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Our Federal Budget is In Trouble- Here’s How We Fix It

Entitlement reform must be a priority for federal legislators.

Ryan Olson, Advocate Editor

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The “American Dream” is built on the premise that an individual who works hard can live with stability and comfort.  Essential to this vision are core government programs like Social Security and Medicare, enacted to protect the economic security of American citizens.  However, with mandatory entitlement spending eating up more and more of our federal budget, the future of these programs is in jeopardy.  In order to preserve these programs for generations to come and balance our federal budget, entitlement reform must be a priority for federal legislators. Safety net programs have been around for nearly a century.  The Social Security Act, for example, was signed into law by President Franklin D. Roosevelt way back in 1935.  The purpose of the program was to guarantee a stable income for retirees of age 65 and older.   The baby boom of the late 1940’s provided a stable source of revenue for funding mandatory programs like Social Security.  In 1965 for example, mandatory Social Security spending accounted for only 2.4% of US gross domestic product.  Today, Medicare and Social Security rack up a combined 10.1% of our GDP.  Further troubling is the fact that these figures are expected to continue rising in the near future.  The Congressional Budget Office estimates that Social Security spending will total approximately 1.5 trillion dollars by 2025 and mandatory health care spending will near 1.9 trillion.  Mandatory spending already accounts for 60 percent of the federal budget.  If this trend continues, the US will have to significantly increase revenue by raising taxes, or settle for less discretionary spending on the military, infrastructure investments, state grants, etc.  Neither of these options would be ideal.  Luckily, there are options that can reduce the long term costs of these programs, and/or generate more revenue to balance our budget and protect the future of important safety net programs:

 

  1. Eliminate the Payroll Tax Cap-  Under current legislation a multibillionaire pays the same amount into social security as someone making $118,500/year.  This is due to the payroll tax cap.  The effect of the tax cap is that someone making $1,000,000,000/year only pays social security taxes on $118,500 of their income.  Eliminating the payroll tax cap would increase revenue for Social Security and help stabilize the future of the program.

 

  1. Raise the Retirement Age-  Raising the retirement age would help reduce the cost of Social Security.  Life expectancy has increased since the program’s creation, but the age of retirement has never been changed to reflect us living longer.  Critics of this action argue that it could leave low income seniors without a safety net in between when they leave their job and reach the official age of retirement.  This is a valid criticism.  However, the federal government could remedy this problem by amending federal legislation to allow jobless persons between age 60 and the retirement age to collect full unemployment benefits until they retire.

 

  1.  Raise the Minimum Wage-  It sounds strange to suggest this as a remedy to solve our federal budget problems, but the reality is that when consumers have more disposable income, they pay more tax revenue and are less likely to be reliant on federal programs like Medicaid.  This would reduce the cost of these programs while simultaneously increasing revenue.

If the federal government wants to ensure the protection of entitlement programs for generations to come, we must take immediate action to reduce their rising costs and increase federal tax revenue.  Entitlement reform is needed, and it is needed now.

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Our Federal Budget is In Trouble- Here’s How We Fix It