It's amazing how sequences in Washington can repeat themselves.
Congressman Chaffetz (R-UT) has just proposed a Social Security reform plan to restore solvency to the program. The plan relies on reforms to the benefit side of the equation and calls for slowing the growth of benefits for higher-earners, increasing the numbers of years over which benefits are calculated, fixing the cost-of-living calculation by switching to the chained CPI, and enhancing benefits for lower-income earners and the very old, among other changes.
As is well-known by now, the growth in entitlement programs fueled by rising health care costs and an aging population threatens an ever-increasing national debt. Our largest mandatory spending programs occupy nearly one-third of the federal budget and, in the coming years, payments out of these programs will continue to outpace the rate of growth in the overall economy. As such, serious entitlement reforms will have to play a role in a comprehensive approach to long-term debt reduction, along with other areas of the budget, in order to get our fiscal house in order.
Social Security beneficiaries will see a raise in their benefits next year, resulting from a 3.6 percent cost-of-living adjustment (COLA) increase. The last time seniors saw such an increase was 2009, when they received a 5.8 percent bump in their Social Security checks.
CBO's latest Social Security projections bring no surprises to anyone familiar with the state of the program's finances. CBO projects the program to face a shortfall in the 2030s, with permanent cash flow deficits.
Clutch Goals -- The U.S. Women’s Soccer team scored an improbable victory over Brazil on Sunday in the Women’s World Cup, overcoming a scoring and manpower deficit with a last-minute goal and sealing the victory through penalty kicks. A similar storyline is playing out in Washington involving a different deficit -- the federal budget deficit. It looks as if negotiations to raise the statutory debt limit and reduce the deficit will also come down to the wire.
Coverage of the so-called "chained CPI" has been heating up recently, due to rumors that it might be included in the latest round of debt negotiations.
As we explained in our recent analysis of CBO's Long-Term Budget Outlook, the debt is on an unsustainable path. Only a decade from now, under their Alternative Fiscal Scenario, debt will surpass 100 percent of GDP. And by 2037, it will exceed 200 percent.
Driving this is the increasing cost of entitlement spending -- Social Security, Medicare, Medicaid and (to a lesser extent) other health spending. But what drives the growth of these programs?