expired major provisions of the budget enforcement act of 1990, and the act ’ s later modifications and extensions, provided a set of rules that helped translate a general commitment to fiscal discipline into the actions necessary to achieve it. remember that in just five years the first cohort of the baby - boom generation will reach 62, the earliest age at which social security retirement benefits may be claimed and the age at which about half of the prospective beneficiaries choose to retire. in about 2008, the proportion of the working - age population that will retire is projected to begin escalating. almost surely, the social security and medicare benefits that are promised under current law to future retirees cannot be financed with existing tax rates. budget simulations by a broad range of analysts ( including those at the office of management and budget and the congressional budget office ) suggest that the rapid increase in the unified budget deficits that would occur under current law as the baby - boom generation retires could set in motion an unsustainable dynamic in which large deficits result in growing interest payments that augment deficits in future years. such a development could have notable, destabilizing effects on the economy. increased productivity growth, while helpful, does not alter that conclusion, because when productivity growth increases, so do social security obligations and, indirectly, medicare benefits as well. productivity would have to grow at a rate far in excess of the historical average to fully resolve the long - term financing problems of social security and medicare. tax rate increases of sufficient dimension to deal with our looming fiscal problems arguably pose significant risks to economic growth and the revenue base. the exact magnitude of such risks are very difficult to estimate, but they are of enough concern, in my judgment, to warrant aiming to close the fiscal gap primarily, if not wholly, from outlay restraint. at the same time, the dimension of the challenge, especially in later years, cannot be underestimated. the one certainty is that the resolution of this situation will require difficult choices, and the future performance of the economy will depend on those choices. history has shown that, when faced with large challenges, elected officials have risen to the occasion. in particular, looking back over the past twenty years or so, it has been evident that the prospect of large deficits generally has led to actions to narrow them. i trust that the recent deterioration in the budget outlook and the fast - approaching retirement of the baby - boom generation will be met with similar determination and effectiveness.

##flection points in asset quality do not signal a turning point in the economic cycle. applying this experience to the current situation, there is no reason to believe that a modest near - term cyclical increase in problem assets or charge - offs portends ill for the continuing economic recovery. the two perspectives on cycles in the financial services business - the performance of financial services firms in this phase of the business cycle, and what asset quality indicators tell us about the state of the economy - together suggest that growth in economic activity will continue to support favorable conditions for financial institutions for at least the near term. banks and credit unions today face important challenges, such as finding a way to replace the revenue surge that came with the mortgage origination boom of 2002 - 03 and generating continued earnings growth without the support that has been provided recently by lower provisions and cyclical improvements in asset quality. as in the past, without strong risk management and credit discipline, the prolonged period of favorable conditions could breed behavior by lenders that will contribute to a more severe credit cycle the next time around. in closing, let me again commend you for taking the time to participate in cuna's government affairs conference. your participation is valuable, and i thank you for inviting me to join you today. exhibit