Here are this week’s reading links and fiscal facts:
Debt is a national security threat. With interest costs projected to exceed defense spending this year, the Senate unanimously recognized deficits as “unsustainable, irresponsible, and dangerous.” As Romina Boccia and Dominik Lett explain, “A dire fiscal crisis would erode the economic foundation of America’s strength, limiting U.S. capacity to defend its vital interests at home and abroad.” While the passage of the resolution is nonbinding, “recognizing that you have a problem is the first step toward solving it,” notes Reason’s Eric Boehm. Next up, recognizing that Social Security and Medicare are driving the long-term budget challenge, and turning words into action through a well-designed fiscal commission.
Congress must cut federal spending. With federal debt and deficits at critical levels, Cato’s Chris Edwards proposes cuts in all categories of federal spending. “[F]ederal deficits are so huge that policymakers should find savings in all types of spending [...] Cutting federal spending should not be seen as a necessary evil but as an opportunity to reform government. Spending cuts would spur growth by freeing up resources for the private sector. Cuts would also reduce federal policymaker overload, and they would enhance liberties and diffuse political divisions by decentralizing power,” writes Edwards.
Congress should restrain emergency spending. The Friday passage of a second discretionary funding bill for Fiscal Year 2024 featured $2.5 billion in questionable emergency designations mostly targeted at foreign policy issues. This comes on top of ten billion dollars in unjustified emergency designations passed earlier this month. Notable line items included half a billion dollars for law enforcement salaries and $8 billion for rental assistance. Still, the final $13 billion emergency funding represents a step forward from the $37 billion that was proposed back in September. Congress should justify emergency designations and offset associated deficit spending.
The RSC Budget includes Social Security reforms. In its FY 2025 budget plan, the Republican Study Committee (RSC) proposes Social Security changes that include reducing benefits for higher earners “who are not near retirement,” increasing the retirement age to better align with increases in life expectancy, and gradually reducing auxiliary benefits (i.e., benefits for family members) for high-income individuals. The American Enterprise Institute’s Andrew Biggs estimates that these changes would only address 15% of Social Security’s $25 trillion unfunded obligation. Nevertheless, Biggs lauds the effort: “[T]he RSC took on the dangerous issue of reforming Social Security, standing up not only to Democrats looking to demagogue the issue but to former President Trump’s efforts to duck the issue [...] If you don’t want the biggest tax increase in history, those are the sorts of things you have to do.”
Increase the Social Security eligibility age. According to the National Center for Health Statistics (NCHS), “Life expectancy for the U.S. population in 2022 was 77.5 years, an increase of 1.1 years from 2021.”The eligibility age for Social Security must also be increased. As Boccia explains, “By encouraging individuals to retire sooner than they otherwise would, Social Security reduces labor force participation, which suppresses growth. Congress should raise the early and full Social Security eligibility ages by 3 years each (to 65 and 70) and index both to increases in longevity. These are both small and common‐sense reforms that preserve the original goals of the Social Security system and reduce its burden on current and future taxpayers.”