Both Democrats and Republicans alike were surprised when Senate Budget Chairman Kent Conrad recently introduced the blueprint of the Bowles-Simpson deficit-reduction plan as a starting point for the Senate’s budget negotiations.
Democrats expected Conrad to put forward a Democratic budget that would have been the first detailed deficit reduction plan in three years, if passed by the committee. Republicans claimed that this move was a stunt by the Democrats, indicative that the Democrats were not willing to vote on any budget plan that could expose them to political attacks before the November elections.
And while Conrad himself acknowledged that a vote is not likely to take place anytime soon, by putting forth the Bowles-Simpson blueprint, named after the chairmen of President Obama’s 2010 bipartisan deficit reduction commission, the issue of fiscal discipline and balancing the budget has been brought back to the front of the national dialogue.
Indeed, the government announced last week that Social Security will likely run out of funding three years sooner than expected – 2033 instead of 2036 – and Medicare funding is expected to run out in 2024. This is a result of an increase in pressure on these programs, as Americans living longer and baby boomers are beginning to collect, in addition to high energy prices and the slow rebound of the economy.
As Mitt Romney has essentially secured the Republican nomination and we turn to the general election, entitlement reform will undoubtedly become an even larger issue that needs to be addressed seriously because we are approaching nothing less than a fiscal Armageddon.
Thus far, Democrats and Republicans are spending more time bickering with each other than putting forward constructive ideas. In response to the news that Social Security and Medicare would run out sooner than expected, House Budget Committee Chairman Paul Ryan said that “rather than work together to advance solutions, the president has opted to play politics with seniors’ care” by distorting “efforts to save and strengthen Medicare.”
House Minority Leader Nancy Pelosi retorted that “despite the repeated efforts of Republicans to privatize Social Security and end the Medicare guarantee, these vital initiatives remain strong” and “Democrats will always ensure they are strengthened, never weakened.”
President Obama has largely avoided taking on entitlement reform and the need to rein in spending and balance the budget. Obama declined to endorse the Bowles-Simpson commission’s recommendations, which aimed to reduce the debt to 60% of GDP and keep decreasing with time, and included serious attempts to restructure Social Security and Medicare programs. He and other Democratic leaders have refused to look into significant cuts to benefits unless Republicans become more willing to consider some of Obama’s taxes increases.
In the budget Obama put forward a few months ago, he again failed to address the nation’s biggest budget challenges – the looming crises of the three big entitlement programs – and was vague on how to address health care spending.
Serious reform of entitlement programs is critical to any fiscal plan that is to be successful. National health and retirement spending is expected to grow significantly – from below 10% of the GDP today to 12% by 2021, 15% by 2035, and 17% by 2050.
There are ways to help reduce Medicare spending and increase savings. These should be considered by our political leaders as negotiations progress.
- Increase the savings mechanisms in the current health care law. This could be done by guaranteeing the law’s $500 billion worth of savings from reduced Medicare payments to health providers and insurers by accepting a “trigger” for further cost cutting if those savings don’t materialize.