Last in an Eight-Part Series
When looking at the federal spending
landscape, it's easy to get pessimistic. As we've shown over the
past several weeks, Washington's current spending and future
commitments will bankrupt our country unless we deal with
is no time for pessimism. The federal government can -- and must --
get spending under control, so it will. The answers are within
Medicare: The program's trustees project Medicare
spending will increase from 2.7 percent of GDP today to 9.3 percent
of GDP by 2050. But we can take simple steps now to restrain that
2003 Medicare Part D prescription drug benefit is projected to
account for one quarter of the new spending after 2020. It's not
too late to suspend the benefit before it takes effect.
we ought to extend the current drug card, which targets help to the
needy -- not seniors who already have drug coverage.
are certain to face a backlash next year when retirees realize Part
D was designed with a gaping coverage hole -- many seniors will
find themselves responsible for thousands of dollars in drug costs.
It would be better to suspend the program and fix it now than wait
for complaints and fix it under pressure.
to really control Medicare spending, lawmakers will have to
fundamentally change the program. It's time to design a new system
based on personal choice, market competition and light regulation.
Such a system should be a "defined contribution" system, not the
"defined benefit" system we have now.
the government would agree to contribute a certain amount to fund
each beneficiary's coverage. This would create a market for private
health plans that would compete for customers by offering
attractive benefit packages. It also would let seniors keep their
pre-retirement health care plan if they're happy with it or design
new coverage options tailored to their needs.
defined-contribution plan also would allow lawmakers to control
costs. Defined-benefit programs don't work because they're like a
blank check -- each new medical advance creates a new government
requirement. A defined-contribution plan would allow seniors to
enjoy those advances without sticking Uncle Sam with the big
Security: Over the next
75 years, taxpayers have promised to pay some $25 trillion more
than it can afford to pay to retirees through Social Security, an
amount nearly twice our current GDP. A long-term solution will
involve two changes: reducing the amount the government promises to
future retirees, and letting younger workers invest in their own
futures through personal retirement accounts (PRAs), allowing them
to do as well or better than the current system.
lawmakers will allow workers to invest a portion of their Social
Security taxes in PRAs, today's workers could create their own nest
eggs, which they would own and could even pass down to loved ones.
This reform would involve some up front costs, but it would ease
federal responsibilities for decades to come, just as a homeowner
who pays points up front saves on mortgage interest over the life
of the loan.
spending: It increased
by 8 percent in 2005 and is up 33 percent overall since 2001.
Washington now spends some $22,000 per household, the most it has
shelled out since World War II.
plenty of places to make cuts right now. For example:
Congressional Budget Office has published a "Budget Options" book
identifying $140 billion in potential cuts.
federal government spends $23 billion annually on silly special
interest projects such as grants to the Rock and Roll Hall of Fame
and efforts to combat teenage "goth" culture in Blue Springs,
Washington spends $60 billion annually on corporate welfare, versus
$43 billion on homeland security.
just for starters. If lawmakers are willing to read spending bills
carefully, they can cut spending by several hundred billion dollars
economist Herb Stein put it, "Things that can't go on, won't." The
country can't go on spending as it is, and it can't meet the
promises it is making to retirees. So it won't. Eventually,
overspending will reach a tipping point and the choices lawmakers
must then make will be very harsh.
wait? That's why I've used this series to outline the problems and
offer some workable solutions. The time to act is now -- before a
rapidly deteriorating budget picture forces us to make even more
Feulner is president of The Heritage Foundation
(heritage.org), a Washington-based public policy research
First Appeared in Investor's Business Daily
When looking at the federal spending landscape, it's easy to get pessimistic. As we've shown over the past several weeks, Washington's current spending and future commitments will bankrupt our country unless we deal with them.
Edwin J. Feulner, Ph.D.
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