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  • Morning Bell: Move Forward, Not Back, on Entitlement Reform

    Last week, after the Congressional Budget Office report showed that the pre-stimulus budget deficit would reach $1.2 trillion in FY 2009, President-elect Barack Obama reiterated his campaign promise to make Social Security and Medicare reform a “central part” of his efforts to control skyrocketing federal spending. Democrats on the Hill are already pushing back against any reform that would lower government spending, but Obama is correct. Spending is the problem. In the coming decades, the cost of Social Security, Medicare, and Medicaid will leap from 8.4 percent to 18.6 percent of gross domestic product (GDP)–an increase of 10.2 percent. Funding all of the prom­ised benefits with income taxes would require rais­ing the 35 percent income tax bracket to at least 77 percent and raising the 25 percent tax bracket to at least 55 percent. As Obama said at the October 30, 2007 Democratic presidential debate:

    We’ve got 78 million baby boomers who are going to be retiring over the next couple of decades. That means more retirees, fewer workers to support those retirees. It is common sense that we are going to have to do something about it. That is not a Republican talking point. And if we don’t deal with it now, it will get harder to deal with later.

    Under the current system, retirees will spend one-third of their adult lives in taxpayer-funded retirement while national security, education, health research, and antipoverty programs fight for the few remain­ing tax dollars and low taxes are threatened. To fix this problem Obama should:

    Disclose the government’s long-term obligations: Though Social Security and Medicare currently comprise about one-third of the entire federal budget, Congress is not required to pass an annual budget for either program. Rather, both operate on autopilot under formulas contained in their governing laws. Obama should push for two key changes in the budget process: 1) Ensure that the long-term costs of entitlement programs are built into the budget process and considered along with other priorities; 2) Any changes in entitlement programs should also be measured over the long term.

    Create a commission to submit recommendations to Congress for a vote: Senate Budget Committee Chairman Kent Conrad (D-ND) and ranking Republican Senator Judd Gregg (R-NH) have introduced legislation in the Senate, and Reps. Frank Wolf (R-VA) and Jim Cooper (D-TN) have introduced legislation in the House that would create a bipartisan commission intended to address the “unsustainable imbalance” between federal commitments and revenues while increasing national savings and making the budget process give greater emphasis to long-term fiscal issues. This commission would hold public hearings around the country to discuss the long-term fiscal problem, and its recommendations should receive “fast-track” consideration by Congress.

    Create incentives for savings: Obama has spoken positively of “automatic IRAs” for American employees not covered by employer-sponsored retirement plans. Auto-IRAs are a terrific way to increase savings and thus empower Americans to build their own retirement savings. Lowering tax rates on savings would also help Americans to build wealth.

    Do not increase taxes: During the presidential campaign, Obama floated the idea of reforming Social Security by assessing a payroll tax of 2 to 4 percentage points on those who earn over $250,000 annually. President Bill Clinton rejected this idea in the 1990s, and Obama should as well. America cannot tax its way out of this entitlement challenge. The problem is caused by surging spending levels, not declining revenues–in fact, taxes as a percentage of the economy are already projected to rise to record levels over the next few decades.

    Reform Social Security: Social Security spending is pro­jected to increase from its current 4.3 percent of GDP to 6.1 percent by 2050–an increase of 1.8 percent. Obama should: 1) raise the retirement age gradually until it reaches 70; 2) income-adjust benefits to target needy seniors more effectively; 3) align Social Security’s inflation adjustment with a more accurate price index than the consumer price index.

    Reform Medicare: Medicare costs are projected to more than triple from today’s 2.7 percent of GDP to 9.4 percent by 2050. Obama should: 1) reduce the massive Part Band Part D subsidies for upper-income families; 2) bring more choice and competition to health care by making Medicare a defined-contribution system.

    Reform Medicaid: Federal Medicaid spending is pro­jected to jump from 1.4 percent of GDP to 3.1 per­cent by 2050. Because Washington reimburses states for 57 percent of all costs, every dollar that a state spends on Medicaid guarantees an additional $1.33 grant from Washington. Converting Medicaid into a block grant to states would eliminate state incentives to overspend on Medicaid.

    One of the first bill’s Obama will sign after being inaugurated on January 20th will probably be a major expansion of Medicaid spending, adding a minimum of $33 billion in new federal spending over just the first four years. This will be a major step backwards on Obama’s promise to reign in entitlement spending. We sincerely hope he eventually changes course and tries fixing the entitlement problem instead of making it worse.

    Quick Hits:

    Posted in Ongoing Priorities [slideshow_deploy]

    25 Responses to Morning Bell: Move Forward, Not Back, on Entitlement Reform

    1. len, Alexandria,KY says:

      After the first Round of Nominations, it seems to me that the Messiah has hit some snags… Tresury noiminee who is in charge of the IRS not paying taxes??? Some example of inetitude isn't it?? New Atty Gen who releases Felon Rich and Terrorists affiliated to BIG Clinton Trailer Library Donors???? Now I feel really served well by the " Transparency Candidate"

      Lastly Clinton Shillery claims a return to her Husband's failed Diplomatic tactics with a 9/11 result kind of seems to be a return to IDIOCY of the Clintonista Policy of Appeasement and the Heck with REALITY!!!

      If that is Change.. God Help us all!!!

    2. Darrel Baird, Kent says:

      I still advocate a national sales tax . Throw out the repressive income tax . he only exemption would be unprepared food. There would be no tax on savings.If you save your money you create capital . If you spend your money you create a market . YOU decide. Not the government! ( Let's see now. You buy a savings bond ,earn 2% intrest while inflation runs 4% to 6%, pay 15% to 25% income tax on the gain ,THEN GET A TONGUE LASHING FROM CONGRESS FOR NOT SAVING MONEY!)

      Of course you COULD just make an honest mistake and not pay your taxes. What the heck ,YOU might get a job with the department of finance !!!

    3. Ozzy6900 says:

      Wait a minute! Weren't the Dems & Libs up in arms when President Bush wanted to reform Social Security? I believe the statement was to "Leave it alone!".

      We all know that Social Security needs to be fixed and one of the ways to fix it is to stop letting Government Officials "dip" into it and leave IOU's. I also am a little leery of the Democrats after reading that they were interested in a professor's idea which involved taking our 401K's and pooling everything.

    4. J. Ruffino, New York says:

      What is all this media expression of the title Czar. The Russian word for Cesare is Czar. Is our culture and political leaning going from the current push for western europe type socialism, a failure, to a russian type of socialism which is dictatorship.

    5. DAVID BERKLAND/sharo says:

      great article on entitilements

      but if we get national health care in the european model

      triage and euthanasia can be used to limit the niumber and cost of the elderly

      it is plausible to see some time limit for retired people to be euthanised and the proerty confiscated to allow the welfare calss to live a better life

    6. Ireland says:

      Were any of these appointees vetted? The left complained that Sarah Palin wasn't vetted properly, but did Obama's trans team check these people's background?

    7. Kent, Virginia says:

      I began voting in 1966. Heritage Foundation has a wonderful video of an early Ronald Reagan speech endorsing '66 GOP candidate Barry Goldwater. I recommend watching it. In his speech Reagan talks of the issues of the day–Federal spending, the growth of Government bureaucracy and Social Security are some of the major topics. I have been hearing candidates for Federal office talk about 'fixing' the same things for 42 years and those same programs are now twenty times worse than they were back in '66.

      In 42 years we have not managed to elect enough Congressional Representatives with the backbone and resolve and love of country to take on the big challenges and make tough decisions for the good of ALL the people.

      Now; with our financial resources strained to the maximum and our national debt plummeting past 1.2 trillion before our new socialist President takes office; with a top heavy Federal bureaucracy this Chosen One has vowed to enlarge by 600,000; with a Congress now dominated by the same Liberal Fascists who got us into the worst financial morass since the Great Depression; NOW we are told our government will address these problems that have been festering for more than 40 years.

      God help us all.

    8. Kent, Virginia says:

      Correction. The Presidential election I referred to was in 1964, not '66, so Federal Candidates have been talking about the same issues for more than 44 years. The fact remains, the problems we face and the Marxist-lite governing policies America will be subjected to for the next four years should send every believer to their knees. Every concerned voter should keep a list of the phone numbers of their elected representatives and continue to express their opinion on National issues.

    9. bill schul Tampa,FL says:

      The qualifications for Medicare and Medicad are to liberal which allowed half the world's population to receive medicare and medicad benefits.The qualifications for a person to receive said benefits should be at least an American Citizen and have

      paid into SSI for 10 years.

    10. Hozro1, Oregon says:

      Don't mess with the Social Secuity and Medicare! It is dishonest and disloyal and immoral to change a contract on one side only!

      Reform the Welfare system, education, or any other entitlement program, but never break a promise to you elders!

      Hozro

    11. Mike, Hickory, NC says:

      Thanks to their willing accomplices in academia, the media, and Hollywood, the Leftists/government elitists have us "ready for stampeding" into their Socialism, so just expect more of their "Progressive" advance (to the rear, and hope We the People finally "get up off our rusty-dusty" to at least begin to stop them in the only places we really could…at the ballot box in 2010 and 2012, and in the Courts after that.

    12. Indianapolis says:

      The state bailouts need to be stopped at all costs, that solution can not be come an accepted norm.

      States need to be returned to being a responsible portion of our government system and they need to demand more of their powers be returned to them. That power balance can only be shifted if the states are financially solvent and not dependent on the Federal Government. (A federal government that steals money just to hand it out to the states.)

    13. mike hutchings texas says:

      AT SOME POINT THEY WILL HAVE TO CALL A HALT TO SAVE THE NON PROFITS WHICH CANT EXIST WITHOUT PROFITS IN AN IRONIC TWIST OR KEEP GETTING UP IN THE MIDDLE OF THE NIGHT FROM UNDER THE WARM COVERS AND FIND NO WOOD TO THROW IN THE STOVE.THEN HAVE TO BREAK UP THE FURNITURE OR IT COULD BE THIS HOUSE WE LIVE IN WILL FALL INTO SUCH BAD REPAIR THE STOVE WILL FALL THROUGH THE FLOOR. THAT ACTUALLY HAPPENED TO MY GRANDPARENTS WHEN THEY WERE SHARE CROPPERS IN THE 1930S. THE FARMER OWNED THE HOUSE AND THEY WERE REDUCED TO PENURY IF THEY WERE WORKING SHARES IN THE FIRST PLACE AFTER THEY LOST THIER LAND.IS IT POSSIBLE ON A LARGER SCALE THAT WE WILL NOT OWN OUR LABOR AND BEYOND THAT BE CRAMMED INTO APARTMENTS AND TOLD THATS THE AMERICAN DREAM AFTER WE ARE TAXED OUT OF OUR HOMES TO LIVE IN SECOND RATE SOCIALIST PARADISE.

    14. laura brown young ha says:

      ALL I REALLY WANT TO KNOW—IS HE QUALIFIED TO BE PRESIDENT?? SHOULDNT THAT BE OUR FIRST THING ON THE LIST?? WAS HE BORN IN KENYA AS HIS GRANDMOTHER SAID OR CAN HE PROVE OTHERWISE??

    15. LVKen7@Gmail.com - says:

      To "fix" Soc Sec and Medicare

      they should remove the CAP on what people pay

      EVERYONE SHOULD PAY INTO SOC SEC AND MEDICARE

      ON EVERY CENT THEY EARN.

      The Rich do NOT pay their share.

      Start Medicare AT BIRTH FOR ALL PEOPLE.

      To -Darrel Baird, Kent OH writes:

      "I still advocate a national sales tax ."

      KJ = GOOD FOR YOU.

      I agree

      that way ALL TAXES ARE PAID WHEN A PURCHASE IS MADE.

      NOT that makes sense.

      ===

      January 14, 2009 Ozzy6900 writes:

      "Wait a minute! Weren’t the Dems & Libs

      up in arms when President Bush wanted to

      reform Social Security?

      I believe the statement was to “Leave it alone!”. "

      KJ =But YOU left out the part about

      the Stock Market Crash that is going on.

      HOW could you posibble believe THAT was a Good idea

      considering the depression we are in?

      ==

      To -January 14, 2009 Kent, Virginia writes about Socialism.

      KJ =BuSh's war in Iraq

      consumed so much of the Govt time and Energy

      they didn't even listen to OTHER PROBLEMS

      Now the USA is a Socialistic country

      THANKS TO BuSh.

      The HF should be writting about

      BuSh the Father of USA Socialism.

      Think they will?

    16. Linda, Kansas City, says:

      We could save billions of $ by reducing foreign aid, except to those in dire need, and then only if we can be assured it will reach the people, not the thugs that steal our goodwill. Also, continuing to give SS benefits to illegals is a waste of money that could help bolster the system and help alleviate the debt.

    17. art english says:

      It seems to me that with all our govt. gives to everyone else, every stupid, silly third world idiot that is just waiting in line for the next chance to fire his slingshot in hopes US will retaliate and demolish their tents and then go back in with millions of dollars to rebuild their hopeless lives. Or better still, in their clouded, hungover wisdom give billions of $ to the very same SOB's that just picked everyones pocket. If they've got that kind of money to blow then why shouldn't we expect them to make good on their promise to pay us back the money that is rightfully ours. After all we did pay the money in! Aw yes dream on fool.

    18. Dorothy Morgan, Okla says:

      Idea? We didn't appreciate the new drug bill forced upon Medicare and it's recipients. The payoff to drug and healthcare companies was felonious, the premiums to the recipients are far too expensive. And the donut hole is pitiful!

      We never voted the drug and healthcare corporations to be our leaders and run our country. Kick the bums out of Medicare; its bad enough that they are telling my doctors how to run their business now. We are now the 38th country in the world in our healthcare; I got use to being Number 1 and need to see it's return….we all do. Save billions of dollars in the process…and let us return to picking our own physicians. The middlemen hired by insurance corporations are costing the system way too much money. Please develop an opinion on this; better system, better results, saving billions.

      How did we get so far off track??? Lobbyists.

    19. NEAL RASMUSSEN says:

      ONE THING I HAVE NOT SEEN MENTIONED ABOUT THE OLD HIGH TAX RATES IS THAT THERE WERE MANY TAX DODGES THAT WERE AVAILABLE AND WERE ELIMINATED AS A JUSTIFICATION FOR THE LOWER RATES.ARE THE DEDUCTIONS COMMING BACK TOO?

    20. ella quinn kinsto says:

      Bush did not make us start to be a socialist country. That is the far left,and the obama adimistration.Bush needs some respect for keeping our country safe.He could never clean up all the mess bill clinton started.Listen to sean hannity on fox news.We could learn a lot from him and mitt romney also laura ingram.

    21. Paul , Lakeland, FL says:

      One way to see an improvement in savings:

      Interest percentage on Bank saving accounts has dwindled to be almost non-existant. A push to increase the percentage of interest paid can only help to improve the total savings and the amount of Americans willing to save.

    22. ArmchairEconomist, A says:

      Entitlement reform simply must be enacted! I understand not breaking promises but we simply cannot afford to pay out the benefits at the existing levels. It's that simple.

      Either reforms are made, and soon, or our bankers will do it for us (a.k.a those foreigners who buy our debt).

    23. Pingback: Economic Notes « 36 Chambers - The Legendary Journeys: Execution to the max!

    24. Robert E. Wayman says:

      I have started to enjoy getting the Mornig Bell because it gives me chance to low off some steam about all the problems that I believe are going to force the USA into bankrupcy! It sure seems that way anyhow. I have to wonder if we could get back on the right track by using more Border Control officers to intercept Illegal Aliens and Drugs. There should be a way to stop the abuse by Illegal Aliens that go to a hospital or other Agency for a free-be and send them directly to jail or to their homeland but "do not pass go"

      I would like to know the names of how the Congressmen and Senators voted on the release of the second $350 billion, these people should be made responsible for whatever happens to these funds and there better be an investigation on what happened to the first $350 billion.

      Bob W.

      "MOLON LABE"

    25. Tucker, Michigan says:

      If we hadn't aborted 22,000,000 million people since Roe vs Wade, we'd have all those people paying taxes and probably wouldn't be in this mess now. Ever think of that?

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