Conservative Principles Now

Our nation is on an unsustainable fiscal course. The three major entitlements – Social Security, Medicare, and Medicaid – alone are set to eclipse historical tax levels by 2052 and a realistic assessment of the Congressional Budget Office baseline shows the government piling on an additional $13 trillion over the next ten years.

The time for pointing out the existence of a problem is over. Both Democrats and Republicans now agree entitlement reform must be a top priority. The question now is what exactly the inevitable reform will include. Specifically, does Congress drastically raise taxes and allow spending to skyrocket or do they maintain spending and revenue at historical levels?

This afternoon Congressman Paul Ryan (R-WI), along with several other House Republicans, held a press conference presenting the updated “Roadmap for America’s Future.” The bill, introduced today, would return the nation to a sustainable fiscal path without raising taxes. The proposal, which has been scored by the non-partisan Congressional Budget Office accomplishes this by focusing on four specific areas for reform:

First, the Roadmap would give universal access to health care by providing a substantial tax credit to enable individuals to purchase their own insurance, allowing for the purchase of insurance across state lines and creating state-based high risk pools to provide those with pre-existing conditions affordable health care options.

Second, the bill would reform Medicare specifically focusing on preserving existing benefits for those over 55 and ensuring future generations of elderly citizens have access to affordable care. Fully funding Medical Savings Accounts for low income beneficiaries, and creating a Medicare payment of $11,000 to purchase Medicare approved plans would contain costs and ensure coverage for generations to come.

Third, the legislation would put Social Security spending on a sustainable course by offering citizens the choice to invest in personal retirement accounts comparable to the Thrift Savings Account used by federal employees. This in combination with slightly increasing the retirement age will finally set Social Security on a sustainable path.

Finally, the bill would reform the tax code by implementing a simple two tier tax system. Individuals with income up to $50,000 and households with income up $100,000 would pay 10 percent. Those with higher income would pay 25 percent. The Roadmap also eliminates the alternative minimum tax, the death tax and the corporate income tax. The corporate income tax, which is currently the second highest in the world, is replaced with an 8.5 percent business consumption tax.

These bold reforms mark an important departure from the Washington norm of ignoring the looming fiscal crisis. In the past politicians avoided entitlement reform in an effort to steer clear of a potential political backlash. Congressman Ryan’s Roadmap confronts entitlement reform head on and proves Congress does have the option to return the nation to a fiscally sustainable course without increasing taxes.

From the President who brought you unaccountable, constitutionally-questionable czars comes the latest innovation in pass-the-buck leadership: a White House executive commission designed to solve the behemoth of a spending problem plaguing the federal government.  Members of Congress have described the commission as a “nothing burger,” a “fig leaf” and “something that is put in place to kind of cover [President Obama’s] rear end.” Colorful critiques aside, it’s an executive commission tasked with making policy recommendations aimed at reducing the country’s projected $1.4 trillion deficit.

News of the commission follows the Senate’s debate this week on the increase of America’s debt limit by a whopping $1.9 trillion, which would raise Congress’ theoretical credit card limit to $14.3 trillion. That’s a legal necessity if the federal government wants to keep borrowing more money.  The key word is “wants,” since the only return on the borrowed money is out-of-control discretionary spending and an expansive entitlement system with no responsible fiscal future.  Congress must address the entitlements crisis if it wants to honestly address the root cause of our future debt problems.

Due to rising costs in Social Security, Medicare and Medicaid, federal spending will cause the debt to grow to 300% of the economy by 2050. In total, the entitlement programs have promised $45 trillion more in benefits than the country can afford to pay.  But hey, we can just raise taxes right? Raising taxes to fund these benefits would require an additional $12,072 per household by 2050 and further thereafter, which would create a tremendous burden on families and future generations. Cutting spending will not be sufficient to pay for the programs, as they will consume the entire federal budget by 2052.

And if you think today’s economy is bad, you’ll really dislike what the future has in store.  If Congress does not immediately address its long-term debt problem, America will face a fiscal crisis far worse than what we’ve seen in the past two years. Publicly-held debt must not grow faster than the economy if it is to be sustainable; otherwise the demand on capital markets would be so severe that private and foreign lenders would stop buying U.S. securities. Yet the United States is still on an unsustainable course.

Enter the executive commission. The Wall Street Journal describes its component make-up: “The 18-member commission will include six people appointed by congressional Democrats, six appointed by congressional Republicans and six appointed by the president. Of the president’s six, two will be Republicans and four will be Democrats.”

This veneer of budget-fixing bipartisanship will no doubt make for a lovely rhetorical flourish at the President’s January 27 State of the Union Address, where it will likely serve as a centerpiece in his argument that he is making serious efforts to tackle out-of-control spending.

But as The Heritage Foundation’s Stuart Butler explains, the commission would be inherently flawed and ineffective, given that it lacks the accountability and “public consultation” necessary to gain popular support for any reforms it recommends: “The commissioners would be chosen from a pool of potentially lame duck Members of Congress, with a report due after the election and recommendations to be crammed through and voted on by the end of the year in a lame duck session. If this process were actually successful, it would virtually guarantee a back-room “Andrews Air Force Base” deal consisting of immediate and real tax hikes combined with distant and doubtful spending cuts.”

There’s a deeper truth at work here: a commission to study budget reform is an unnecessary measure designed to keep one’s hands clean while another does the dirty work. In reality, there’s nothing stopping Congress or the President from acting on their own accord and bearing the mantle of responsibility that the public has placed on their shoulders. In short, they have the power – but evidently not the will – to take serious steps to cut spending and reduce the deficit that this year exploded to “26 percent of the economy.”

They could start with canceling TARP, capping discretionary spending growth (which has increased by 25 percent over the last three years), and returning to federal spending levels of just a decade ago.  These fiscally prudent steps would immediately signal the American public that Congress comprehends the crisis.  At that time, Washington could undertake serious entitlement reform that puts America on a fiscally responsible path forward.  Understanding you have a problem is a good start, but a lame duck commission is not the solution.

Quick Hits:

• According to the AP, “the number of newly laid-off workers seeking jobless benefits unexpectedly rose last week, as the economy recovers at a slow and uneven pace.”
• The New York Times attempts to rationalize why so many college professors are liberal by blaming “typecasting” in this morning’s edition, and also blames William F. Buckley and conservatives themselves.
• 200,000 Haitians could apply for Temporary Protected Status to live and work in the United States, starting Thursday. Their status would allow them to remain the United States for 18 months. They must first prove they were in the United States before January 12, when the earthquake struck Haiti.
• The United Nations Intergovernmental Panel on Climate Change (IPCC) has retracted its earlier 2007 claim that the Himalayan glaciers were likely to disappear by 2035. The IPCC now says there is little scientific evidence to back up their claim.
• For the first time in the history of the Index for Economic Freedom, the United States is no longer in the top category of economically free countries and is even second in the North American region (behind Canada). This year’s score of 78, though high in global standards, is 2.7 points lower than last year and bumps the United States to a second-tier country of freedom. For more, visit www.JobsAndFreedom.com.