With U.S. debt projected to grow more than 275 percent by 2035, the nonpartisan Peter G. Peterson Foundation asked six think tanks to find ways to address the nation’s long-term budget challenges. Below are details from plans that will be unveiled at a fiscal summit the foundation is hosting Wednesday in Washington.
America must change course. Unless we act, Social Security, Medicare and Medicaid will consume all taxes in about four decades. We believe the key is to transform the relationship between the federal government and individuals in a way that restores individual opportunity and national prosperity.
That requires a single, flat-tax rate that collects revenue without economic distortions; that is simple and that encourages investment. This would give Americans greater control of their economic futures while promoting the capital formation needed for job creation.
Our plan refocuses Social Security and Medicare into real insurance programs that protect seniors from poverty while no longer debt-financing benefits for the rich. Over a five-year period, our plan transforms Medicare into a defined-contribution system, with stronger health security for the poor. Unlike today’s traditional fee-for-service Medicare, we would guarantee new protections against catastrophic costs for all enrollees.
Today, many low-income seniors apply for welfare because the Social Security benefit is too low. We propose moving toward a flat benefit greater than today’s average benefit; this would keep everyone well above poverty. At the other end of the scale, we phase down this flat benefit for the 9 percent of most affluent retirees, and end checks for the top 4 percent with the highest non-Social Security incomes.
This fairer, more focused income-adjusting of benefits replaces today’s unfair means testing — where the IRS taxes the benefits of half of all seniors, including those with incomes of as little as $15,000.
As for Medicaid, we empower recipients by helping able-bodied beneficiaries buy private insurance.
Heritage puts all three entitlement programs on real budgets. Our plan balances the federal budget within a decade. It shrinks the debt sharply and helps Americans build better retirement security.
AMERICAN ENTERPRISE INSTITUTE
Plan developed by Joseph Antos, Andrew Biggs, Alex Brill and Alan Viard; does not represent the institutional views of AEI
Our plan addresses the long-term fiscal imbalance while promoting limited government and economic growth. The plan fundamentally reforms the tax code while aggressively cutting federal spending to hold down the debt.
On health care, the plan restrains spending and promotes individual choice. Medicare is converted to a premium support program and the tax break for employer-provided health insurance is replaced by a refundable tax credit to buy insurance, with the largest subsidies going to those with greater financial need or higher health risks. Medicaid is converted to a block grant program, giving states greater flexibility, accompanied by greater responsibility.