion: China could very well provide a pool of capital that helps fuel not just its own growth but the global economy - helping to prevent economic stagnation in developed nations for decades into the future.

"They're saving at these incredibly high rates," says Kotlikoff. "If they keep that up they can't help but generate lots of capital for the rest of the world to use."

Even with China's help, US tax rates would have to rise to cover the spending that Kotlikoff's model predicts.

"We spend far more on healthcare than other industrialized countries, but it's not at all clear that we are ... more satisfied" with our care, or healthier, as a result, says Jim Horney, an analyst at the Center on Budget and Policy Priorities, a Washington think tank.

But it's not clear that other nations, with nationalized care, have created systems that satisfy their citizens or contain costs either, experts say.

The goal of cost-containment leads quickly into controversial subjects such as rationing or means testing.

"It's going to take a real comprehensive approach," Mr. Horney says. "We face a long-term problem, and we need to do something about it."

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