Here is an article from a presentation by Congressional Budget Office Director Douglas Holtz-Eakin. He looks at it as a fiscal analyst, tasked with non-partisan analysis of the Federal budget.
Article in brief: Medicare/Medicaid is a much bigger and more immediate problem than SSec; the current private-account proposal has not been specified and can’t be analysed, but private accounts as discussed so far will not solve the financial problems; he believes the private-account issue is a policy issue, not a financial one; the 2006 presidential budget only addresses reductions on 17% of the federal budget; and there are major long-term budget problems.
"Even so, he said, there are good fiscal reasons for discussing Social Security before Medicare because its problems are easier to address, and simply opening the debate focused the nation’s attention on its long-term budget outlook. "
Here is the transcript.
Excerpts: "the system will become an increasing drag on the federal budget beginning in about 2020, when benefit payments start to exceed revenue from payroll taxes…
“the Social Security debate so far had focused on policy, not financial issues, raising the question of whether the nation wants a pension-like Social Security program or something more like a 401(k) plan. … There are arguments on both sides.” …
"Because the administration has not yet proffered a specific Social Security proposal, there is no “full-fledged plan that one could evaluate in any deep and meaningful sense,” he said.
"On federal budget matters, Holtz-Eakin stressed that the nation faced a fiscal crisis in the coming decades largely because of the explosive growth of federal health programs, particularly Medicare for seniors and Medicaid for low-income Americans.
"Currently, Medicare and Medicaid spending equals about 4 percent of the entire U.S. economy. Because health care costs are growing much faster than the overall economy, federal health benefit spending will balloon to about 12 percent at some point in the future, creating a financing burden that can’t be sustained, he warned…
"Holtz-Eakin called permanent tax cuts “a big deal” that would subtract about $200 billion a year in revenues down the road. However, he added, “It’s one finger in a dike with so many holes that (allowing the cuts to expire) won’t stop the long-term problem.”
"He added, “As a matter of simply arithmetic, you really do have to look at the spending side.”
"Holtz-Eakin noted that the spending controls proposed in the president’s 2006 budget addressed only a small a slice of federal outlays – so-called discretionary spending – and would be insufficient to ward off future shortfalls. Because the president exempts defense and homeland security from cuts, his plan focuses reductions on just 17 percent of the federal budget, Holtz-Eakin said. …
"Holtz-Eakin said he saw reasons for optimism because he sensed a much greater willingness by Congress to confront long-term budget problems. "
Please see article and transcript before they age off the Web.
The difference between policy decisions and financial ones makes it clearer for me, as I have been feeling the financial proposals somehow “not right”, especially since there is no concrete financial proposal. As a policy matter, it makes a more proper discussion.
So, for the Debate issue, is the Administration being off-target to address Social Security while keeping silent on Medicare (seniors) and MedicAid (the poor) (both involving the health industry, with their political clout)?
And what should we, as citizens, ask our representatives to work on?