The Age of Entitlements Must End

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HERITAGE FOUNDATION — The latest Democracy Corps poll, performed by Democratic pollsters Stan Greenberg, James Carville and Bob Shrum, shows that by a 64% – 29% margin, the American people believe that things in this country “have gotten pretty seriously off on the wrong track.” But nobody seems to have bothered to tell President Barack Obama who, on the second-to-last leg of a $4 million fundraising trip for Democrats, told a group of supporters in Columbus, Ohio: “Slowly but surely, we are moving in the right direction. We’re on the right track.” And that wasn’t the most completely divorced-from-reality statement that the President made yesterday. Responding to a question about Social Security, the President insisted: “So here’s the thing. Social Security is not in crisis.” Oh yes it is.

The debate about whether Social Security needs to be fixed is over. The 2010 Social Security Trustees Report, released on August 5, shows that the program will run cash-flow deficits in both 2010 and 2011 due to the effects of the recession. Then in 2015, Social Security will begin to inflict massive permanent annual deficits on American taxpayers. And Social Security is just one of the Big Three entitlements (Social Security, Medicare and Medicaid) that is set to bankrupt our country. Unless major reforms are made, spending on just these three programs alone will consume all federal government revenues by 2052. According to the International Monetary Fund, over the next 20 years the United States will experience the second highest projected increase of all the G20 countries in health care and pension spending as a share of GDP.


If we really want to get our nation back on track, one of our top priorities must be to end the age of entitlements. Under current law, Congress does not review and approve the level of funding for these programs annually or…ever. Rather, their expansion is on autopilot, fueled by demographic changes and rapidly rising health care costs. Unless major reforms are made, these entitlement programs will crowd out all of our other national priorities. The Heritage Foundation’s Solutions for America chapter on The Entitlement Crisis recommends:

Put These Programs on a Budget: Congress should set firm and enforceable budget caps for Medicare, Medicaid, and Social Security. Put these programs on a firm, long-term budget—say 30 years—and require Congress to review these budgets regularly. Triggers or other mechanisms should be deployed to enforce budget limits if Congress fails to act.

Fix Medicare: Establish a new Medicare “defined contribution” system as we transition away from today’s costly and inefficient fee-for-service system. New retirees, just like federal workers, would receive a government contribution to purchase the health insurance that best meets their needs. The contribution, or “premium assistance,” would be capped but reviewed periodically. An individual’s contribution would be adjusted according to income and underlying medical condition.

Fix Medicaid: Healthier families should be allowed into private health insurance with their share of Medicaid money. We need patient-centered care to give the disabled, elderly, and their families a say in the care and services they receive. Medicaid’s long-term care benefit must be transformed from an open-ended entitlement to an insurance-based model of private coverage as part of a general strategy to boost long-term care insurance.

Fix Social Security: To boost savings, we need to include a system of voluntary personal accounts within Social Security. The system as a whole should be made solvent by transforming the remainder of Social Security to “real insurance,” focusing benefits on those who really need them during retirement while strengthening the safety net for poorer retirees. Incentives such as removing payroll taxes for workers over the retirement age should accompany these changes.

Increase Retirement Savings: Automatic enrollment, whereby workers are automatically enrolled in employer-sponsored retirement savings but allowed to opt out, should be expanded, and automatic IRA, a simple payroll deduction system that small businesses would offer to employees, should be created.

President Obama told his supporters in Columbus yesterday that Social Security only needs “some modest adjustments in order to strengthen it.” It is exactly this type of head-in-the-sand denialism that has caused the vast majority of Americans to believe that our nation is “pretty seriously off on the wrong track.” Ending this country’s entitlement mentality is not just an economic challenge, but a moral one. It is simply wrong to make unsustainable promises to today’s adults by shackling our children and grandchildren with crippling debt or heavy taxes.

The Heritage Foundation is the nation’s most broadly supported public policy research institute. Their mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense.