Imagine your family's finances if you spent and borrowed like Washington: you'd owe $60 in credit-card loans for every $100 of income. Every month you'd pay back a little but borrow even more. In 10 years, you'd owe $87 for every $100 you made. At some point you'd hand off the debt to your kids. If they worked until 2035, they'd owe more than $180 for every $100 they earned. In 2050, your grandkids would owe more than $320. By 2080 they'd owe seven times their earnings. Of course, lenders would cut them off well before then, and your family would be ruined. But this is the path your government is on right now.
Today, our country faces a fiscal meltdown—and Washington's continued cowardice is a big part of the problem. The social-insurance strategies of the 20th century—Medicare, Medicaid, and Social Security—are driving our federal government and economy to collapse. It's long been obvious that we're ill prepared for the retirement of the baby boomers. Now, the recession and Washington's recent spending spree have accelerated the day of reckoning.
Consider just one program: Medicare. Today, this program is short $38 trillion of what it promises to provide your parents, you, and your kids. In five years, the hole will grow to $52 trillion. Your family's share: $458,000. Medicaid will add trillions more in state and federal debt.
Social Security's surplus is already gone, and its debt is mounting. Without shoring up its finances, the government will be forced to cut benefits nearly 25 percent or raise payroll taxes more than 30 percent.
Both Republicans and Democrats share the blame for failing to be candid about the difficult choices we face and for continuing to make promises that cannot be kept. Some apparently have no sense of shame about shaking a tin cup at China and Japan.
I've put forward a specific solution to meet this challenge, a plan the nonpartisan Congressional Budget Office says can achieve its goals of paying off government debt in the long run—while securing the social safety net and making possible future economic growth. I call it "A Roadmap for America's Future." If followed, this is what will happen:
You, not your government or your boss, should own your health plan. The Roadmap replaces a tax break that benefits only those with job-based health insurance with tax credits that benefit every American. It addresses the key drivers of rising health-care costs, securing universal access to quality, affordable health coverage.
Everyone 55 and over will remain in the current program. For those now under 55, the Roadmap turns Medicare into a health-care program like the one enjoyed by members of Congress. Future seniors will receive a voucher and will be able to choose from a list of Medicare-certified insurance plans that best suit their needs. The government subsidy will provide additional support for those with lower incomes and higher health costs.
Everyone 55 and older will remain in the existing program with no change. My plan offers those now under 55 a choice: continue to take part in traditional Social Security or join a retirement system like Congress's own plan. Future seniors will be able to invest more than a third of their payroll taxes in savings accounts they will own. These accounts will be guaranteed and managed by the federal government—not by a private investment firm. For both Social Security and Medicare, eligibility ages will gradually increase.
PRO-GROWTH TAX REFORM
To get the economy going again, the Roadmap offers the option of a simple, low-rate, two-tier personal income tax, eliminating loopholes and the double taxation of savings and investment. Corporate income taxes will be replaced by a simple 8.5 percent business consumption tax. (For specifics on these and other reforms, go to americanroadmap.org.)
Critics say that any attempt to cut entitlements is tantamount to political suicide. Nonsense. Most Americans see such reforms as common sense. It makes sense to gradually increase the eligibility ages for Social Security and Medicare—Americans are living decades longer than when these programs were first enacted. It also makes sense to tie benefits to income so that those with fewer resources receive more support. Arguing in favor of "means testing" Medicare premiums, House Majority Leader Steny Hoyer, the respected Maryland Democrat, put it well late last year: "We have to buck up our courage and say that if we try to take care of everybody, we won't be able to take care of those who need us most."
One frequent charge against these reforms is, however, correct: the Roadmap does shift power to individuals at the expense of government control. It rejects the merits and sustainability of a cradle-to-grave welfare state, which drains individuals of their self-reliance. The plan unapologetically applies our nation's founding principles—individual liberty, limited government, and free enterprise—to the challenges of today. And the Roadmap does this in a way that honors our historic commitment to strengthening the social safety net for those who need it most.
I welcome the debate on how to tackle our fiscal crisis—and the larger debate on the proper role of government. But I'd encourage those taking aim at the Roadmap to arm yourselves with a specific alternative. My dad used to say, "Son, you are either part of the solution or part of the problem." (That was usually when I was being part of the problem.) Now we must make the same demand of politicians in Washington: Don't patronize the American people as if they were children—deferring difficult decisions and promising fiscal fantasies. Tell the American people the truth and offer them a choice, and they will do what's right.