From the American Enterprise Institute, a post that explains in brief how to reform each of the three largest entitlement programs so that they will not go bankrupt by the time today’s younger workers need them.
Here are the programs:
Social Security (a social program to redistribute wealth from current workers to current retirees)
Medicaid (a social program to provide health care to low income/low wealth Americans)
Medicare (a social program to provide health care and prescription drugs to older Americans)
And here’s one of the solutions (for Social Security):
Social Security is the easiest entitlement program to reform and can be done without raising taxes.
The age should be gradually raised to 70 by 2065.
Benefits should be indexed to price inflation, not wage inflation, as the program’s purpose is to keep the elderly out of poverty.
Benefits should gradually be reduced for earners with high incomes. The system should be a way to keep individuals out of poverty, not create a dependent upper- and middle-class.
Together these three reforms would ensure Social Security stays solvent. The entire system, however, could be easily replaced with a new program designed to keep seniors out of poverty and empower them throughout their retirement. People should be given the incentive to work longer by eliminating the Social Security payroll tax for individuals over 62, and a basic income supplement should be provided to impoverished senior citizens. Workers should then be given ownership of their retirement savings by enrolling all workers 55 and younger into a retirement savings account funded by 5 percent of the worker’s earnings (2.5 percent from the individual and 2.5 percent from the employer). These simple reforms would create a system that actually provides a safety net for needy citizens — all for 60 percent of what the U.S. currently spends on Social Security.
Click through for the other two problems and solutions.
Revenue neutrality. The budget calls for the House Ways and Means Committee to produce a tax reform package with a tax revenue target of between 18 and 19 percent of GDP. This is in line with historical revenue figures. By contrast, big government budgets like “Gang of Six,” “Simpson-Bowles,” and the Obama budget call for a long-range revenue target of over 20 percent of GDP. The Ryan budget is a no tax hikes budget.
Six personal rates down to two. The Ryan budget replaces the current six-rate personal income tax structure (10, 15, 25, 28, 33, and 35 percent) with a two-rate system of 10 and 25 percent. This will result in a lower tax rate on the majority of small business profits, from 33 or 35 percent down to 25 percent.
Repeals Obamacare tax hikes. The Ryan budget eliminates the entire Obamacare law. This includes repealing the 20 new or higher taxes which have taken or are about to take effect from that law.
Eliminate the AMT. The Ryan budget eliminates the AMT, instead favoring a simpler system with lower rates and a broad tax base.
Lower rates on businesses. As said above, the Ryan budget lowers the tax rate on the majority of small business profits to 25 percent. It also lowers the federal income tax rate on larger corporate employers from 35 percent (the highest in the developed world) to 25 percent (closer to the developed nation average). While this makes American companies more competitive, it would still leave us with a higher corporate income tax rate than the developed nation average, Canada, and the United Kingdom. In order to make us truly internationally-competitive, the federal rate must fall to 20 percent or less.
No more picking winners and losers in the tax code. In order to target revenues at 18-19 percent of GDP with tax rates no higher than 25 percent, the Ways and Means Committee will have to curtail or eliminate most tax exclusions, adjustments, deductions, and credits. That means that all consumed income will be taxed once and only once. No longer will the tax code favor one type of economic behavior over another.
Moves tax code from “worldwide taxation” to “territoriality.” The Ways and Means Committee is directed to shift our tax code from one which seeks to tax income earned all over the world to one which only seeks to tax income earned in America. This is known as “territoriality,” and it’s already been adopted by and large by our trading competitors. By retaining a worldwide tax regime, we’re exposing our own countries to double taxation–once when they pay the foreign nation’s income tax, and again when they try to bring the money home.
The National Debt has now increased more during President Obama’s three years and two months in office than it did during 8 years of the George W. Bush presidency.
The Debt rose $4.899 trillion during the two terms of the Bush presidency. It has now gone up $4.939 trillion since President Obama took office.
The latest posting from the Bureau of Public Debt at the Treasury Department shows the National Debt now stands at $15.566 trillion. It was $10.626 trillion on President Bush’s last day in office, which coincided with President Obama’s first day.
The National Debt also now exceeds 100% of the nation’s Gross Domestic Product, the total value of goods and services.
Mr. Obama has been quick to blame his predecessor for the soaring Debt, saying Mr. Bush paid for two wars and a Medicare prescription drug program with borrowed funds.
The federal budget sent to Congress last month by Mr. Obama, projects the National Debt will continue to rise as far as the eye can see. The budget shows the Debt hitting $16.3 trillion in 2012, $17.5 trillion in 2013 and $25.9 trillion in 2022.
[…]His latest budget projects a $1.3 trillion deficit this year declining to $901 billion in 2012, and then annual deficits in the range of $500 billion to $700 billion in the 10 years to come.
If Mr. Obama wins re-election, and his budget projections prove accurate, the National Debt will top $20 trillion in 2016, the final year of his second term. That would mean the Debt increased by 87 percent, or $9.34 trillion, during his two terms.
Paul Ryan interviews Richard Foster, Chief Actuary of the Centers for Medicare and Medicaid Services.
Excerpt of transcript:
HBC CHAIRMAN RYAN: As you may know, I’ve been working across the aisle with a member of the Oregon delegation from the Senate on a premium support plan that uses competitive bidding to help determine the contribution. Competitive bidding we’ve seen has worked well in Medicare Part D and Medicare Advantage. I’d like to get your thoughts on choice and competition as it relates to these previous successful reform plans. Given what we’ve seen in these aspects of Medicare, do you believe that competitive bidding is a process that can be successfully applied Medicare-wide?
CMS CHIEF ACTUARY FOSTER: Yes, I think it can. Obviously, it would represent a large change from the status quo, but I think it could work. We’ve seen the signs of this – you mentioned the Part D prescription drug program, for example, where the different drug plans compete against each other on the quality of their benefit package and the premium level. And we’ve seen – every year since Part D started – a migration of beneficiaries to more efficient plans with lower premiums. So that can help. We’ve also seen for durable medical equipment that competitive bidding, in this particular area of Fee-For-Service Medicare, reduced prices that we had to pay by 40 percent.
RYAN: By forty percent?
FOSTER: Forty percent, that’s right.
RYAN: Those are the kinds of cost savings we’re going to have to achieve if want to make good on the promise of the Medicare guarantee. This should not be a partisan issue. Competitive bidding is something Alice Rivlin has been a champion of, Ron Wyden has been talking about, the Bipartisan Policy Center, and more. There is a lot of data out there that competitive bidding when applied Medicare-wide can achieve the benefit of keeping these benefits going while attacking the root cause of cost growth.
It sounds to me like there is a real crisis, that Ryan has a plan to solve it, and that the person who is the most aware of the finances of these two entitlements agrees with Ryan.
Social Security
Paul Ryan interviews Stephen Goss, Chief Actuary of the Social Security Administration.
Excerpt of transcript:
HBC CHAIRMAN RYAN: If we do [nothing], then we have an across-the-board cut of about 23 percent that occurs in benefits. Is that correct?
SSA CHIEF ACTUARY GOSS: Exactly… The Commissioner standing at that time would simply have 77 cents available for every dollar of scheduled benefits, and would not be permitted to spend more than that. We do not have borrowing authority. So a decision would have to be made about who would get the money. We could have an across-the-board 23% cut immediately, or a Commissioner could say, ‘Well we’re not going to pay the March benefits in March. We’ll wait until April – wait until more revenues come in to allow full payment a month late.’ After a few months we would perhaps then have to start paying benefits twomonths late. So this would be a way that it could be handled. Of course, if people have to pay rent on time, that would be a difficulty. There’s no easy way out on this… We hope and pray that Congress would indeed act well before we ever hit the Trust Fund reserve exhaustion.
RYAN: Given that we have this abrupt 23% cut that occurs in law – current law – is it not wise so start reforming now, sooner, so that the distribution of the change is spread more broadly and evenly across income cohorts? Let me ask it this way: does that abrupt 23% cut hit current senior cohorts? A person who is turning 62, or 65 today – that affects them as well, correct?
GOSS: It certainly would. They would be at an older age at that time but clearly it would affect them. That is assuming that we wait and do absolutely nothing until that point.
RYAN: So if one provides reforms soon, could you not prevent these kinds of effects from hitting those current cohorts? Could you not phase reforms in gradually that prevent that 23% cut from happening so it doesn’t affect people who are currently in or near retirement? Could you structure reforms that prevent that from happening if you act sooner?
GOSS: Absolutely. We have a number of proposals – including yours Chairman Ryan – and many other proposals that would take exactly that approach. Our trustees and everybody who speaks on this has opined extensively about the value of acting sooner rather than later, so that we can have gradual changes phased in and we have more options if we act relatively soon.
In 2006, Nancy Pelosi was asked when she would be willing to fix these entitlement programs. Her reply? “Never. Is never good enough for you?“. Democrats hate children – they want to pile debt upon debt onto future generations, who will not even have mothers and fathers to take care of them. First they smash the family with no-fault divorce and same-sex marriage. Then they run up trillions and trillions of dollars in debt handing out bailouts and green energy grants to their election fundraisers. It’s sick.
WINTERY KNIGHT 