Top economist Kent Smetters thinks the U.S. is on a 20‑year clock—and the tilt of the federal budget toward baby boomers is at the center of the story.
In a new analysis and in an interview with Fortune, the Penn Wharton Budget Model (PWBM) faculty director sketches an outer limit for U.S. federal debt and a political economy that heavily favors older Americans. His bluntest line may also be his simplest: “We do spend about 10x more per older person than we do per younger person. In total, we spend about 6x in aggregate on older people than younger people.”
Smetters added he works a lot on understanding the political economy of the U.S. and there’s just “a lot of incentive for every generation to try to pass a big bill to the next generation. The question is, how long can they get away with that?”
“The assumption is that the financial markets are being set in a way where they keep believing that Congress will eventually get its act together up until the point where it’s mathematically impossible for that to be true anymore,” Smetters said. “Sometimes people ask me, ‘You know, when could financial markets unravel?’ And the answer is, well, that could happen today, it could happen tomorrow, it could happen whenever they stop believing that Congress will eventually get its act together.”
Those dates line up uncomfortably well with the gradual fading of the baby boomer generation from positions of economic and political power. Asked whether it is a coincidence his 20‑year horizon roughly overlaps with the last years of baby boomer dominance in Congress and the C‑suite, Smetters was cautious but open to the framing.
He connected the budget choices to a broader psychology of ownership. In the Social Security and retirement space, he says, Americans routinely treat government‑funded benefits as if they were purely private property—even when taxpayers have put up most of the cash.
Once the trust fund is exhausted, he estimated, the program can pay only about 83% of scheduled benefits, and that fraction erodes further over time. But he doubts that deadline will force timely action.
In the current political debate, that looming Social Security shortfall has collided with a parade of more exotic ideas, from Trump Accounts for newborns to proposals for some kind of “AI dividend” that would redirect tech profits back to the public.
Smetters was skeptical.
Behind the scenes, Smetters has pushed a less flashy but more radical idea: Shut down the costly tax deduction for 401(k) and 403(b) contributions, which he estimates cost roughly $1.3 trillion to $1.4 trillion in forgone revenue over 10 years in earlier work, and reroute that money into non‑contributory retirement accounts for low‑income workers linked to the earned income tax credit. Crucially, he said, people would not be allowed to deposit their own money in those accounts at all, precisely to avoid the political pressure for early withdrawals that has undermined past efforts to nudge workers into saving more.
Smetters’ version is if the government funds 90% of your retirement account and you put in 10%, you still feel entitled to “the entire account” because, as he put it, “that’s all mine. It’s not yours.”
If the numbers and the politics sound abstract, Smetters insisted the consequences are not. When countries bump up against their fiscal limits, he said, the damage goes far beyond the bond market.
“What people don’t get is that when you have these financial collapses, it’s not just finance,” Smetters said. The problem the U.K. faces now, he said, is that they already have very high taxes so their “fiscal space” is quite limited in terms of what they can do now.
“That’s the problem with the baby boomer generation,” he added. “It’s going to be really hard to change benefits over time.” Sometimes when you have giant fiscal problems that keep going unsolved, year after year, “they can lead to really incredible changes in society that can be very disruptive, beyond just economics.”
