Tuesday, January 10, 2017

New paper: “A long-term budget for entitlements and required revenues.”

A long-term budget for entitlements and required revenues

Stuart M Butler and Maya MacGuineas January 9, 2017

Entitlement programs in America have a long-term effect on the country’s fiscal and economic condition, but today’s budget-making procedures fail to provide an orderly pathway for helping to resolve disputes about long-term fiscal goals and commitments to Americans.

In “A long-term budget for entitlements and required revenues,”  Stuart M. Butler and Maya MacGuineas propose a procedure to establish a long-term budget for entitlements, and revenues to sustain them, as part of a reformed federal budget process. The procedure for enacting and revising the long-term budget would have two elements:

  • Element 1: Congress would enact a 25-year spending plan for the major entitlements, along with a clear funding plan to cover their cost. A long-term budget would also include tax expenditures. The funding plan could include dedicated taxes (e.g., a payroll tax), other revenues, or specified savings from other programs. The long-term budget would be the default for these areas of spending and revenues unless Congress made explicit changes during a formal review conducted every four years after a presidential election.
  • Element 2: To maintain the long-term budget as the default, we propose an “inside-outside” approach. A commission chosen by Congress and the president would regularly design and implement a package of spending and/or revenue adjustments to keep the long-term budget on track; but a bipartisan and bicameral congressional super-committee could develop an alternative package which would take effect if enacted using an expedited procedure.

1 comment:

WilliamLarsen said...

“Congress would enact a 25-year spending plan for the major entitlements, along with a clear funding plan to cover their cost.”

Why not use the same requirement as that required of business? Why use 25 years when the nature of Social Security is entire generations with three potentially working at the same time? This does nothing to solve the funding problem. It is a charade, smoke and mirrors to appease the workers that they are doing something, but in reality it does nothing.

“While the goal of protecting seniors is very important, the concern is that the current form of entitlement status is disproportionate and has been leading to an alarming level of unfunded long-term obligations, imperiling the economy and the financial security of future generations.”

Who is more important to protect; the unborn, those who are not old enough to vote, workers or seniors?

“Treat projected spending on entitlements, tax expenditures, and the identified tax revenue needed to support them in a similar way and at the same time as other budget items, which would be good politics as well as good budgeting practice.

Put these major parts of the budget on a more level playing field with other priorities, requiring Congress to make choices among competing priorities within a more evenhanded budget process.”(/b>

Social Security and Medicare have dedicated tax revenues and do not have authority to borrow. This is far better than the General Budget which currently has a $19 Trillion + debt.

“Each year CBO would calculate and publish a 10-year “moving average” for the major categories of entitlement spending and sustaining revenues, based on actuals for the previous five years and CBO projections for the next five years. This moving average would be used to determine whether spending or revenue trends were departing from the long-term budget outside the “corridors” (see below) sufficiently to trigger an automatic adjustment procedure.”

You do not need to do the ten year moving average to determine if the spending and revenue trends are departing. I did this in 1975 and found they were. They have accelerated every year since 1940! It does not take a rocket scientist to figure out that as birth rates decrease, wage growth increases and Treasury rates decrease and the legacy debt that revenue and expenditures are diverging at more than $1 Trillion dollars a year in actuarial terms.

This is not worth the electrons used to generate the document. Total waste of energy.