Oct. 15 (Bloomberg) -- The first Baby Boomer applied today for Social Security benefits, a milestone marking the approaching retirement of a generation of Americans whose eligibility for government payouts threatens to overwhelm the federal budget.

Kathleen Casey-Kirschling, a retired Maryland teacher who was born at 12:00:01 a.m. on Jan. 1, 1946, applied this afternoon for early retirement benefits. She'll become eligible to receive them in January when she turns 62.

``This is the first drop of rain in the flood,'' said Bob Bixby, head of the Concord Coalition, a Washington-based advocacy group that promotes balanced federal budgets. ``It's the beginning of an era. It's symbolic but it reminds us that we're not doing anything to prepare for this.''

The demands on retirement programs by the estimated 80 million Americans born between 1946 and 1964 combined with spiraling health-care costs will eventually overwhelm the federal budget unless lawmakers change government policies, Bixby said.

The nonpartisan Congressional Budget Office said in an August report that Social Security spending is likely to grow by 50 percent over the next 40 years. Medicare and Medicaid costs will increase to about 20 percent of the nation's economy during that time, the agency said, an amount that would swallow all the government's resources if tax revenue remains at historic levels. Baby Boomers become eligible for Medicare in 2011.

Bush's Proposal

President George W. Bush's proposal to alter the Social Security system by diverting a portion of payroll taxes to individual accounts was rejected in 2005 by Democrats and some Republicans in Congress.

Treasury Secretary Henry Paulson last month sought to revive interest in overhauling Social Security by issuing a report that said the system faces a shortfall in the ``indefinite future'' of $13.6 trillion. The program can be made solvent only by increasing taxes, reducing benefits or some combination of the two, the report said.

Social Security Administration Commissioner Michael Astrue said it is ``highly likely'' that policymakers will amend Social Security sometime between 2009 and 2011, when the next president has a ``mandate'' to pursue far-reaching policy changes.

``It's just a question of timing,'' Astrue said.

More Agreement

There is more agreement among Democrats and Republicans on how to solve the issue than may be apparent from their public statements, he said.

``When you're behind closed doors, and you're not posturing for the public or for the media,'' Astrue said, ``they say almost word for word the same thing.''

Casey-Kirschling also expressed confidence that the issue will be addressed, saying her generation will force lawmakers to act because ``they're going to want to take care of their children and grandchildren.''

Still, she expressed reluctance to delay benefits to help shore up the system's finances.

``Why should Boomers who have earned it and may need that -- and they may need that -- extra support in their retirement for medicine, for food, for whatever -- why should they wait?''

Casey-Kirschling's comments reflect the difficult choices that will face lawmakers when they take up the issue, Astrue said.

``Nobody likes any of the options,'' he said. ``Nobody wants to pay higher taxes. Nobody wants to cut benefits. So there's no easy answer one way or another, and so you can't expect anyone to say, `Oh yeah, that's terrific idea.' There is no terrific idea. The question ultimately will be: `What's the least painful idea?''

To contact the reporter on this story: Brian Faler in Washington at bfaler@bloomberg.net.

Last Updated: October 15, 2007 16:41 EDT