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  • Morning Bell: 6 Fixes to America's Fiscal Crisis

    President Obama made his first offer to congressional Republicans yesterday in negotiations over the “fiscal cliff”—an economic catastrophe of tax hikes just a few weeks away.

    The White House’s proposal? $1.6 trillion in tax increases, $50 billion in new stimulus spending, and a change that would make it easier to raise the debt limit—so that all this spending could continue.

    Senate Minority Leader Mitch McConnell (R-KY) couldn’t contain his laughter at these suggestions.

    One congressional aide said the offer “amounts to little more than reiterating the President’s budget request—which failed to get a single vote in the House or Senate.

    Perhaps House Republicans could simply bring President Obama’s latest proposal up for another vote to see if anything has changed.

    The “fiscal cliff” is man-made. Congress—primarily the liberal-led Senate—and the President built it themselves through their legislative decisions over the past four years, and then they turned away and tried not to look at it until after the election.

    Elected officials in Washington keep enacting short-term patches to keep the government running, which is not a real solution. We need to reform the programs that are causing the runaway spending and deficits today and in the years to come—the large, lumbering entitlement programs of Social Security, Medicare, and Medicaid.

    >>> As a candidate in 2008, Barack Obama said he’d like to reform entitlements in his first term. We’re still waiting. Watch the video.

    In a new paper, Heritage’s J. D. Foster, Norman B. Ture Senior Fellow in the Economics of Fiscal Policy and Alison Acosta Fraser, director of the Thomas A. Roe Institute for Economic Policy Studies, point out that

    Obama’s tax hikes would reduce the rise in federal debt over the next 10 years by 15 percent. The President is silent about the other 85 percent. The numbers confirm that President Obama’s tax hike demands are at best tangential to attaining a balanced budget.

    The real issue is federal spending, and Foster and Fraser describe the bottom line this way:

    When this year’s kindergarteners enter college, just 13 years away, spending on these two programs [Social Security and Medicare] plus Medicaid and interest on the debt will devour all tax revenue.

    To make meaningful changes to the nation’s unsustainable budget policies, Foster and Fraser lay out four “simple, commonsense, and thoroughly vetted solutions” that already enjoy broad support across the political spectrum:

    1. Raise the Social Security eligibility age to match increases in longevity. People are living longer, and entitlement programs need to be updated to reflect that fact. According to the Social Security actuaries, continuing to increase the eligibility age to 69 by the year 2034 and allowing it to rise more slowly thereafter to reflect gains in longevity could go a long way toward reducing Social Security’s funding shortfall. While this would not reduce today’s budget deficit, it would strengthen Social Security’s finances and put it on a path toward sticking around in the future.

    2. Correct the cost-of-living adjustment (COLA) in Social Security. The annual COLA benefit adjustment is determined today by the Bureau of Labor Statistics’ Consumer Price Index (CPI). However, the CPI, an antiquated measure, generally overstates inflation, meaning that benefits are increased a bit too much each year to offset inflation. Again, according to the Social Security actuaries, using a more modern inflation measure would substantially reduce Social Security’s shortfall over time.

    3. Raise the Medicare eligibility age to agree with Social Security. Medicare has an eligibility age problem, but unlike Social Security, the Medicare eligibility age remains stuck at 65. An obvious solution is to wait five years and then slowly raise the eligibility age to align eventually with the Social Security eligibility age. While the short-term budgetary savings would be negligible, the long-term savings in Medicare would be profound.

    4. Reduce the Medicare subsidy for upper-income beneficiaries. In 2012, the average Medicare beneficiary received a subsidy of about $5,000. Subsidizing Medicare benefits for low-income seniors—and perhaps for some middle-income seniors—makes sense, but upper-income seniors do not need and should not receive a $5,000 subsidy to buy Medicare health insurance.

    In addition to those reforms, Foster and Fraser list two bonus proposals that have not been considered as closely by lawmakers, but would be simple and effective:

    5. Phase out Social Security benefits for upper-income retirees. As a nation, we need to ask whether today’s working families should pay payroll taxes so that upper-income retirees can continue to receive their checks. In short, Social Security should be social insurance against poverty rather than a government-run pension scheme.

    6. Consolidate Medicare’s elements and collect a single higher premium. Medicare is actually three distinct components, referred to generally as Parts A, B, and D, reflecting the fact that Medicare was built up over many years. This antiquated structure is confusing and inefficient. An obvious reform is to consolidate the three distinct parts into a unified Medicare program, with a single premium, and then raise the premium to cover 35 percent of related program costs.

    Continuing to raise America’s debt limit every few months is irresponsible and dangerous. And failing to address the budget deficits that give rise to this debt limit pressure every few months is equally irresponsible and dangerous. Raising taxes would weaken the economy, kill jobs, and hold down people’s wages. This is not a “solution.”

    Congress and the President should instead consider these serious fixes to the drivers of out-of-control government spending. All that’s missing is for the President to take the lead, which is what Presidents are supposed to do.

    Quick Hits:

    • House Speaker John Boehner (R-OH) rejects the White House’s first offer on the “fiscal cliff.”
    • In Egypt, where President Mohamed Morsi has seized additional powers, Islamists are hurrying to replace the country’s constitution.
    • Congress is spending a half-billion dollars to refurbish one of its office digs, reports the Washington Guardian.
    • Members of Congress from both political parties are lining up lucrative lobbying jobs on K Street even before leaving office.
    • Join us at noon ET today for a Google Hangout on the fiscal cliff. Our panel will include experts from Heritage and Americans for Tax Reform, as well as Ed Morrissey from HotAir.com.
    Posted in Economics [slideshow_deploy]

    83 Responses to Morning Bell: 6 Fixes to America's Fiscal Crisis

    1. don says:

      i have 6 ways myself..1 get rid of Obama…2..Get rid of Obama..3Get rid of Obama..4.Get rid of Obama..
      5.Get rid of Obama..6.Get rid of Obama

    2. KC - NM says:

      I see nothing wrong with the 6 items listed, however we must also look at the huge amount of wasted "pork" funding that is on the books each year. Overall, spending needs to stop except for the few items that are critical to keep the US running. Revenue must be increased as well.
      The next issue is more difficult – the current leadership of the Senate and House need to step down and let others who understand the skill of negotiations take over. It is sickening to listen to Pelosi and Reid but not much better to listen to Boehner and McConnell. And the President – he needs to cancel his December million dollar vacation to HI and start leading. He was voted in to lead – so get with it!

      • sciman61 says:

        I did not vote for the current President and I definitely don't want any more of his so-called leadership. We don't need more revenue from taxes–the government; local, state and Federal already confiscate enought of our money. We do need to cut spending and I mean cut–not keeping it the same or reducing the spending increase or rate of growth–bureaocrats think a lower % increase is actually a cut–really?

    3. Dave R. says:

      DO NOT raise the debt ceiling until AFTER a balanced budget amendment has passed and is sent to the states! Besides blocking stuff piecemeal this is the only real leverage the house can can really exert that will have long term effects.

    4. toledofan says:

      Great article, great ideas, but I fear all for not. We assume that the Democrats want to fix what's broke, but the reality is they don't. There is absolutely no evidence to support them doing anything different than they did for the past four years. I think the best thing the Republicans can do is just to walk away and let the Democrats fix their own mess. OMG they haven't developed a meaningful budget in well over three years, they want as much tax revenue as the y can get and will continue to spend us into obvilion. So, again, I pray the Republicans are strong enough to walk away, don't agree to anything that is not principled, and stand together.

    5. Petch says:

      Why is there a SS cut off at $110K? At that point why not allow Businesses to stop paying but at a personal level continue to pay at a 2% rate.

      • Social Security isn't suppose to be welfare. It has financial problems as it is – yes. But to ignore the problems and pass the costs on to those you make more is crazy. You can't fix a problem by throwing money at it.

      • john edwards says:

        The SS cutoff at $ 110 K is because your SS dividend is tied to your SS contributions. Ending this cutoff, as well as 'means testing' will show SS for what it is: welfare.

    6. DLR says:

      So, if all six of these recommendations were implemented, what would be the net effect?????

      • MSH says:

        Right. So what are the boundaries that define income levels and what are the effects of each recommendation and the total? Convince us with data or at least some kind of cogent analysis.

    7. Carolyn says:

      Maybe the goverment should cut their pay, their retirement, their health care and then talk to me about cutting mine.

    8. Kevin D. Glynn says:

      Whom do you consider an "upper income retiree"? You do not say! Is it someone who saved his money in an IRA and draws on that to live; someone who gets a pension or took a pension buyout and rolled it into his IRA? And, would you deny a person's right to his Social Security check even though he started contributing to it since his first part time job at age 14?
      If these are the people that you are referring to, you sound like Obama; echoing his wealth redistribution policies rather than a Conservative voice.

    9. lkottis says:

      I disagree strongly that raising the medicare age is a realistic idea. The only alternative, unless Obamacare will cover the resulting gap, is for people to keep working to get health insurance. It may be easy for older pundits and politicians to get jobs, but it is not possible for most Americans if they get laid off after age 50 or so. That already leaves a 15 year gap. The economy cannot even provide jobs for new college graduates – how can anyone expect it to provide for additional, older people?

    10. JBF says:

      If higher income individuals should not expect to benefit from Social Security or Medicare, then they should not have to pay for it. It is just wealth redistribution by a different name.

      • PaulE says:

        Exactly! If there is no "opt out" for people once they become a "high income individual" (people typically are NOT born into wealth or even being upper middle class income), then your suggestion about automatic elimination of people who may have managed to work their way up the economic ladder over their career makes zero sense. You would be advocating forced payment into a system, which you would never receive any benefit from. This article echoes the same static view of upper income individuals, at least on this specific point, as Obama does. Which I'm sure is not the intent of the Heritage Foundation.. Could someone from Heritage please clarify how this would work?

      • What the article does not say is that higher income Americans already pay more for it. The suggestions here just make the redistribution bigger.

    11. RogCol says:

      Don't know if these six would "fix" the fiscal problems, but it would go a long way toward doing so. These are realistic solutions that I have been proposing for years.

    12. Jane Horton-Leasman says:

      The real problem(s) facing the demise of S.S. and Medicare are all of they myriad of programs attached to both, which are MEDICAID. The endless numbers of freebies sucking the blood out of S.S. and Medicare are full of waste and fraud. And, to suggest that inflation is actually less and the COLA to low income Seniors is too high is ridiculous. What about the "earned income" paid out to many of the so-called poor from the tax base, when low income Seniors are barely getting by. Then there is the EBT/food stamp program which is a joke, allowing recipients to use these cards like a "get in free" at restaurants, etal…and they then bleed the local food banks. Seniors are carrying the load, but those committing the abuses now will pay the piper in the future…when they are Seniors and actually need the help.

    13. Len says:

      I grew up loving my country, and trusting it to do the proper thing. Following this election that all changed, not because I am a poor looser, but it became quite evident that what the electorate wanted and what we got were starkly reversed and we have become a "banana republic" state, and never, never again will the conservative will of the people be exercised again. The slightest resistence in congress will be interpreted later to be the cause of any failures the O'Bama administration may incur.The only solution is to stand back and let there be a real "fiscal cliff" with no one to blame but them. A disaster is coming regardless, why not let them take the whole blame, and then there will be hope for America. The ship has hit the iceberg and there is no amount of repair that can fix it. While talking of salvage, no matter how honorable, is ludicrous. The shudder we feel is normal and all is well, meantime the ship is sinking and going down. They were asleep at the wheel and so are you and the rest of the "crew," with not a clue to the real danger. WAKE UP!!

    14. Brenda Roberts says:

      I heartily disagree with raising the retirement age. This has been done in the past and is akin to the ponzi scheme that social security and medicare actually are. What do businesses do when facing bankruptcy? Liquidate their assets and distribute to their creditors. Let's liquidate all the federal land holdings and return all federal land (with the exception of national parks) to the people who were forced to particpate in this great ponzi scheme. I am not willing to forfeit what my husband and I have paid into SS all our lives just as we are nearing retirement. Then let's dismantle social security and medicare and let the free market control costs of healthcare. With competition and non-governmental intereference, costs will level out to affordable levels. And let people assume their own responsiblity for their retirement. If they choose to live in poverty in their old age, because the chose to plan poorly, then so be it. I don't feel sorry for them.

      • Why not use that money to pay down the debt that has been incurred by the people you want to pay? In real bankruptcy, creditors are put into line. According to the Supreme Court, Flemming V Nestor, people in Social Security are dead last. They have no earned interest in their benefits.

        If you aren't willing to forfeit what you have paid in, what is it that you are willing to do. The Trustees are telling you that the system is coming to collapse. The politicians say that the system is 'you know – structurally sound'. The trustees are telling you that you will foreit something, the only question is how much.

    15. Penni Eads says:

      The only problem I have with this is the statement that upper income retirees should not receive what they put into the system through social security. Any working citizen pay A LOT of medicare and social security in addition to state, federal, auto, property, and sales taxes. I personally believe that Social Security was a mistake from the very beginning. Nearly all entitlements need to be discontinued since most people can take care of their own needs and have compassion for those in need. There should be some assistance for the disabled and elderly, and states should take care of their own needs, not the federal government.

      • realist512 says:

        Good chance that the wealthy live longer, extracting more from the system. It wold be interesting to know the demographics.

      • bill says:

        I would agree except I want a refund on the money I paid in to both programs all my life. I am 73 and started working while in high school!

      • guest says:

        Yes, all that compassion just waiting for an outlet….you can sure find an abundance in these missives.

      • bruno says:

        I disagree. If one pays into the social security system, then one should be entitled to receive the benefits from the system, regardless of income levels. Given the current entitlement system you must be progressive liberal idiot who wants to see wealth distribution. The only recourse is to abolish the program and go to a Medicaid-backed welfare state to support the disabled and elderly.

    16. will says:

      For Medicare to exist as anything close to what we have today, major funding adjustments will be necessary. These will include vastly higher premiums, higher deductibles and higher copays… from, guess who, those wealthy folks who are being targeted by the current "Cliff Debate." And then these same people will be called upon to "save" Social Security… but in this case they will pay way more in and then be means tested and get way less out. Every study/commission has pretty much come up with these same conclusions. Isn't this the best argument to force the Administration to tell us how much money it is going to need from the so-called Rich to save the entitlements for the most vulnerable? Poll the public… Do you want increased taxes for reckless spending or do you want to fund the entitlements for the most vulnerable?

    17. R. Barney says:

      They all sound good except number 5 below.If the upper income retirees paid into it they should receive something from it or be excused from it. (why don't we just admit that liberal fantasy schemes don't work and you cannot escape from them once emplemented)
      Phase out Social Security benefits for upper-income retirees. As a nation, we need to ask whether today’s working families should pay payroll taxes so that upper-income retirees can continue to receive their checks. In short, Social Security should be social insurance against poverty rather than a government-run pension scheme

      • I am glad that you use the phrase "should be", because Social Security was never an anti-poverty program and isn't today. I would argue that it shouldn't be social insurance against poverty. The system has no visibility into need. What you are suggesting will turn the system into welfare. As bad as Social Security is as insurance, it will only be worse as welfare.

        The system has become more progressive over time, but you want to expand the problem. Today benefits are loosely connected to contribution. You are suggesting that benefits should be directly connected to voting power.

    18. Rollie Herzog says:

      I can agree with all of your ideas except item #6. I still get drugs through a system set up by my employer and their system is far better than any set up by the Government.

    19. Mark Bartosik says:

      Does this president expect us all to agree to end America as it was founded on a honist days pay for an honest days work? I suppose if we elect a president who has never had to earn a paycheck does not know what it is like to make a payroll, that has made his life's work rabble-rousing. how can we now assume he intends to fix any of our countries problems? This man only knows how to spend other people's money and is hell-bent upon destroying the Republican party any way he can! We need to stop spending money in Washington like there is no end to it. well the end is here and it is Now! It is time for the adults in the room to stand firm not one penny in more taxes unless there is 5000.00 cut in spending for each penny in increase. For years the Demacrats always promis spending cuts right after they get there tax increase then it never happens. This time the spending cuts MUST come first!

    20. Sue Merriner says:

      Americans are made to pay into social security. Quit calling it an entitlement.

      • The problem is that they did not pay enough into the system. The key phrase is "Into". Virtually all that you put in was given to retirees of the time. None of what you paid before 1983 went into anything. Very little of what you paid since went 'into' anything.

        Your argument is something like saying I went to the car dealership and paid the price of a used compact and then saying that the new large luxury car is yours because you paid in. Today's benefits depend upon workers contributing not on what you 'paid-in'.

    21. Jeff says:

      Some great ideas. A couple of criticisms though.
      1. The wealthy have paid huge amounts of money over the years into social security. To think of getting nothing back is unAmerican and amounts to an unfair tax and confiscation. Since there are so few wealthy, it won't be a huge loss to the system if the wealthy continue to receive their checks.
      2. The Cost of Living adjustments maybe should be tied to an index that measures the actual costs for seniors. Seniors probably less on gas, food and housing, but they spend more on medical care which is generally outpacing inflation.

      • Jeanne Stotler says:

        They pay him the same as everyone else, there is a cap on what is deducted — some meet it sooner then others and some never make that amount. The amount you recieve as a retiree is figured by how yong you worked and your age, those that retire at 70 YO get the max, where a retiree at 62 gets the least, only COLA changes these amounts.

    22. J. Atkins says:

      I sincerely hope that the idea of giving the president a chance to raise the debt limit any time he wishes will not be granted.

    23. Bob Hernandez says:

      The next stimlus should be to give every USA Citizen… Man, Woman and Child… $2,000,000. This would save our Treasury tons of $$ and actually stimulate our economy. Why NOT? Why waste another Trillion!

    24. John says:

      I understand and want fiscal sanity as much as anyone.

      However are you telling me that I should expect nothing in return from Social Security and Medicare from all I paid into entire working career because I have been successful and all I paid in I should write off as my contribution to a social tax?

      • PaulE says:

        Exactly my point as well. Either there needs to be some sort of opt out provision for people during their working years, so they can apply the money they would have been forced to contribute to Social Security to their own private retirement account, or they should be able to recoup some of the money that the government extorted from them over their 35 to 45 years in the work force.

        As for people who have already retired, leave them alone. No one over the age of 65, that happened to have been fiscally responsible and now has a decent retirement portfolio, should be penalized for Obama's spending problems. It's not like these folks will be able to find full-time employment or in many cases even part-time employment to make up what they would lose from not getting Social Security at this point.

      • This isn't 'fixing' Social Security. It redefines Social Security from insurance that we pay for to wealth that is paid for by the wealthy. What the Heritage plan here does is shifts the resources away from those who have paid to those you haven't.

        This is just shifting deck chairs on the Titanic to make room for more passengers.

    25. Ron W. Smith says:

      There's no disagreeing with some of what you say, Amy. There is, though, a big question about leaving out the costs related to our voluntary status as SuperPower on Call. We assumed that role in flush times following WWII and now find ourselves in far leaner ones while still footing the ever increasing annual price tag. Our international footprint is an extravagance for a country confronting a mounting backlog of infrastructure needs and looking to cut needed domestic programs common in developed countries everywhere. The military/industrial complex and our Chinese bankers have to be happy, but there's no reason U.S. taxpayers should be.
      Please observe that I'm not suggesting National Defense is unimportant. Conflating National Defense and SuperPower on Call is a problem, though Simple National Defense as practiced by most countries around the world is not an extravagance. It's a necessity, Running more than 700 military installations large and small around the world, however, is quite a luxury, and comes with a consequence: constant wars and interventions since we're the ones with all the assets for managing an untidy world. And we do it on the U.S. taxpayer's dime. increasingly, we do it on borrowed money, blaming "entitlements" as the sole cause.
      Our $16.3 trillion national debt and $1 trillion + annual deficit? They do deserve your attention and mine, Amy, but not without bringing in our nation's unshakable habit: being SuperPower on Call

    26. Jim Jordan says:

      Once again, as usual I support the Heritage Foundation completely as being the one organization that has over hundreds of years been the saving grace to the USA. They know and specialize in knowing every phase of our federal government in detail. They have specialists who study our government thoroughly and although they do have a basic Conservative nature, it is still one that has been proven to be extremely beneficial to our nation overall. Their recommendations are not the normal rantings of well wishers and empty dreamers. Obama and the whole nation needs to listen to them carefully and for the sake of our children's, grandchildren's, and great grandchildren's future. WE JUST CANNOT AFFORD TO GO ON OVER THE CLIFF IN THE WAY OBAMA WANTS…. JUST GOING FARTHER AND FARTHER IN DEBT. Jim Jordan

    27. Hoke Reed says:

      Hmmm…on number 5. Please tell me why those of us who have contributed to Social Security our ENTIRE lives, should be forced to forego OUR money just so we can have yet another example of MY money being taken away and GIVEN to others?

    28. W Barnes says:

      You lose us when you refer to tax increases over 10 years and stimulus spending increases for just one year. If you are going to quote numbers please give us the basis. Afterall a trillion here or there and you eventually are talking about real money as someone once said…

    29. Mary says:

      Medicare and Social Security are NOT entitlements. We paid into it, securing our future. Entitlements are those programs that "they" didn't pay, but the government (we) GIVES to those who have not contributed. We have many, many entitlement programs that should be looked at that are deserving to be cut back. Further, the military IS important. The military is our line of defense in protecting the citizens of the United States and they need to be in full force with men and equipment in order to defend. The military are a special breed. They sacrifice for you and they are willing and eager to do it, while you can rest.

    30. Roy M says:

      I will go for number 5 as soon as the SS system returns my $600,000 plus growth/interest that I have put into this corrupt system over the last 33 years. I work for myself and therefore have been paying the entire 15.8% from my own pocket.

      I have been paying for others since I was 13 years old. Why don't we make Congress cut all entitlements until they have returned the stolen "trust Funds" back into the SS system.

      I presume you will consider anyone with a paid off home as a wealthy senior who should forgo monetary gain from a broken system that the senior has funded well beyond what he would ever recoup. I guess that is the definition fof"fairness" in America today.

    31. Roy M says:

      I will go for number 5 as soon as the SS system returns my $600,000 plus growth/interest that I have put into this corrupt system over the last 33 years. I work for myself and therefore have been paying the entire 15.8% from my own pocket.

    32. DR. J. D. VILLA says:

      How about major cuts to foreign "Aid"? We send billions to foreign governments or groups that HATE US and even want to destroy us, including Egypt, Afghanistan, Syria, etc., and countries that don't even like us and even fight us in the UN, like France and other European countries. And how about the UN, that useless and even harmful institution? And how about useless Federal Departments such as Education, Commerce and Energy? Cut THEM, and not programs into which we have paid all our lives while working and should serve us in our old age!

    33. Bruce says:

      Phasing out Social Security benefits on the wealthy would turn all of the FICA taxes paid by them into a retroactive income tax . That's not equal taxation under the law and, to me, would be immoral.

    34. John says:

      Wow! I just recently signed up for this news letter under the belief that is was from a conservative think tank. Sounds more like a liberal one.

      I have been paying into social security for 58 years, since I was a nine year old pin boy. Now you are advocating that because I might not need it and that the government has robbed its funds to spend on other things, that I should not some of my money back?

      I have paid into Medicare since its inception, and Clinton uncapped it in my peak earning years. Now, I should not benefit from it?

      Tell you what. If Uncle Sam wants to pay me back what I put into these programs, with a nominal interest rate, I will call it even.

    35. I'd add at least a couple thoughts — add a variable surtax on holders of all defined benefit pension and health retirement programs to cover any expected shortfall in defined benefit payouts by the Pension Guarantee Trust Fund. Adjust for viability of each particular benefit if one wishes. Provide the option for individuals to opt out of their defined benefit taxation if they convert their defined benefit into a prorated 401k investment as if they'd put all their benefit contributions to these market sensitive investments. Those of us with market based 401k retirement plans shouldn't have to pay a dime for underfunded benefits agreed to by politicians who are also eligible for defined benefit retirement plans.

      It might also be worth tossing in a tax on college professors and workers bloated pay and retirement packages to help pay for all the impending college loan failures/bailouts. Colleges should be more sensitive to markets and shouldn't be pumping out people with degrees in basket weaving if there's no market for basket weavers. Curriculum bloat requiring all sorts of wasted classes and bloated faculty roles and extra college expenses should also be adjusted.

      Just saying, it's time for some common sense here and there.

      Meanwhile, I'll go crawl back under my rock and take a nap.

    36. John says:

      Raising the medicare age is bad. It would cause a burden on medicaid because 70% of those people would not be working anyway. Stopping social security payments to high incomed individuals is also a very poor example. They paid the most in anyway because of the higher income and it cost their employers a ton of money. Do they stop paying into the system? Are their employers exempt? There is already a limit on income before age 70. Just raise that age over the years also. Easy peazy.

    37. James McMillin says:

      Unfortunately, you don't want to hear those who disagree or you would have posted my first position statement. So much for open discussion and selective 'comments'. Too bad for you and your readers.

    38. Margaret Paddock says:

      Why is it that social security always has to take the hit? What about the salaries these bafoons get? They made this mess but I don't see them giving back any of their high salaries and benefits.

      They need to re adjust the salaries to meet the inflation they have caused. This is so maddening it is unbelievable the gall of these elected officials. They could all do without a salary for a year or two and give the money to help correct the mess they made.

    39. jane hughes, md says:

      Number 5, to phase out Social Security payments to higher income individuals is dead wrong. The fact that today's workers are supporting payments to retirees is because the government has spent money that these retirees have had INVOLUNTARILY taken from their paychecks over the years. This was a promise made to people by the Federal Government. At the least, the retirees, regardless of income, should receive the amount that they put into the system. This is one more reason that the Federal Government should not be entrusted with any program exect perhaps as a safety net provider for the truly incapable. When you look at what people's investments could have achieved compared to Social Securtiy it is unforgiveable.

    40. gorio says:

      Perhaps the "rich" people with a net worth pf 5 million who don't have to work to maintain their lifestyle, should consider leaving the high tax states like California or New york and consider moves to Texas or Oregon or even outside the country so their incomes would not be taxable, as a way to protest the second class treatment they are receiving from the rest of the country that doesn't consider them human but rather a "cash cow" that is periodically bled to satisfy the greed of politicians and their redistributionist friends. When the revenue dries up, maybe the average citizen will thank the taxpayers rather than use them as a convenient source of "free money" after doing their legalized smash and grab legislation

    41. Drew says:

      I enjoyed this article and these steps except for step 5: "Phase out Social Security benefits for upper-income retirees"… I won't argue whether social security is right or not, it is here to stay. However, I will argue it would be wrong for everyone to have to paid social security their entre working career and then be denied access to social security simply because they were financially successful. We are supposed to be a nation of free market ideals, of incentivizing individuals to attain more. The ideals were not to redistribute income to earn equal outcome instead of equal opportunity for the masses.

    42. This isn't 'fixing' Social Security. It redefines it from insurance that we pay for to wealth that is paid for by the wealthy. What the Heritage plan here does is shifts the resources away from those who have paid to those you haven't.

      Social Security isn't a safety-net. Benefits are based on contributions, where the more you contribute the more you get. The rate slows as to make Social Security a progressive system. You can't describe a system as a safety that gives Pete Stark a wealthy ex-congressman a benefit that is vastly larger than average Americans who get a benefit that is vastly larger than those who are in need.

      Social Security has its problems, and we may have to adopt some of these ideas, but you can't do it without saying the system is broken. At that point, we discuss whether Social Security is the right tool to provide welfare – it isn't. It can't. It has no visibility into need. This plan pretends that what we have works fine.

    43. Bill Witter says:

      I really am tired of Social Security and Medicare being called "Entitlements". I have spent 48 years paying into Social Security with the promise of income at old age, when I am unable to work. Medicare, I have paid into for 37 years and continue to pay $99.90 per month (2013 will pay $104.90 per month) for Medicare.
      In 2013, Social Security payments increase by 1.7% while Medicare charges increase bt 5.0%. Both supposedly based upon CPI ??
      It is not my fault that the government – Congress- has raided these funds for other spending. In fact President Bush attempted to change this to a sister program to the 401K and IRA plans. That was shot down by the same people who want to be able to rob from these funds for their own earmarks – Including Barrack Obama – who robbed it of #716 Billion to pay for ObamaCare.
      Do not call these programs "Entitlements". Welfare and Medicaid are entitlements!
      Leave my Social Security and Medicare alone – or – refund to me all of the money that I and my employers have paid into these funds for the past 48 years and I will put it in my IRA and live better than I am now!

    44. dexter60 says:

      It is pointless to speak of deficits or balanced budgets when there has been no budgeting for several years — merely a periodic struggle to 'raise the debt limit' when in face there is no limit. All told, this amounts to blatant fraud; swindles perpetrated by those paid to steal and do little else.

      Even the most well-meaning attempts ‘to make things better’ can miss the causes of disaster from the machinations put in place earlier.

      The need to ‘correct’ the cost-of-living adjustment (COLA) in Social Security.
      The annual COLA benefit adjustment is determined today by the Bureau of Labor Statistics’ Consumer Price Index (CPI). However, the CPI, an antiquated measure, generally overstates inflation, meaning that benefits are increased a bit too much each year to offset inflation. The inflation caused by such programs as Social Security in the first place providing the manipulation of interest rates and the creation of more fiat money and debt. COLA is another Band-Aid on a mortal wound that adds another level of problems.

      It is time to take out the garbage.

    45. Mary says:

      Since we are all forced to pay into Social Security, we all should have the right to get our SS retirement money, whether we need it or not. I personally think it is a Ponzi Scheme also. But I paid into it every year that I worked and if you don't pay into it, the IRS comes after you. We should not lose what we were forced to pay. One way for the Country to get some money would be for the Presidents, Vice Presidents, and all the Congress and Senators and any other Government paid officials to get their retirement cut to a certain number of years that they were in the Senate, Congress or President appointees. They do not have to worry about their retirements, and many of them have only been in office a short period of time. Most of them are Rich , some are not, and all they do is want to tell us what we can earn, and what we can keep, and play rich against poor. I prefer to take care of my self, but it is difficult to save much, with all the fees, taxes, and more taxes and high inflation. We need to throw out Obama, and all his Marxist, Liberals who want to destroy our Republic. It is a shame our voters do not understand what he is doing.

    46. AlfromFl says:

      Those 6 steps seem simple enough so how much would these steps go toward fixing the financial problem? If you give something simple like these 6 steps to the people (going to have to ID just where the line is drawn on item 4 and the cutoff for whom is immediately effected) and the electorage would demand that congress legislate these. So far no one knows what steps to take and who will be effected so congress is not pushed by their constituents and nothing gets done. Maybe House Spkr ought to put a strawman on the floor of tax reform and these 6 steps as one possible interpretation of what the people would like to see.

    47. @LindaArmijo says:

      Another option to the Social Security debacle. If they so choose, couldn't an individual get back, in one lump sum, all of the money they have paid into Social Security, to invest as they choose? Basically, this would be a way to "opt-out", stop paying premiums into Social Security, but not lose what was already put in. Once agreed upon, this individual would not be eligible to receive any future SS benefits. I'm not sure how the numbers would crunch, but in the long run, this may save the system for those who cannot or will not save money and want to have a government-run safety net. This seems more fair than paying in your whole life, then, after having become very successful, be told you don't qualify for benefits because you are too wealthy and "don't need the money".

    48. Jerry McGee says:

      I agree with all of the above proposals, except #2. I believe there is more inflation in the economy than is reflected by the CPI. I could be wrong, but I don't think the CPI includes energy or food costs, does it?

    49. realist512 says:

      These are no-brainer changes. I think that republicans will be surprised when Obama goes big across the board! He will first break the back of the silly Norquist pledge so that this does not distort politics for the next 20 years. He wants to significantly move towards a balanced budget. When he says something, it is core. Just stay tuned.

    50. nnoway says:

      First of all, there is no "fiscal cliff."

      It's really an "austerity_bomb."

      The conservatives have been pushing austerity as the way to deal with the economy, the debt, and the deficit. Yet when push comes to shove, the Republicans realize that even this partial form of austerity will send the economy back into recession—a tacit admission that austerity doesn't work, hasn't worked, and won't work. We have only to look at Europe and the economic and political devastation caused by the EU's forays into austerity-based economics.

      Yet the GOP still focuses on massive spending cuts—-money that is taken out of the economy, causing job losses and stopping growth—-as the right way to handle the debt and deficit.
      They cling to the fallacy of a "debt crisis" because they are the authors of the fallacy.

      The US national debt is a long-term issue—and can be adequately addressed after the economy is fully recovered from the Great Bush Recession. There is no valid reason to try to make significant cuts in the debt during a weak recovery—a recovery made weak by Republican obstructionism—-because such cuts would do just what the so-called fiscal cliff would do.

      But Republicans cannot bear the idea of the defense budget being cut, or the idea that the top 2% should pay their fair share of taxes. So the GOP fights against the austerity_bomb it created during the debt ceiling debacle of 2011—while at the same time proposing budget cuts aimed at the most vulnerable members of American society with the full knowledge that those same cuts will weaken the economy and may cause a new recession.

      The idea that Republicans are "fiscally responsible" is a joke. A cursory glance at the last 60 years of US economic history by party shows clearly that the GOP has never been fiscally responsible—in fact, quite the opposite, especially since Reagan began catering to the corporate culture by relying on the fraud that is supply-side economics.

    51. Fris says:

      There are real ways to cut spending that no one wants to discuss. There are multiple federal agencies that should simply be abolished. IRS, DEA, EPA, enact the fairtax, legalize and tax drugs, remove our armed forces from bases overseas. Essentially bring true freedom back to ths country, return the federal government to it's rightful place of dealing with infrastructure and national defense. People will say this is crazy, but the only reason it is crazy is because we have elected officials whose only goal is to have power and be reelected. It's our own fault for consistently putting these people in office.

    52. Greg says:

      Just like BO, the greedy people on both sides of the fence refuse to allow cuts to their favorite bit of pork! Someone needs to get serious about spending cuts and deal with the fact that some of their favorites won't get as much money as it did before. Then, stop the stupidity of raising taxes on everything, as BO wants to do! He is dumb enough to believe that increasing taxes will increase spending by the people! His true goal is the destruction of the U.S., which he's succeeding at!

    53. George Blumel says:

      The Heritage ideas presented here are practical and easily accomplished to ameliorate the serious national "entitlement" problems addressed. But as limited government patriotic citizens shouldn't we always approach these problems not only with the simple obvious short term solutions but also with the free market proper solution? For Social Security that would be privatization and it should always be offered alongside other idea as the ultimate solution in a free country.

    54. Erich Berger says:

      I am 56 and looking at the end of unemployment compensation after a year of actively looking for work and getting more than a few interviews. Seems I have screwed the pooch in my career by not getting on the fast tack to manage a company…I gave it up to concentrating (belatedly) on having a family, which has given me more satisfaction than any promotion I have ever received. I am at the top of my game. My health is great. I have a 2 year-old son and another due to be born next month. I won't be retiring, ever. My 401K-IRA is just about gone, between the crash and using it to pay for my healthcare insurance. Pass legislation giving incentives to hire older workers to overcome age and experience bias. Let me remain a productive citizen, and I'll forgo the hundreds of thousands I've paid into SS and medicare until I absolutely have to. Active workers lessen the pressure on entitlements.

    55. Tom says:

      I do not know how an upper income individual gets a $5,000 subsidy to buy Medicare insurance (point 4 above). I am an upper income individual as defined by Social Security's MAGI (modified adjusted gross income) and I pay more than 2 times the standard rate for Medicare insurance. Am I missing something? I was very fortunate in being able to participate in building a company and getting a lot of stock options. When I exercised those options in a "cashless" transaction, my entire gain was subject to Medicare/Medicaid taxes – not capped like Social Security taxes. I therefore paid over $300,000 in Medicare taxes in one year. Not complaining, as I mentioned I have been fortunate; but anyone who thinks my past Medicare contributions and current payments are not "redistributing income" is out of their mind. So now proposal 5 would like to phase out my social security payments after I have maxed the taxes for many years???? These two elements of Foster and Fraser's paper don't appear to be well thought out.

    56. uncle barry says:

      I must take issue with fix #2. Annual COLA adjustments are NOT very annual. Case in point. The SS COLA Formula does NOT take into account the cost of energy, food & clothing. In my mind that's all there is.

      There were NO COLA increase in 2008, 2009 & 2010. Keep in mind that gasoline cost $1.85PG in 2008 and went as high as $4.85 – $5.50PG in California where I live.
      In 2011 if memory serves me correctly, I did receive a cola increase of (ready? ) a whopping 3.5%. That's three & a half percent increase for the year 2011

      Gasoline has doubled. The cost of food has gone up10% across the board. And the dollar has been devalued 15%? If not exactly 15% it's pretty close to it.

      Usually COLA information arrives some time in December. Today is Dec. 2nd. Something tells me that there will be no COLA this year.

      So my point is that the 3.5% I received in 2011 doesn't even cover the increase in my monthly electric bill.

    57. Jack Lloyd says:

      The conservatives and republicans in Congress should allow the democrats and the administration present a budget and then let the president aign it, and then abstain from any additional agreements. When the country goes over the cliff, the president ande Congressional democrats can take the blame; instead of blaming the republicans and Pres. Bush for what happens.

    58. Steve Leary says:

      Interesting but no numbers to support your 6 points.
      a. what are the cost projecions for Social Security
      b. what are the savings by extending the age to 69 for full benefit.
      c eliminate early 62 benefit age or increase to 66 and what are the cost savings.
      d. Medicaire illusions of profound long term savings ? Show me the $$$
      e. Cola is the third rail in DC so what about elimiating Baseline Budgeting formula first then go eliminate Cola to a new formula for retirees inMedicaire.
      f. I own a small business and match 6.20% SocSecurity and 1.45% to medicaire for my employees and myself with no cap no my income so would I want to give years of funding for a so-called uper income class warfare plan from Heritage. Give me the money that my wife and i have put into both programs and average 8%return 10 years or greater and pass the unused onto my family who work in my business. My plan is IRHP INDIVIDUAL RETIREMENT HEALTH PLAN so I can shop for health coverage and live off Social Security that my wife and I funded along with our 401-k plan. The unused monies would pass onto my family in their IRHP plan so they can build their Health and Retirement plans.

    59. Andy Morris says:

      Interesting that you should suggest that "high income retirees" should not receive social security and should not receive a $5,000 credit towards medicare. You are apparently suggesting that these retirees should pay into the programs at the increasingly higher levels all of their working lives and then, because they have prospered from their efforts,should not only pay a Part B premium more than 3 times as much as the lowest recipient ($4,028 to $1,260), but also receive no Social Security. You'll have to excuse me, but that sounds an awful lot like socialism to me.

      Currently an "affluent" retiree gets no deduction for the extra $4,032 he/she pays for his part "B" medicare and is taxed on 85% of the social security benefit he/ she received. This then gives them the privilege at today's rates of sending 29.7% of their SS back to the IRS and to contribute an additional 10% to 15 % ($4,028- $1,260) to medicare for their part B Medicare.

      In addition, if you ran your own business, you also had the opportunity to pay 50% of the SS/Medicare contribution towards all of your employee's retirements. This wouldn't be quite so bad if at some point in your life you had the opportunity to opt out of SS and fund your own retirement plan but that option presented during the Bush administration never got off the ground. So once again, we look to the same group to pay more and, at the same time, to further limit the deductions that they receive for supporting charities to solve the problems created by excessive govt. spending.

    60. Don C says:

      I also take issue with calling Social Security an entitlement!! As an employee and an employer for 60+ years, I was forced to contribute to this program. If the former propriortery SS fund had not been raided by Johnson and the Congress in the 60s and then directed into the general fund to be spent and squandered, it is estimated that the average account today would average about $1.6 million. Instead, all the fund has now is an endless collection of worthless IOUs from Congress for tens of trillions of dollars and is seeking ways to reduce the return of these stolen funds from the government. The theft of these funds is criminal yet, the only persons who will ever be punished are the rightful recipients.

    61. Molly says:

      How about getting rid of free phones and many of the other "freebies" instead of taking all of the money from medicare. I wonder why I bothered to work, I could have medicaid and not have a copay or pay into it. I have cancer and go to a clinic that does not accept medicare so I have to pay what medicare does not cover. They do accept medicaid, patients covered by that pay nothing.

    62. Frank Z says:

      raising the age is unfair; ask any mechanic/brick layer if he wants to work until 70; the rate for ss is too high, it should be 3% on all earnings & col's should continue or it will fall behind; the medicare coverage should start at 60 not 70, Mr. Reagan raised the ss % and robbed the middle class since 1980; yes, reduce/eliminate the ss payments & medicare for upper incomers, they don't need it; yes, consolidate medicare into 1 piece & charge a fair rate, it's not fair now for people who have worked 50 plus years & have to pay again. We are systematically ruining the American economy by these band-aid measures you propose. Let's take the bull by the horns & fix these problems and cut waste, which is a major contributor to the problem.

    63. Gerald L. Fortier says:

      As a 69 year old senior, I realize the importance of saving Social Security and Medicare. I believe that these programs were established to help senior citizens cope with expenses after retirement. However, it has been used as a slush fund for Congressional spending and is broken.
      Many young people have found this to be a source of income for alleged disabilities. I am sure that some of the claims are valid, but I know that many are not. Every day I see lawyer commercials promoting disability claims for Social Security.
      Saving Medicare is just as important, but the cost is skyrocketing. What ever happened to TORT reform? Frivolous lawsuits and huge payouts drive up the cost of prescription drugs, doctors and hospital care.
      I think we have to many politicians and to many lawyers.

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