Responding to the sticker shock of the Congressional Budget Office’s projected record $1.2 trillion budget deficit, President-elect Barack Obama said:
We will — we are working currently on our budget plans. We are beginning consultations with members of Congress around how we expect to approach the deficit. We expect that discussion around entitlements will be a part, a central part, of those plans. And I would expect that by February, in line with the announcement of at least a rough budget outline, that we will have more to say about how we’re going to approach entitlement spending, how we’re going to approach eliminating waste in government, one of Nancy’s tasks.
So we will have some very specific outlines in terms of how it’s going to be done.
The Heritage Foundation can’t wait to see these ‘very specific outlines’. We sincerely hope Obama is being honest when he says, “I’m not out to increase the size of the government long- term.” A key test will be seeing if he keeps his promise to the American people to enact a net cut on government spending. Addressing the long term financial threat that Social Security, Medicare and Medicaid pose must be part of fulfilling this promise.
This spring, 16 federal budget experts from seven think tanks (including American Enterprise Institute, Brookings Institution, Concord Coalition, The Heritage Foundation, New America Foundation, Progressive Policy Institute and Urban Institute) issued a paper concluding that automatic, escalating benefits from Social Security, Medicare and Medicaid will cause “unsustainable deficits in the federal budget” that “threaten the health and vigor of the American economy.” Their report concludes: “Our group has come together, from diverse points on the political spectrum, to sound an alarm: if America is to remain strong, such evasions must end.”
Moving to “specific” steps, the authors propose:
- 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 defense.
- 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 amounts.
- The long-run costs of these three programs should be made visible in the budget at all times and considered when decisions are made.
These are just some necessary first steps to bringing entitlement spending under control. If we really want to address our long term financial problems, we will also have to rethink social insurance entirely.