Talking Points, May 21 - June 3, 2009

Talking Points
May 21 - June 3, 2009

Recession drains Social Security (New York Times, 5/12/2009)
Alarm sounded on Social Security, Report also warns of Medicare collapse (Washington Post, 5/13/2009)
Report: Medicare fund is 8 years from insolvency (Los Angeles Times, 5/13/2009)

Rising unemployment is slowing the flow of payroll taxes into the Social Security and Medicare trust funds, but the biggest challenge for these programs is the retirement in the next decades of the baby boom generation. The budget pressures generated by the aging of the American population are immense. But challenges imposed by the demographic transition China confronts may be still greater. China is the first country to “go gray before it goes green,” that is, China is the first country to have a rapidly aging population before it becomes affluent.

In 2005, the median age of the Chinese population was 33. In the U.S. it was 36. Roughly 8% of China’s 1.3 billion people were over age 65, while about 12% of America’s 302 million were at least 65. By 2030, it is projected that China’s median age will reach 41, passing America’s 39. Because of the ongoing effect in China of the one child family policy and lengthening life spans, the share of China’s population over age 65 will have doubled to 16%. In the U.S. it will have risen, but not as dramatically, to 19%. The charts below show these patterns (click here to see larger versions at our website).

After three decades of remarkable growth, China’s economy is now the world’s third largest. Few countries have lifted living standards as widely or significantly as China has managed over the past generation. But on a per capita basis, China is much poorer than the U.S. The World Bank put China’s per capita gross national income in 2007 at $5,420. The figure for the U.S. was roughly 8 times higher at $45,840. (These calculations use the purchasing power parity method, the gap using the Atlas method is much greater: $2,370/$46,040.) China’s population is aging more rapidly than America’s and it will have to care for its elderly with much fewer resources than exist in the United States.

Chinese are hyperconscious of this and they prepare for old age by saving at a much higher rate than do Americans. Chinese leaders want people to spend more, but most people, especially those in rural areas, are reluctant to do so because existing pension and health insurance systems are inadequate and in some places non-existent. A massive health care system reform has just been launched and efforts are also underway to improve spotty pension coverage. Such government pledges have been made before and, for the moment, most Chinese are weaving their own safety nets.

USC U.S.-China Institute scholars in economics, gerontology, social work, public policy, and architecture are working with Chinese colleagues on the challenges posed by this demographic transition. And USC students are traveling to China to immerse themselves in these problems as well. For several years, students in social work have studied and carried out field work in Beijing. Last summer, architecture students worked on designs for a retirement community in Hainan province. Additional information about much of this research and many of these training programs is available in the news and china@usc sections of our website.

USC’s Nicholas Cull, author of the definitive study of the Cold War role of the U.S. Information Agency, recently testified before the U.S.-China Economic and Security Review Commission on the scope and impact of China’s recent public diplomacy efforts. Click here to read his testimony. Public diplomacy efforts don’t come any bigger than last summer’s Beijing Olympics. Click here to watch presentations from our conference assessing the domestic and international impact of the Games.

Finally, we note President Barack Obama’s appointment of Utah governor Jon Huntsman to be America’s ambassador to China. Huntsman, comes from one of America’s richest families. He earned a degree in business from the University of Pennsylvania, learned Chinese, and served as a Morman missionary in Taiwan. He was appointed by President George H.W. Bush to be ambassador to Singapore when he was just 32. Huntsman also served in the office of the U.S. Trade Representative. Huntsman, a Republican, was first elected governor in 2004. He received 77% of the vote in winning reelection last fall. He should be readily confirmed by the Senate. Huntsman will succeed Clark “Sandy” Randt as ambassor. Randt spoke at the U.S.-China Institute last spring. China is expected to name a new ambassador to the U.S. soon.

Thanks, as always, for sharing Talking Points with others.

Best wishes,
The USC U.S.-China Institute
Support the institute at: http://www.usc.edu/giving/.

USC

Exhibitions