When it comes to the outrageous expansion of the federal debt, neither political party comes out unscathed. In January of 2001, the debt was $5.7 trillion. Now, after 8.4 years of a Bush-Obama spending spree, it stands at $11.4 trillion, with Congressional Budget Office estimates putting it at 82% of GDP by 2019 if the current course is sustained. The threat of fiscal calamity is now undeniable, revealing to every American, with stark clarity, the necessity to address the nation’s fiscal crisis.
Entitlement programs, such as Social Security and Medicare, are those social welfare programs provided to all, irrespective of the circumstances. They represent the single largest component of the budget, at more than 42%, and their 2007 costs alone totaled $1.2 trillion—more than double the defense budget. And as the baby boomer generation enters into the forefront of Social Security and Medicare, those programs will take an even larger bite out of the budget than they do now.
Entitlements have long been known as the “third rail of American politics,” for they could electrocute an individual’s candidacy when touched. But in order to stem the tide of the ever-increasing federal debt, serious action must begin by way of entitlement reform. We must fix the third rail to prevent fiscal calamity.
Social Security: Social Security is on the road to bankruptcy. Last year then-Treasury Secretary Henry Paulson declared the program “financially unsustainable” and in dire need of reform. And it needs it. Badly.
Modifying Social Security is both essential and complex. In sum, the program should first become means-tested, where individuals have to qualify for benefits. Next, Americans who meet certain criteria should be eligible to opt out and instead build up their own individual retirement accounts (IRAs), such as 401K’s. Given the current direction of Social Security, the chances of younger Americans, particularly those under the age of 45, having anything left and therefore wishing to continue to benefit from the program will be virtually nonexistent, enabling it to be phased out.
Medicare: Medicare provides medical services to America’s senior citizens regardless of income. In 2003, President Bush and Congress instituted additions which will swell costs by as much as $1.2 trillion in ten years, according to the Washington Post. These additions constitute what is known as the Medicare Part D prescription drug benefit which, in short, provides a subsidy to the prescription drug costs of the nation’s seniors.
The layman’s solution to Medicare lies in slapping a grandfather clause on Part D, meaning that those who are currently not on the program will not receive expansionist Part D benefits; in making Medicare means-tested; and in allowing qualified individuals to opt out of the program if they so choose. After all, why should Bill Gates get his healthcare paid for by the government after he turns 65?
Whether or not a person qualifies for entitlement benefits should rely upon several factors, principally income level but perhaps also including yearly expenses, savings and the number of dependents. The switch to a means-tested structure should pertain solely to those who are currently under the age of 45 or 50; that way, those who are already anticipating on receiving Medicare and Social Security benefits soon or who paid into the system for years will get them. Greater reform in the healthcare industry must then occur for those under that age through free-market approaches, not a brand-new entitlement program, and IRAs must be greatly encouraged.
These are just a few starting points, but if the government takes serious action to implement the above proposals, we will at last be able to see a glimmer of hope for the debt—and for the next generation—without damaging the economy with tax increases or cutting benefits for those in need.