America’s economic crisis is actually a spending crisis. Poorly designed and managed entitlements–most notably Social Security, Medicare, and Medicaid–are currently the spending items that pose the greatest threat. These programs are unsustainable and must be addressed if our nation is to avoid total economic collapse.
As Michael Tanner of the Cato Institute has noted:
The facts are both simple and frightening. The unfunded liabilities of Social Security and Medicare run between $50 trillion and $110 trillion. Those two programs, along with Medicaid, are the primary drivers of our future indebtedness. In fact, by 2050, those three programs alone will consume 18.4 percent of GDP. If one assumes that revenues return to and stay at the their traditional 18 percent of GDP, then those three programs alone will consume all federal revenues. there would not be a single dime available for any other program of government, from national defense to welfare.
Entitlement reform is infamously known as the third rail of politics. Very few dare touch it. However, time for procrastination has run out. Entitlement reform must be immediately addressed if we are to survive as a nation.
Even if it means I am a one-term Congressman, I am fully pledged to substantive entitlement reform that will help to pull this nation back from the brink of imminent economic disaster.
In point of fact, it is clear that our Founders never intended for the federal government to be in the charity business. They foresaw the destruction to which such a path would lead. We should heed their wisdom and strategically angle back toward personal responsibility and self-sufficiency.
That said, we did not develop our current culture of dependence overnight. Nor will we be able to end it overnight. However, we can wisely begin the necessary journey by adopting, wherever possible, solutions that begin to limit and better manage current entitlements.
BOLD SOLUTION A: Adopt the Paul-Lee-Graham Plan for Social Security Reform
Social Security is one of our most massive entitlements, and it is broken. Its yields are notoriously low, making it a poor investment for those who pay into the system. Moreover, this year, for the first time, we are paying out more in Social Security than we are paying in. If we do not reform Social Security now, it will consume every dollar of the U.S. economy within the next decade. We should not wait another moment to get this monster under control.
As Senators Rand Paul, Mike Lee, and Lindsey Graham have all acknowledged, the votes do not currently exist for creating free-market alternatives to the Social Security system. Raising taxes to keep this massive entitlement solvent will only kill jobs and do further damage to our economy. The Rand-Lee-Graham Plan protects the economy from collapse by making Social Security solvent without raising taxes, principally via:
- Gradual increase in the Social Security retirement age
- Gradual increase in the early retirement age
- Indexing the retirement age to longevity to ensure a constant ration of years worked to expected years in retirement
- Slower benefit accumulation for higher lifetime earners
The Rand-Lee-Graham Plan does not preclude future adoption of free-market solutions to the Social Security debacle once enough votes could be garnered for such an approach. However, it does provide a sound plan that buys us time to find those votes. It simultaneously prevents Social Security from crushing our economy in the next decade.
BOLD SOLUTION B: Abolish Medicaid
Medicaid is a program administered by the states in order to address the health care needs of low-income individuals and families.
Medicaid spending is currently split between Washington and the states. When it was first created in 1965, Medicaid cost only $1 billion. While it was never projected to be a big ticket budget item, our federal government was wrong as usual. Total Medicaid spend today surpasses the $450 billion mark and continues to rise. The Department of Health and Human Services projects that Medicaid will consume more than $900 billion before the next decade is out. Medicaid is headed for collapse if something is not done to alter the current course.
The only real solution? Abolish Medicaid.
But then what?
I believe it is inefficient and unfair to have the federal government collect money from the states only to redistribute it. For this reason, I would most strongly support allowing the states to keep the moneys they would otherwise have given to the federal government for Medicaid redistribution. However, if support could not immediately be garnered for this approach, a second and hopefully temporary option would be to create federal block grants to the states.
In either case, the states would then become wholly responsible for working with the limited resources they have in order to create a workable system. here again, the idea of each state becoming a laboratory for ideas would come into play. The states would be encouraged to innovate and compete in finding the most workable, efficient, and fraud-free means of addressing their respective social safety nets. There would be no room to reward failure as the money supply would be finite. Rather, needed course corrections would occur more quickly, and the best ideas would gain wider adoption across the country.
BOLD SOLUTION C: Replace or Abolish Medicare
Medicare is the federal goernement’s inefficient, unsustainable, one-size-fits-all health care entitlement for seniors.
In April 2011 the U.S. House of Representatives actually voted to eliminate the Medicare Payment Board, opting instead for Congressman Paul Ryan’s proposed voucher system. However, the U.S. Senate did not support the plan.
The Ryan Plan would phase out Medicare for anyone 55 and younger, replacing it with a voucher system one people reach the age of 65. The vouchers would facilitate the purchase of a plan that meets the individual’s specific needs.
I would prefer to see a choice to opt out of the system altogether should individuals wish to do so–no pay in, no pay out. However, if votes for an actual opt-out could not be garnered, a voucher system that offers real choice would certainly be a step in the right direction.
Senators Rand Paul, Mike Lee, and Jim DeMint have proposed an alternate plan that would shut Medicare down starting in 2014 by allowing seniors to enroll in the Federal Employees Health Benefits Program (FEHBP). Projections suggest that there would be massive savings, at least in the short term, which would buy time to come up with longer term solutions.
Like the Ryan Plan, the Paul-Lee-DeMint Plan has pluses and minuses. FEHBP premiums have been rising faster than those in traditional Medicare. However, it would actually permit people to move off a government system and eliminate the unfunded Medicare Part D mandate.
I would be willing to seriously consider either of these plans in current or amended form as a further means of reining in entitlement spending, limiting government, and moving back toward a healthy model of self-sufficiency.