The good news is that Congress recently passed a bill raising the debt ceiling and cutting future government deficits very modestly. The bad news is that the U.S. government remains on an unsustainable long-term path of fiscal insanity and insolvency.
After including the impact of the new debt ceiling agreement, the debt will still reach approximately 133 percent of GDP by 2033, over $52 trillion—almost $20 trillion above today. That will be the highest in our nation's history both in dollars and as a percentage of our economy. By 2033, interest on the debt alone will cost an eye-popping $1.4 trillion, far more than the government spends today on national defense or Medicare.
While we both agree the debt ceiling shouldn't be used for political leverage, we believe Congress needs to pass a major plan cutting future deficits and debt. Despite the gravity of the debt problem, Republicans and Democrats clearly seem unable to do so.
But some responsible Republicans and Democrats are having quiet conversations behind the scenes about what could possibly work. The two of us, both former congressional staff members from opposite parties, have discussed a framework of what could save this nation from potential bankruptcy. It will only work if both parties make politically painful concessions.
The first to look at are entitlements, which are expected to be over 14 percent of GDP throughout this decade. Social Security and Medicare came about in the same era when life expectancy was about 65 years old. Now overall life expectancy is in the high seventies. As currently structured Social Security will be insolvent in 13 years and benefits would be reduced automatically unless thoughtful reforms are not adopted before then.
One way to do this is to slowly raise the age at which high-earning people can receive benefits. This should be done in a very gradual approach and could not affect current or soon-to-be retirees. But it is fair to tell all 20-year-olds that they should not all expect to retire at 65?
Another step is adjusting the government's rate to calculate inflation for Social Security checks. The government has an overly generous way of calculating the rate because it doesn't always reflect seniors' inflation realities.
Medicare is also a huge driver of the deficit and there are ways to save there too. Medicare's hospital insurance funds will be depleted in just six years.
We can reduce the reimbursement rates to monopolistic Medicare Advantage insurance companies that treat the program as a cash cow and profit handsomely from it. And shouldn't high-income Medicare beneficiaries pay at least a modest amount for their medical costs after they hit a cap?
Both of us also agree on the need for a robust U.S. military, but there are opportunities for savings, especially with a Pentagon that has never passed a clean audit. We could improve Pentagon procurements and perhaps reduce military personnel to reflect the development of drones and autonomous vehicles. After all, there are no long-term pension and health care obligations for a drone that has served its country well.
The next step is modestly trimming parts of the size of the federal bureaucracy. We have 2 million federal employees and a near-record 7 million government contractors. We should make it easier to get rid of low-performing workers while providing very robust worker protections, including to safeguard our non-political civil service. That saves short-term salaries and long-term pension and health care obligations.
Finally, there is the subject of federal revenues. One of us, the Republican, has no interest in raising taxes while the Democrat has no appetite for cutting spending, especially entitlements. But no package can pass unless both spending cuts and new revenue are part of it. Spending cuts would have to be linked to revenue increases because Republicans have been burned before by promised spending cuts that never come.
Closing loopholes may improve economic efficiency and broaden the base of who pays taxes. We could also raise the Social Security wage cap. That would both cut the deficit and improve Social Security's solvency. Finally, Congress should also take a hard look at each provision of the $2 trillion Trump-era tax cuts before extending any of them in 2024, when they sunset.
None of this is easy, we know. It will require politicians to show significantly more courage than we have seen from the last generation of politicians from both parties. The two parties have fundamental disagreements about how to cut the deficit, but neither can do it alone. Both sides must compromise and take painful votes in order to make this happen. Sacred cows will be gored, and third rails touched. And some people will have to recommend policies that their friends may not like. The two of us have just done so.
Thomas Kahn is the longest-serving Democratic House Budget Committee staff director (1997-2016) in history. Kahn now teaches budget policy at American University.
G. William Hoagland is the longest-serving Republican Senate Budget Committee staff director (1982-2003) in history. Hoagland is senior vice president of the Bipartisan Policy Center.
The views expressed in this article are the writers' own.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
