of an aging population and the soaring costs of its medical care is certain to place enormous demands on our nation's resources and to exert pressure on the budget that economic growth alone is unlikely to eliminate. to be sure, favorable productivity developments would help to alleviate the impending budgetary strains. but unless productivity growth far outstrips that embodied in current budget forecasts, it is unlikely to represent more than part of the answer. higher productivity does, of course, buoy revenues. but because initial social security benefits are influenced heavily by economywide wages, faster productivity growth, with a lag, also raises benefits under current law. moreover, because the long - range budget assumptions already make reasonable allowance for future productivity growth, one cannot rule out the possibility that productivity growth will fall short of projected future averages. in fiscal year 2004, federal outlays for social security, medicare, and medicaid totaled about 8 percent of gdp. the long - run projections from the office of management and budget suggest that the share will rise to 9 - 1 / 2 percent by 2015 and will be in the neighborhood of 13 percent by 2030. so long as health - care costs continue to grow faster than the economy as a whole, the additional resources needed for such programs will exert pressure on the federal budget that seems increasingly likely to make current fiscal policy unsustainable. the likelihood of escalating unified budget deficits is of especially great concern because they would drain an inexorably growing volume of real resources away from private capital formation over time and cast an ever - larger shadow over the growth of living standards. the broad contours of the challenges ahead are clear. but considerable uncertainty remains about the precise dimensions of the problem and about the extent to which future resources will fall short of our current statutory obligations to the coming generations of retirees. we already know a good deal about the size of the adult population in, say, 2030. almost all have already been born. thus, forecasting the number of social security and medicare beneficiaries is fairly straightforward. so too is projecting future social security benefits, which are tied to the wage histories of retirees. however, the uncertainty about future medical spending is daunting. we know very little about how rapidly medical technology will continue to advance and how those innovations will translate into future spending. consequently, the range of possible outcomes for spending per medicare beneficiary expands dramatically as we move into the next decade and beyond

even more meaningful if it were coupled with the adoption of a set of provisions for dealing with unanticipated budgetary outcomes over time. as you are well aware, budget outcomes in the past have deviated from projections - in some cases, significantly - and they will continue to do so. accordingly, a well - designed set of mechanisms that facilitate midcourse corrections would ease the task of bringing the budget back into line when it goes off track. in particular, you might want to require that existing programs be assessed regularly to verify that they continue to meet their stated purposes and cost projections. measures that automatically take effect when costs for a particular spending program or tax provision exceed a specified threshold may prove useful as well. the original design of the budget enforcement act could also be enhanced by addressing how the strictures might evolve if and when reasonable fiscal balance came into view. i do not mean to suggest that the nation's budget problems will be solved simply by adopting a new set of rules. the fundamental fiscal issue is the need to make difficult choices among budget priorities, and this need is becoming ever more pressing in light of the unprecedented number of individuals approaching retirement age. for example, future congresses and presidents will, over time, have to weigh the benefits of continued access, on current terms, to advances in medical technology against other spending priorities as well as against tax initiatives that foster increases in economic growth and the revenue base. because the baby boomers have not yet started to retire in force, we have been in a demographic lull. but this state of relative stability will soon end. in 2008 - just three years from now - the leading edge of the baby - boom generation will reach 62, the earliest age at which social security retirement benefits can be drawn and the age at which about half of those eligible to claim benefits have been doing so in recent years. just three years after that, in 2011, the oldest baby boomers will reach 65 and will thus be eligible for medicare. currently, 3 - 1 / 4 workers contribute to the social security system for each beneficiary. under the intermediate assumptions of the program's trustees, the number of beneficiaries will have roughly doubled by 2030, and the ratio of covered workers to beneficiaries will be down to about 2. the pressures on the budget from this dramatic demographic change will be exacerbated by those stemming from the anticipated steep upward trend in spending per medicare beneficiary. the combination