Rarely mentioned in the presidential race or the congressional mash-up at the pig trough is the most serious domestic issue facing this country — the financial tsunami that is surely coming within a few years if concrete actions aren’t soon taken to reform Medicare, Social Security, Medicaid and other major entitlement programs. Sometime this year, Medicare will begin spending more than it brings in via taxes, while the same point will be reached by Social Security in less than a decade. The Heritage Foundation summarizes the consequences of not acting now:
– The annual combined cost of the “big three” entitlements — Medicare, Social Security and Medicaid — will double from the current 8 percent of gross domestic product to 15 percent when today’s newborn graduates from college, to nearly 20 percent of GDP when today’s college graduate reaches retirement in 2050.
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– The unfunded future obligations of the federal government are now the equivalent of a mortgage of more than $50 trillion ($38.8 trillion of which is due to Medicareand Social Security). This translates into a financial burden of $170,000 for each American.
– Without reform of entitlements, balancing the budget would mean driving up taxes to European level within a generation at the risk of European economic stagnation.
One member of Congress, however, is thinking and acting seriously on this issue. Rep. Paul Ryan, R-Wis., has introduced a four-part package, the enactment of which would not only spark major progress toward restoring the government’s fiscal integrity but would also increase economic freedom and opportunity for all Americans.
Ryan’s package starts with tax reform that gives every taxpayer the option of using either the current system or a simplified code that uses a return the size of a postcard. The tax reform also includes replacing the current business tax with a consumption tax of 8.5 percent, which is half of the average for all industrialized nations.
The other three parts of the Ryan package are shifting ownership of health insurance coverage to individuals and families with a refundable tax credit, giving workers age 55 or younger the option of investing a third of their Social Security taxes in personal retirement accounts and giving states much greater flexibility to adapt the Medicaid program to their particular conditions.
It is not necessary to agree with each and every component of Ryan’s proposals. What is significant is that he is taking concrete action on the nation’s most critical domestic issue. It’s time others in Congress and on the campaign trail do likewise.
