According to Article Solutions for America: The Entitlement Crisis, what does the Heritage Foundation’s Issue Brief recommend as the chief reason for why entitlement spending must be reined in? Do you agree or disagree, and why?Vol. 3 August 17, 2010The Entitlement CrisisTHE ISSUE: EntitlementsSocial Security, Medicare, and Medicaid threaten to bankrupt the nation. The unsustainable tsunami of spending on these programs will accelerate as 77 million baby boomers flood into them. Unlike other parts of the federal budget, such as defense or most education programs, Congress does not review and approve the level offunding for these programs annually orever. Rather, their expansion is on autopilot, fueled by demographic changesand rapidly rising health care costs.

We are reaching a budgetary tipping point as entitlement spendings automaticfirst call crowds out other national priorities. Recentstudies show that Americas long-term fiscal situation isone of the worlds worst, which makes reforms even moreurgent if we are to avoid the fate of Greece or even Britain.But entitlements are also a moral challenge. It is simplywrong to make unsustainable promises to todays adults byshackling our children and grandchildren with crippling debtor heavy taxes.THE FACTS:Ever-Higher Spending. Without reforms, these programs will more than double the historical average offederal spending from 20% of the economy to nearly50% in just two generations.Lack of Budget Control. The United States is the onlymajor country that does not subject these programs toreal budgets and budget control.Doubling Taxes. Raising taxes to pay for these uncontrolled promises is not an option. Congress would haveto double federal Income tax rates on the next generation and continue to raise taxes in a futile attempt tokeep up with spending.New Revenue, New Spending. Even if higher taxeswere thought to be part of the solution, the experienceof Obamacare and previous programs demonstrates thatnew revenue simply encourages new spending.Mortgaging Our Future. U.S. debt exceeds $13 trillion,but we would have to take out the equivalent of a mortgage of $63 trillion to cover the future debt costs ofthese entitlements. Each persons share of that hiddenmortgage now exceeds $200,000.THE SOLUTIONS:Tell Us the Truth and Fix the Way Congress SpendsOur Money. First and foremost, the age of entitlements must end. Rather than allow these programs tobankrupt us on autopilot, Congress should set firm andenforceable budget caps for Medicare, Medicaid, andSocial Security. Put these programs on a firm, long-termbudgetsay 30 yearsand require Congress to reviewthese budgets regularly. Triggers or other mechanismsshould be deployed to enforce budget limits if Congressfails to act. Entitlement obligations should be disclosedprominently in the annual budget resolution. Beforeenacting major new policy changes, Congress shouldshow their true costs by considering the long-term budgetary implications. Today, Congress looks only at thefirst 10 years. When lawmakers do pass reforms, savingsshould be banked rather than spent on other programs.Fix Medicare. Establish a new Medicare definedcontribution system as we transition away fromtodays costly and inefficient fee-for-service system.This means deciding as a nation how much we wantto spend instead of todays open-ended promises.New retirees, just like federal workers, would receiveheritage.org/solutionsEntitlementsEntitlements are one of the greatest domestic challenges the nation faces. This product is part of the EntitlementsInitiative, one of 10 transformational initiatives in our Leadership for America campaign.5Entitlements Will ConsumeTax Revenues by 2052Entitlements Will Consume All Tax Revenues by 2052If future taxes are held at the historical average, spending on Medicare, Medicaid, and Social Security will consumeall revenues by 2052. Because entitlement spending is funded on autopilot, no revenue will be left to pay for othergovernment spending, including constitutional functions such as defense.PERCENTAGE OF GDP2052: Entitlements 18.2% of GDP25%24.0%Tax 30-Year Average TaxRevenue Revenue: 18.2%20%SocialSecurity15%10%Medicare2.7%5%Medicaid0196519751985199520052015Source: Congressional Budget Office.a government contribution to purchase the health insurance that best meets their needs. The contribution, orpremium assistance, would be capped but reviewedperiodically. An individuals contribution would be adjustedaccording to income and underlying medical condition.Fix Medicaid. The current system is unaffordable,imposes huge costs and unfunded mandates on states,and is poorly suited to the needs of patients or doctors.Healthier families should be allowed into private healthinsurance with their share of Medicaid money. We needpatient-centered care to give the disabled, elderly, andtheir families a say in the care and services they receive.Medicaids long-term care benefit must be transformedfrom an open-ended entitlement to an insurance-basedmodel of private coverage as part of a general strategy toboost long-term care insurance.Fix Social Security. To boost savings, we need toinclude a system of voluntary personal accounts withinSocial Security. The system as a whole should be madesolvent by transforming the remainder of Social Security2025203520452055206520752083heritage.orgto real insurance, focusing benefits on those who reallyneed them during retirement while strengthening thesafety net for poorer retirees. As Americans live longerproductive lives, the retirement age should be raised andindexed to future increases in longevity. Incentives suchas removing payroll taxes for workers over the retirementage should accompany these changes. Another important step is to improve the indexation of past earningsused to calculate Social Security benefits and establishing a more realistic cost-of-living adjustment that betterreflects changes in a retirees cost of living.Increase Retirement Savings. Automatic enrollment,whereby workers are automatically enrolled in employersponsored retirement savings but allowed to opt out,should be expanded, and automatic IRA, a simple payrolldeduction system that small businesses would offer toemployees, should be created. Workers should be encouraged to include annuity-like products, which ensurethat they will not outlive their savings, in their retirementplans.Solutions for America is a product of Heritages Leadership for America campaign. Our mission is to formulate and promote conservative public policiesbased on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense.6