Federal Budget

A Balanced Approach to Restoring Fiscal Responsibility

Rather than spending time trying to hammer out complex budget procedures of dubious merit and effectiveness, policymakers should focus on actual steps they can start taking to reduce projected deficits by slowing the growth of health care spending throughout the U.S. health care system while also reforming Medicare, closing the Social Security shortfall, and raising more revenue. While policymakers may not yet be ready to address such matters fully, they can begin by seeking “grand bargains” involving changes in both the big spending programs and taxes, including the changes suggested below. To be sure, some of these changes will be difficult to enact on their own. But, in the spirit of “shared sacrifice” as exemplified by the deficit‐reduction packages of 1990 and 1993, these measures may be achievable as part of overall deficit‐reduction packages. (Note: Not all signatories to this statement favor all of the following measures, but all favor at least a majority of them.)

• Adopting recommendations of Congress’ Medicare Payment Advisory Commission, which could generate substantial savings;
• Increasing the Medicare premiums that affluent beneficiaries pay;
• Instituting vigorous research programs to determine the comparative effectiveness of different health care treatments and procedures as well as what is causing the huge differences in health care costs across the country, and using the results as the basis for new policies to restrain health care costs without compromising health care quality;
• Curbing or eliminating outdated or unproductive tax expenditures;
• Switching to the Bureau of Labor Statistics’ alternative, more accurate Consumer Price Index in computing the annual cost‐of‐living adjustments in Social Security and other entitlement programs (while taking steps to shield low‐income and other vulnerable beneficiaries) and the annual inflation adjustments in the tax code;
• Reforming farm price supports; and
• Adhering to Pay‐As‐You‐Go rules for both increases in mandatory programs and tax cuts.

While, taken together, these proposals would have a substantial effect on future deficits, policymakers will need ultimately to enact more extensive measures to achieve long‐term fiscal sustainability.