WASHINGTON -- The bad news is that after the turn of the century, declining federal deficits will reverse course and shoot back up. And by 2010, when the baby boomers start retiring, the Social Security system will come under increasing strain.
The good news is, there's time to solve these large problems in ways that won't deal staggering blows to the economy.
President Clinton's Bipartisan Commission on Entitlements and Tax Reform held its first public hearing yesterday on just how to perform that politically difficult task.
No one offered any solutions, which are to be presented to the president by early December. But those present did agree on the size of the problem. And it's scary.
Mr. Clinton's five-year budget plan is expected to slash deficits below $200 billion a year through 1998. After that, if current laws remain the same, annual deficits will shoot skyward again, soaring as high as $385 billion by 2004.
That will shrink the pool of money available to fuel economic growth, bump up interest rates, undercut improvements in U.S. productivity and make U.S. products less competitive in world markets.
In short, it'll be a return to the bad old of days of stagflation and high unemployment -- and lead to lower living standards for new generations of Americans.
It will also choke the flow of the federal revenues needed to feed the maw of the mushrooming entitlements monster -- and thus further aggravate efforts to curb deficits and promote economic growth.
"The longer we wait to do something about it, the more draconian the remedies will have to be," Federal Reserve Chairman Alan Greenspan told the commission.
Without spelling out precisely how to cope with it, he said, "there is no alternative to scaling back growth in federal spending."
Under questioning, he also acknowledged that some big tax breaks might also have to be trimmed or eliminated. Most of those breaks benefit middle-income families and corporations.
Mr. Greenspan noted that the most explosive growth in federal spending is occurring in entitlement programs that are expanding much faster than the economy as a whole.
The Social Security system also will come under mounting fiscal pressure over the ensuing 20 years as the crest of the boomer generation reaches the graying age.
Any talk of tinkering with Medicare and Social Security benefits energizes the powerful senior lobbies.