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Opinion

How to reform entitlements and save the American dream – without raising taxes

The Heritage Foundation budget plan shifts Social Security benefits to a needs-based insurance program. It ditches Obamacare and changes Medicare to a 'premium support plan.' And it simplifies the tax code.

By Curtis Dubay / June 21, 2011



Washington

America must get its fiscal house in order. The Congressional Budget Office estimates that, absent action from Washington, our national debt will be nearly as big as our entire economic output in just 10 years. By 2035, debt will be up to nearly double what we produce. No economy can stay afloat with that much red ink.

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So what would you say about a reform plan that balances the federal budget in 10 years, cuts the national debt by more than half in 25 years, saves Social Security and Medicare from bankruptcy, and preserves the American dream for generations to come – all without jacking up taxes? It’s no pipe dream. It can be done.

An analysis by federal budget experts at the independent Tax Policy Center (a joint venture of the Urban Institute and Brookings Institution) found that a new fiscal reform plan developed by my colleagues at The Heritage Foundation accomplishes all that, and more.

How do we do it? First and foremost by reforming the biggest drivers of government debt: entitlement programs like Social Security and Medicare.

A problem of demographics

For decades, politicians have made entitlement promises that taxpayers can’t afford to keep. These programs tax today’s workers to pay benefits to retirees. The problem is, the politicians keep promising better and better benefits, even as the number of retirees increases faster than the number of people paying for them.

The problem is simple demographics. Back in 1960, there were five workers for every retiree. Today there are three workers for every beneficiary. In less than 20 years, the ratio will be two-to-one. There are simply not enough workers to pay benefits at current levels for the onslaught of Baby Boomer retirees now starting to enter the system. And retirees are living much longer, even as health-care costs are spinning out of control.

Recognizing these problems, our plan transforms Social Security and Medicare into real insurance programs, rather than the open-ended entitlements they are today.

Social Security benefits only to those who need them

We provide financial security to retirees and guarantee assistance to people who need it. Our plan does not lock in benefits for those who have no need for them, nor does it raise taxes to make sure the Bill Gateses of the world can get subsidized health care. Instead, government payments for the well-off are reduced, but their taxes, and their kids’ and grandkids’ taxes, are not raised. We keep government smaller and taxes lower.

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