Guest op-ed by David Walker, former Comptroller General of the United States.
The House passed the Build Back Better (BBB) bill despite the non-partisan Congressional Budget Office’s (CBO) report that it will not pay for itself and the non-partisan Tax Policy Center’s determination that it will raise taxes on the middle class. They just ignored President Biden’s promises and the likely inflationary impact.
More importantly, it is time for Congress to stop making new direct or indirect mandatory spending promises when the federal government does not know how it is going to keep the over $100 trillion in unfunded promises it has already made, including over $65 trillion for Social Security and Medicare. As a result, the Senate should reject the BBB.
The debt ceiling mechanism has clearly been a failure and needs to be replaced. The Congress and the President need to recognize this reality and put a mechanism in place that will enable the Congress and the President to make the tough tax and spending choices necessary to restore fiscal sustainability and ensure the long-term solvency of Social Security and Medicare over time.
According to the U.S. Government’s Consolidated Financial Statements, as of September 30, 2020, the federal government had about $102 trillion in liabilities and unfunded promises of which over $65 trillion relate to Social Security and Medicare. Both these numbers are growing much faster than the economy.
The 2021 Social Security and Medicare Trustee Annual Reports project that the combined Social Security Trust Funds and Medicare Hospital Insurance Trust Fund will go to zero in 2034 and 2026, respectively. If that happens, tens of millions of seniors will have their monthly Social Security benefits cut by 20 to 25 percent and hospitals will have their payments cut by 15 to 20 percent. Importantly, the projected Trust Fund exhaustion years are expected to accelerate in the next Annual Reports and the amount of needed cuts will grow over time.
Despite the above, some politicians want to create new or expand existing direct and indirect (e.g., tax expenditures) mandatory spending programs claiming they will “pay for them.” This is clearly the case in connection with certain tax and spending proposals in the pending “Build Back Better” plan.
Just paying for new expansions of government is not a prudent fiscal goal. The time has come to reject any new or expanded mandatory spending (e.g., entitlement) programs until Congress and the President have enacted reforms that will ensure the long-term solvency and sustainability of the combined Social Security programs and Medicare Hospital Insurance program. We also need to replace the debt ceiling with a more effective fiscal control mechanism.
To facilitate the enactment of needed fiscal reforms, the Congress and the President should support creation of a statutory Fiscal Sustainability Commission. That Commission should be comprised of qualified and respected Democrats, Republicans and Independents who would engage the American people on the need for structural fiscal reforms while seeking input from the public and key interest groups on potential reforms. The Commission would then make specific fiscal reform recommendations to the Congress that would achieve a stated percentage of public debt/GDP (e.g., 90 percent) by a date certain (e.g., 2030) while also ensuring the long-term solvency of the Social Security and Medicare programs. The Commission could also recommend a replacement mechanism for the debt ceiling. All the Commission’s recommendations should be guaranteed a vote in the Congress.
This Fiscal Sustainability Commission could be enacted as part of the Budget Reconciliation process or a debt ceiling bill. History shows that economic growth will slow, and inflation will get worse over time absent a restructuring of our nation’s finances. With rising inflation and the threat of stagflation on the horizon, the time for action to restore fiscal sanity and sustainability is now!
At least 27 of the required 34 states have already called for a limited Constitutional Convention under Article V to propose a fiscal responsibility amendment. These states already recognize that the federal government has lost control of the nation’s finances in ways that threaten the future of our country and families. Other states are poised to join the cause if the Congress does not change course and fails to propose such an amendment. Let us hope that they act before it is too late.