The Fiscal Impact of Population Change: Discussion

It is now well established that world-wide demographic shifts are going to affect both the U.S. and world economies in ways that are not entirely predictable. What we can do—and what Ronald Lee and Ryan Edwards do so well—is to plot out for the future some of the fiscal implications under reasonable guesses about demographic, economic, and legal factors. These factors include what we know already from the past, such as the maximum number of people in the world of any age over 0 next year and over 10 in another ten years. A typical next step is to posit what in estimating circles is known as “current law” (defined partly by convention, not just law). Even if that law cannot possibly be maintained, some of its implications can be understood. Finally, one assumes some reasonable parameters, such as future fertility, mortality, and labor force participation, largely based on historical trends. Some argue that long-term estimates should not be made because we know so little about the future. But this argument ignores what we do know, largely derived from demographic data. The more important point is that we must do long-term projections if government is going to make promises for the long term. It is the government (or private sector) contract that makes assumptions, largely implicit, about what is affordable in the future. If making projections for 50, 75, or 100 years is relatively new in our history, so also is a government making promises about how future income growth in the economy will be spent in 50, 100, and 200 years. The analyst or economist or actuary is forced to derive the implications of contracts and to try to make them explicit. Many of the