If the upward march of social transfers as a share of GDP has stalled since 1980, might it ever be reversed? What might cause a future reversal?

There is indeed reason to believe that the rise of public generosity will be reversed in at least one dimension and that the reversal has already begun. The direction of likely retreat points toward less public support for the average elderly person. The main reason for that partial retreat is that people now live too long for the current system of pensions to be sustained, though policy history also determines which countries face the greatest budgetary problems. Specifically, I shall argue here that:

1. The aging of national populations poses a great threat to the current rates of support for the pensioners (retirees). Other things equal, this effect is especially strong in countries that are aging faster.

2. The budgetary pressure is especially intense in countries that moved in the wrong direction between 1960 and 1990, by encouraging early retirement.

3. The combination of these demographic and political forces jeopardized Italy's pension system the most and also strongly threatens pensions in Austria, Belgium, Finland, France, Germany, Greece, Netherlands, and Spain. Some of these have already cut back pension generosity. Other countries faced less danger of a crisis, even though some of them have extremely old populations.

4. The necessary adjustments, which already began late in the twentieth century, will be paid for mainly by the pensioners themselves, in the form of reduced support per pensioner. Other kinds of social transfers will probably not be cut, and taxpayers will go on paying the same, or slightly rising, shares of national income for social programs.

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