The Age Wave Could Bust Government Budgets, Rating Agency Says

The ratings agency Standard & Poor's has joined the chorus of concern about how the looming age wave will affect governments that must pay for escalating entitlement programs, The Wall Street Journal reports. "Government debts will surge in coming decades if action isn't taken quickly to cut the cost of paying pensions and providing health care to aging populations," the report found. "If governments don't cut age-related spending, S&P said, the size of the state relative to the economy will jump and credit ratings will fall, with developed economies suffering the largest downgrades. However, many European nations that have generous state pension systems and will have older populations would be in a much worse position. In the U.S., government debt would rise to 415% of GDP, while Japan's debt would rise to 753.1% of GDP, by far the highest figure for the 49 economies covered" (Hannon, 10/8).

The Financial Times: "The report, 'Global Ageing 2010: An Irreversible Truth', builds on similar studies conducted by S&P in 2006 and 2007. However, it notes that given the effect that failing to rein in spending on pensions and healthcare for the elderly will have on national finances, the more likely outcome is that governments will take steps to control costs" (Cohen, 10/7).