Economic Report of the President

Henry J. Aaron
Henry J. Aaron The Bruce and Virginia MacLaury Chair, Senior Fellow Emeritus - Economic Studies

February 26, 2003

The Economic Report of the President and the president’s budget comprise the major economic
statements of the Administration. They cannot be evaluated independently of one another. In fact, one of
the foremost purposes of the Economic Report is to provide analytical arguments to buttress the
president’s proposals. This Economic Report is no exception. Nor is it exceptional in its inclusion of a
welter of useful exposition, carefully reasoned and clearly written. The Council members and staff who
prepared this document are, as usual, skilled professionals.

The quality of the Economic Report, however, cannot be evaluated apart from the policies it
advances. If those policies are flawed, no amount of analysis can spare the Economic Report from harsh
judgment. To be sure, this Economic Report deals with many important matters. It contains sophisticated
reviews of tax policy, regulation, and international trade. But the central challenge facing budget policy
in the United States is rather differenthow to prepare the U.S. public finances for the fiscal
challenge posed by the retirement of the baby boom generation.

The first baby-boomers will become eligible for Social Security in just five years and for Medicare
in eight. These dates usher in three decades of sharply increasing demands on the federal government to
pay for pension and health benefits for the elderly, disabled, and survivors.

In brief, the federal budget will come under increasing stresssooner rather than later. Action is
required to prepare the nation to handle this stressnow, and not at some indefinite future time. The fiscal
challenge of the baby boom generation’s retirement is not a distant problem that can be left to our children.
It commences well within the ten-year planning horizon that Congress has been using for budget planning.