Taking Back Our Fiscal Future (PDF)
This paper put together by top budget and policy experts
affiliated with several major Washington policy research
organizations, is a significant step towards tackling the growing
and chromic problem of entitlement spending. As the paper
"Despite our diverse philosophies and political leanings, we
have found solid common ground. We agree that:
- Unsustainable deficits in the federal budget threaten the
health and vigor of the American economy.
- The first step toward restoring budget responsibility is to
reform the budget decision process so that Social Security,
Medicare, and Medicaid--the major drivers of escalating
deficits--are no longer on "auto-pilot."
The authors agree on several steps:
- Congress should enact a real long-term budget for Medicare,
Medicaid and Social Security that would limit their growth, take
them off auto-pilot, and curb their current ability in the budget
process to pre-empt funds from other types of programs, such as
- Congress and the President should enact long-term budgets
for Social Security, Medicare, and Medicaid and be required to
review them every five years. The rules for the five-year review
must include a trigger or action-forcing device that automatically
make changes when projected spending exceeds budgeted
- The long-run costs of these three programs should be made
visible in the budget at all times and considered when decisions
The authors agree that certain myths are used as excuses for not
tackling the entitlement problem. Among the biggest is that we can
simply fix the problem by "rolling back the Bush tax cuts" and
raising taxes to pay for entitlement promises. The authors agree
that raising taxes to the European-style levels needed for that
would "cripple the economy."
The paper finally summarizes the "options" often put forward for
restructuring the long -term budget for Social Security, Medicare
and Medicaid. These include privatization approaches, raising
premiums and deductibles, and even raising payroll taxes. But the
authors make clear that these are the options that should be
debated, and that "members of our group disagree about the best way
forward, and some would object in principle to some of the
options." The purpose of the budget process changes is not to
decide on a reform, "but rather to set in motion a process that
will yield an outcome that ultimately only the people and their
representatives can craft."
For papers on the entitlement problem authored by the Heritage
participants in this group, see:
Butler, Stuart M. "Solutions to Our Long-Term Fiscal
Challenges." Testimony before the United States Senate Budget
Committee. January 31, 2007. http://www.heritage.org/Research/Budget/tst013107a.cfm.
Butler, Stuart and Alison Fraser. "Congress Should Reject New
Taxes and Curb Exploding Entitlements." Heritage Foundation Web
Memo, January 16, 2007. http://www.heritage.org/Research/Taxes/wm1313.cfm.
Butler, Stuart and Dan Mitchell. "What is Really Happening To
Government Revenues: Long-Term Forecasts Show Sharp Rise in Tax
Burden," Heritage Foundation Backgrounder, July 28, 2006. http://www.heritage.org/Research/Taxes/bg1957.cfm.
Butler, Stuart and Maya MacGuineas. "Rethinking Social
Insurance." The New America Foundation, February 19, 2008. http://www.heritage.org/Research/Budget/wp021908.cfm.
Fraser, Alison. "A Better Measure of Long-Term Spending: FASAB
Proposes Changes in Accounting for Social Security, Medicare,"
Heritage Foundation Web Memo, October 31, 2006. http://www.heritage.org/Research/Budget/wm1242.cfm.
Fraser, Alison. "Federal Budget Should Include Long Term
Obligations From Entitlement Programs." Heritage Foundation
Executive Memorandum, June 22, 2006. http://www.heritage.org/Research/Budget/em1004.cfm.
Taking Back Our Fiscal Future
Federal Budget Deficit as a Percentage of GDP, 1962-2082
Federal Spending as a Percentage of GDP Under Current Law,