The Republican Study Committee Budget on the Key Drivers of Spending and Debt
Any serious effort at balancing the budget will involve reducing spending on federal health care and Social Security
The House and Senate both have budget committees. And yet, neither chamber has released a budget this year. Against this backdrop, it’s refreshing to see the Republican Study Committee (RSC) continue its nearly 30-year tradition of producing an alternative conservative budget proposal. Titled “Protecting America’s Economic Security,” the RSC under chairman Kevin Hern (R-OK) and Budget and Spending Task Force chairman Ben Cline (R-VA) proposes to balance the federal budget, cut taxes, slash red tape, and boost work.
The growth in the federal debt is directly tied to increases in spending for entitlement programs and interest on the debt. Major entitlement programs, namely federal health care and Social Security, combined with interest on the debt will be responsible for 82 percent of projected spending growth over the next 10 years. Congress will also be confronted with two major deadlines within the 10-year budget window, the period Congress considers when developing budget proposals. Both Social Security’s and Medicare’s trust funds, accounting mechanisms that authorize Treasury to borrow funds to pay benefits that exceed incoming payroll tax revenues, are projected to be depleted before the end of this decade.
Here's how the RSC budget proposes to address the main drivers of federal spending and debt growth:
Modest Social Security Reforms. The RSC budget emphasizes that Social Security reform will require bipartisan support and highlights past examples of Republicans and Democrats working together to prevent indiscriminate benefit cuts while tweaking aspects of what’s now the federal government’s single largest program. While short on details, the RSC Budget proposes tweaks to the retirement age as well as reducing benefits for the highest income earners. While this detail is not included in the actual budget document, task force chair Rep. Cline has reportedly shared that “the retirement age would be increased at a rate of three months per year — but not for current or near-retirees — starting in 2026, until the retirement age reaches 69 for those turning 62 in 2033.”
Medicare Premium Support. In addition to championing smaller tweaks to Medicare to reduce costs, such as site-neutrality in payments and coverage of bad hospital debt, the RSC proposal would adopt a premium support model, structured to save both taxpayers and beneficiaries money. Premium support relies on market forces and competition to achieve cost savings, which is a more reliable way than the federal government tinkering around the edges of health care policy. Noticeably, this iteration of the RSC budget does not include an increase in the Medicare eligibility age, nor does it mention reducing subsidies for higher-earning beneficiaries (though premium support might offer a pathway to different levels of subsidization based on income). Those are disappointing omissions as Medicare eligibility policy should more closely align with Social Security’s eligibility policy since both programs target roughly the same population.
Singles out Old-age Entitlement Programs from inflation adjustment improvement. The RSC budget acknowledges that there is a more accurate inflation measure available than what most federal spending programs use now to adjust benefits. Shifting to this measure also happens to save taxpayers’ money by avoiding inflated spending that goes beyond compensating for how inflation affects purchasing power. The RSC proposes to adopt the more accurate chained CPI, except for two of the largest federal government programs: Social Security and Medicare. Chained CPI has already been adopted to adjust policies in the tax code and it’s overdue to shift to this measure across federal spending programs. It’s unfortunate that the RSC excluded this policy from affecting Social Security and Medicare as there’s no good policy reason to do so (albeit obvious political reasons exist).
Expands health care choices for small businesses and their employees. The RSC budget correctly identifies that “the exclusion for employer sponsored insurance (ESI)…is the primary reason why the U.S. has developed its unique health care system, in which the government has artificially made it cheaper for employers… to lock people in their present jobs and… handle health care negotiations for individuals, instead of increasing wages and giving people increased freedom.” The RSC proposes to allow employers of small businesses to provide their employees with a cash contribution toward the purchase of a health care plan of the employees’ choice. This proposal should go much further and allow all workers to choose their own health plans, regardless of whether their employer sponsors a particular plan. Individuals should decide how to make the most of their tax-advantaged benefit dollars. The proposal would also expand access to health savings accounts (HSAs) and address several regulations driving up the cost of health care.
Block Grants Medicaid and related health care subsidies. The RSC budget proposes five federal block grants to support state-based health care programs to provide subsidies and care for the diverse populations who are eligible for Medicaid, the Children’s Health Insurance Program and Affordable Care Act subsidies. The current state-federal matching grants design undermines political accountability and cost-effective policy choices. Block granting Medicaid and related health care subsidies to ensure the most vulnerable beneficiaries have access to needed care while encouraging efficiencies in care provision makes sense.
A Worthwhile Effort
Even if the RSC budget has a small chance of becoming law, it’s very much worthwhile for members of Congress to go through a budgeting exercise with the goal of identifying what it would take to balance the budget over the next decade. This can be particularly educational for members of Congress and constituents who mistakenly believe that cuts to unpopular programs like foreign aid and so-called woke spending will suffice to eliminate deficits. Any serious effort at balancing the budget will involve reducing spending on the largest and fastest-growing federal programs: Medicare, Medicaid, and Social Security. I applaud the Republican Study Committee on their efforts to include the largest spending growth drivers in their budget proposal. This is a good start, and we can’t stop there. We still have a long way to go.
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