Restoring Fiscal Sanity 2005

Restoring Fiscal Sanity 2005: Meeting the Long-Run Challenge

Copyright Date: 2005
Pages: 146
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  • Book Info
    Restoring Fiscal Sanity 2005
    Book Description:

    The retirement of the baby boom generation will create spiraling costs for health care and pension programs. Combined with lower revenues, these developments will lead to a decline in economic growth if nothing is done. In this second volume of Restoring Fiscal Sanity, a group of policy experts focus on how to bring spending and revenues in line over the next decade, and even more important, how to balance them over the longer term. They suggest reforms in the tax system, Social Security, and Medicare that might close this looming gap and put the nation on a sounder fiscal footing.

    Contributors include Henry J. Aaron, William G. Gale, Ron Haskins, Jack Meyer, and Peter R. Orszag (Brookings Institution), Rudolph G. Penner and C. Eugene Steuerle (Urban Institute), and John B. Shoven (Stanford University).

    eISBN: 978-0-8157-9779-1
    Subjects: Political Science, Health Sciences

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Foreword
    (pp. ix-x)
    Strobe Talbott

    One of the staples of American public debate is concern over the solvency of Social Security, the complexity of the tax code, the rising cost of health care, deficits in the federal budget, the nation’s escalating debt to Asian central banks, and other perceived threats to our economic future. It is hard—but important—for citizens to evaluate the seriousness of these issues or the efficacy of the various proposals offered to solve them. This book is designed to help in that regard. It forecasts future pressures on the federal budget and offers a guide for judging the pros and...

  4. Acknowledgments
    (pp. xi-xii)
  5. Overview
    (pp. 1-16)

    Sometimes good news poses hard choices. Over the next several decades Americans will be forced to make difficult decisions necessitated by the good news that people are living longer and that medical care has become far more effective (albeit more expensive) than ever in history. These choices will require adjustments by almost everyone—families, communities, employers, and older people themselves—but they will be most starkly evident in the federal budget.

    More than two-fifths of the federal budget is currently devoted to Social Security, Medicare, and Medicaid. Increased longevity, the retirement of the large baby boom generation, and rapidly increasing...

  6. 1 Dimensions of the Budget Problem
    (pp. 17-34)

    The nation is headed for a fiscal train wreck. Unless entitlement growth is curbed or tax burdens are raised to unprecedented levels, exploding deficits will threaten economic stability—probably within two decades. In the shorter run the deficit outlook is not as dire, but deficits are large enough to have a corrosive impact on economic growth. Moreover, it would be beneficial to keep the public debt as low as possible, to provide flexibility as budget problems grow in the future.

    An aging population and rapidly rising medical costs will lead to budget problems in the future. Social Security, Medicare, and...

  7. 2 The Size and Role of Government
    (pp. 35-54)

    Americans face serious budget choices over the coming decade and far more daunting ones afterward. This chapter first examines three illustrative plans for achieving balance in the unified budget over the next ten years and then turns to the options for meeting the larger, longer-term challenge: how to balance the budget as the population ages and medical care grows more effective and more expensive. As the baby boom generation retires, average life spans continue to increase, and medical costs continue to rise, federal spending will accelerate rapidly unless current policy changes drastically. There are only three choices. Americans can reduce...

  8. 3 Social Security
    (pp. 55-72)

    Social Security plays an important role in the lives of senior citizens. Social Security benefits represent an important source of income for most recipients, and an essential one for some; benefits account for more than half of total income for about two-thirds of beneficiaries over age sixty-five. At the end of December 2004, the average monthly benefit for retired workers was $955, and the average for retired couples was $1,574. Social Security also affects the nation’s finances. On the revenue side, Social Security will collect about $600 billion in payroll tax revenue in 2005, accounting for more than a quarter...

  9. 4 Health
    (pp. 73-98)

    Projected increases in federal spending on health care programs account for most of the anticipated gap between taxes and spending over the next few decades. The gap is so large that cuts in other government programs cannot plausibly close it. The remaining alternatives are to cut Medicare and Medicaid benefits sharply or to accept huge tax increases. Efforts to eliminate waste and improve efficiency should be pursued and may yield sizable savings, but the savings will not be enough to avoid difficult choices. The problem is just too large, and transforming existing medical practices will take many years.

    That challenge...

  10. 5 Tax Policy Solutions
    (pp. 99-118)

    Taxes play a central role in long-term fiscal issues. Thelevelof revenue collected must ultimately be sufficient to finance the chosen level of spending. Likewise, thestructureof tax policy has far-ranging effects on the economy, similar to the structure of spending programs. This chapter is a guide to reforms that, in our view, could improve the structure of taxes and could align revenue levels with different chosen levels of spending.¹

    The fundamental goals of tax policy appear to be widely accepted: taxes should be simple, transparent, stable, and fair; encourage economic prosperity; impose minimal costs on the economy;...

  11. 6 The Politics of Deficit Reduction
    (pp. 119-138)

    Addressing the fiscal challenges facing the country in 2005 and beyond is daunting. Fundamental disagreements exist about what government should do and how to pay for it. Most Democrats are eager to preserve Social Security and Medicare more or less intact, as well as to protect the social safety net for low-income families and a host of other programs that are a legacy of the New Deal and the Great Society. Most Republicans, on the other hand, would like to keep tax rates low, limit the size and scope of government, and return to individuals more responsibility to provide for...

  12. Contributors
    (pp. 139-140)
  13. Index
    (pp. 141-146)
  14. Back Matter
    (pp. 147-148)