Sometime next month the Senate will be forced to raise the federal debt limit beyond a record $12.1 trillion. While the current recession has exacerbated the problem, our rising national deficits are actually a structural problem a long time in the making. In the coming decades, the cost of Social Security, Medicare, and Medicaid benefits will leap from 8.4% of gross domestic product (GDP) to 18.6% of GDP—an increase of 10.2% of GDP. To educate Americans about our nation’s large and growing fiscal imbalance The Heritage Foundation has, since 2005, teamed up with the The Concord Coalition, The Brookings Institution, and former U. S. Comptroller General David Walker to encourage Americans to demand action through a Fiscal Wake Up Tour.

Today The Concord Coalition released four video briefings from top national experts on the fiscal challenges facing the country, including the one below from Heritage Vice President for Domestic and Economic Policy Studies Stuart Butler:


You can find many of the charts used in  Butler’s presentation in the  2009 Federal Revenue and Spending Book of Charts.

Last year 16 federal budget experts from seven think tanks (including: American Enterprise Institute, Brookings Institution, Concord Coalition, Heritage Foundation, New America Foundation, Progressive Policy Institute, and Urban Institute) issued a paper concluding:

  • Congress should enact a real long-term budget for Medicare, Medicaid and Social Security that would limit their growth, take them off auto-pilot, and curb their current ability in the budget process to pre-empt funds from other types of programs, such as defense.
  • Congress and the President should enact long-term budgets for Social Security, Medicare, and Medicaid and be required to review them every five years. The rules for the five-year review must include a trigger or action-forcing device that automatically make changes when projected spending exceeds budgeted amounts.
  • The long-run costs of these three programs should be made visible in the budget at all times and considered when decisions are made.

The Heritage Foundation further recommends:

  • Income-adjusting Social Security benefits to target needy seniors more effectively. This could be accomplished through “progressive indexing,” which would index initial benefit levels for middle-income and upper-income families to price inflation rather than wage growth, eliminating much of the increased Social Security costs driven by higher ben­efits. This would also target more benefit growth to lower-income retirees. If accompanied by an increase in the retirement age, progressive indexing could eliminate the entire Social Security shortfall.
  • Reducing the massive Medicare Part B and Part D subsidies for upper-income families. These programs are not social insurance: Enrollees did not earn their benefits with payroll taxes. Rather, they are large subsidies from taxpayers. Part B recently began modest income-relating. Long-term fundamental reform will likely involve bringing more choice and competition into health care, such as moving Medicare from a defined-benefit system to a defined-contribution system.
  • Converting Medicaid into a block grant to states would eliminate state incentives to overspend on Medicaid. Additionally, giving states more flexibility to craft different Medic­aid packages for different individuals based on their unique personal circumstances could save money while improving service delivery. State incentives to help individuals purchase long-term care insur­ance could also substantially reduce Medicaid’s bur­den insofar as these expenses are concerned.