ReZoom

You may have caught the "60 Minutes" interview with U.S. Comptroller General David Walker, wherein he claimed that America is suffering from a "fiscal cancer" brought on by entitlement programs we can no longer afford. Or you may have picked up Alice Rivlin and Isabel Sawhill's recent book Restoring Fiscal Sanity: The Health Spending Challenge, which predicts a "category six fiscal hurricane" driven by the promised benefits of Medicare and Medicaid.

So which is it, a cancer or a hurricane? We spoke with Maya MacGuineas, president of the Committee for a Responsible Federal Budget – a bipartisan, non-profit group committed to educating policy makers and the public about fiscal policy issues. Her advice? Save, save, save.

Among federal budget experts, it seems there is no shortage of pessimism when it comes to the baby boom generation's financial legacy. Is it really so bad?

Given the tremendous fiscal challenges this country faces, I count myself as one of those "pessimists." Yes, it really is that bad. Currently, we have over-promised in our major health and retirement programs by trillions of dollars. The changes that will have to be made will not be simple nor will they be the painless.

Our political process does not require us to face these problems in a timely manner, and the longer we wait (and we have already waited too long) the more difficult the changes will be. Ultimately we will have to reduce the level of promised benefits in our health and retirement programs (Social Security and Medicare) and raise taxes – a lot. Given the magnitude of the problems, I promise you we will have to do both. We shouldn't pretend the problems aren't real. Instead we should be working to solve them.

And what is to be made of the fact that these experts – many of whom work closely with or even within the Federal government – are taking their findings directly to the public, rather than working with Federal and local governments?

Most of us who care about these issues work both with the government and directly with the public. My group, the Committee for a Responsible Budget, for instance, works closely with Members of Congress and their staffs to work in a bipartisan manner on these pressing problems. At the same time, at the grass-roots level, we host a simulation called the "Exercise in Hard Choices" that allows Americans around the country to try their hand at balancing the budget and addressing the long-term challenges. This simulation is educational and gets non-experts more involved in the issues. We even run it in high schools and the students get a lot out of the experience. Educating Members [of Congress] and voters are both part of the effort to increase awareness about the challenges we face.

In November of 2005, USA Today said that you "see a future of unfunded promises, trade imbalances, too few workers and too many retirees." Does this hold true, or have you seen any encouraging changes?

I wish I could sound cheerier, but I can't say that I have seen a single encouraging change since then. Right now I am just hoping that the presidential election will not bring a lot of new costly promises, such as more tax cuts or spending program with no plans for how to pay for them. It would be encouraging if one or more candidates proposed specific ideas to get these challenges under control.

Not more than six months ago, much was being made in the media about boomers enjoying "the greatest transfer of wealth in history," meaning that there was a good chance your Greatest Generation parents – who scrimped and saved and made paying off the mortgage a point of pride – were going to help bail you out of some debts or ease you into a comfortable retirement. What is your opinion of this prophecy?

Many Boomers will be entering retirement with higher levels of savings than before, but others will be entering with discouraging little and even significant levels of debt. Life expectancies are much longer, yet people are still retiring, oftentimes in their early 60s – even when they are able to work much longer. This may not be possible for many Boomers.

My prediction is that we will see some people retiring with vast wealth and others with little or nothing. Again, we should be working to reform the country's entitlement program now so that people will know what to expect and hopefully so we can do so in a way that will protect those who will be depending on the programs.

What can boomers do, on an individual level, to counter these dire predictions? What can later generations do?

Save, save, save. All generations need to be saving more to enhance their own financial security. We have no idea what the major entitlement programs will look like in a decade or two from now, but in all likelihood, promised benefits will have to be cut back. Saving will also help the economy, and while we cannot grow our way out of these problems, economic growth can certainly ease the burden of all the promises we have made. Also, people will have to adjust their expectations about at what age they will be able to retire.

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