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Factsheet #56 on Budget and Spending

March 26, 2010

Heading for a 10,000-Foot Cliff: Why Budget Process Reform is Needed Now

Skyrockets and Auto Pilots

  •  Hungry Entitlements: Entitlement spending on Social Security, Medicare, and Medicaid will skyrocket, driven by rising health care costs and an aging population. Entitlements will devour all federal revenue by 2052 and crowd out all other spending--including constitutionally required spending, such as defense.
  • It's Not My Fault: Two-thirds of federal spending is mandatory. It grows on autopilot and is not subject to annual review. This process shields lawmakers from ever debating how to get that spending under control.
  • Move to the Front of the Line: Entitlements--Social Security, Medicare, and Medicaid--are the bulk of mandatory spending and are automatically funded first, before any other programs.
  • Entitlements Will Consume All Tax Revenues by 2052Where's the Beef? Washington has promised a total of $63 trillion more in entitlements benefits and other obligations than it can afford, yet that figure is mysteriously missing from thousands of pages in the budget.
  • Simply Incapable: Congress has shown that under the current legislative process, it is incapable of solving the problem.

Back to Reality: Reform That Will Work

  • Transparency, Anyone? The $63 trillion of unfunded obligations--which is equivalent to $200,000 of debt per person--should be disclosed at the outset in the annual budget so that Congress is forced to confront this debt.
  • Let's Get Real: Social Security, Medicare, and Medicaid should be taken off autopilot and put on long-term, 30-year budgets, reviewed every five years. This would prevent spending from exploding and require regular review of entitlement spending within the context of other budgetary priorities.
  • Put a Cap on It: All federal spending should be capped to force Congress to make trade-offs between all programs, and any budget resolution or spending bill that would exceed caps should require a two-thirds supermajority vote. Families and businesses have to live within their budgeted means--so should Congress.
  • Honestly ... : The cost of policy changes that would increase unfunded obligations should be estimated over the long term--not a 5-year or 10-year window, as is currently the case--and the increase in future promises should be subject to an up-or-down vote. For example, when Medicare Part D was passed in 2004, Congress evaluated only the five-year cost of $409 billion, but the long-term, present-value cost was more than $8 trillion at the time and exceeds $9 trillion today.
  • Bank It First: Congress often "pays for" programs by offsetting the cost of a new program with future promised "savings" that rarely if ever materialize. Instead, savings should have to be banked and locked away before they can be considered savings.

For more information, please visit: http://www.heritage.org/Initiatives/Entitlements

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