1150 Seventeenth Street, N.W., Washington, D.C. 20036
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Email Event
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America's finances face massive challenges from rising entitlement costs. New legislation introduced by Representatives Jim Cooper (D-Tenn.) and Frank Wolf (R-Va.) seeks to create a bipartisan commission to correct our long-term fiscal challenges. The recession puts additional strain on entitlements as unemployment decreases revenues and more people claim benefits. The
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recession could cause Social Security to begin running deficits as early as 2011, years sooner than the previously projected date of 2017. The bill, Securing America's Future Economy Commission Act (SAFE), which has cosponsors on both sides of the aisle, would require Congress to vote up or down on each recommendation of the bipartisan committee rather than passing on issues.
At this event, Representatives Cooper and Wolf will outline SAFE's ability to improve America's finances. Henry Aaron of the Brookings Institution; AEI's Andrew G. Biggs; and Chuck Blahous, the executive director of President George W. Bush's Social Security Commission, will discuss the SAFE plan. AEI's Kevin A. Hassett will moderate.
| 9:15 a.m. |
Registration | |
| 9:30 |
Presenters: | U.S. Representative Jim Cooper (D-Tenn.) |
| U.S. Representative Frank Wolf (R-Va.) | ||
| 10:15 | Discussants: | Henry Aaron, Brookings Institution |
| Andrew G. Biggs, AEI | ||
| Chuck Blahous, Hudson Institute | ||
| Moderator: | Kevin A. Hassett, AEI | |
| 12:00 p.m. |
Adjournment |
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WASHINGTON, MAY 4, 2009--When it comes to addressing the entitlement cost crisis, "time is of the essence," Representative Jim Cooper (D-Tenn.) explained at an AEI event on April 29. Cooper and his Republican colleague Frank Wolf (R-Va.), recently introduced the Securing America's Future Economy (SAFE) Commission Act, a proposal that would require Congress to address the fiscal imbalance imposed by Medicare, Medicaid, and Social Security commitments.
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Representatives Frank Wolf (R-Va.) and Jim |
The sixteen-member SAFE commission--composed of administration officials, members of Congress, and outside experts--would hold town hall meetings across the country and form recommendations to balance the federal government's long-term fiscal obligations. These recommendations would be presented to Congress for an up-or-down vote, forcing members of Congress to go on record with their constituents and giving them cover to make difficult decisions.
Although Cooper and Wolf did not identify any specific recommendations that they would expect the commission to make, they underscored the scope of the impending crisis, which they estimated to be $56 trillion in unfunded entitlement obligations in coming years. "If Congress fails to act, America could lose its AAA credit rating by as early as 2012," Cooper asserted. If you "destroy the credit rating of the greatest country in the history of the world, you're not just playing with fire, you're playing with nitroglycerin." The size of federal commitments to health and pension entitlement spending, he said, make the government "a giant insurance company with side businesses in defense and homeland security."
Despite the difficulty of the task they have set for themselves, both congressmen were optimistic about the possibility of reform. "I believe that this would bring about an economic renaissance in our country," Wolf said. Success, he added, will depend on having "credible and convincing leaders" and adequate resources for the commission and its staff.
Following the congressmen's presentation, AEI resident scholar Andrew G. Biggs, the former principal deputy commissioner of the Social Security Administration, discussed population aging as the primary driver of entitlement growth in the short to medium term. While many argue that health care inflation is the predominant cause of entitlement growth, Biggs explained that, properly analyzed, "over the next 20 years, population aging will account for over 60 percent for total entitlement spending increases. It is not until 2045 before healthcare inflation becomes the predominant driver of entitlement costs." He explored this topic further in a 2008 Health Policy Outlook.
The Hudson Institute's Chuck Blahous added that the fiscal consequences of the current economic downturn have made these changes more urgent. "When you put our near-term difficulties together with our long-term trends, you see some very disturbing phenomena." The disappearance of the Social Security surplus is the most noteworthy example, which has resulted from increased retirement payouts to baby boomers and sagging payroll tax revenues.
An alternative picture of the projected spending crisis was presented by Henry Aaron of the Brookings Institution, who asserted that "it would be wrong-footed from the very beginning [to] describe [the fiscal challenges] as an entitlement problem. It isn't a 'Social Security, pensions, and other entitlements' problem. . . . It is a 'public spending on health care' problem." Focusing on spending projections for various entitlement categories, he pointed out "the projected deficit, eliminating Medicare and Medicaid impacts, is in the vicinity of 1 percent of GDP. There's not a big problem there." To address problems with health care spending, Aaron urged "systemic health care reform" accompanied by additional deficit reduction, including spending reductions and tax increases.
The panelists agreed that a SAFE commission could be a useful tool for addressing the entitlement crisis. However, Biggs cautioned that any panel would need to "represent the reasonable spectrum of opinion on the issues." Blahous identified characteristics of successful past commissions, explaining that past panels agreed about the scope of the problem, contained a bipartisan appointment mechanism, involved outside experts in the decision-making process, resisted outside pressure from special interest groups, and counted on behind-the-scenes assistance from the administration. Aaron agreed with Blahous's criteria but argued that the necessary consensus on the causes of future deficits has not yet been reached. Aaron also criticized the SAFE proposal for inviting "a minority of the commission, as few as five members, to authorize projections based on alternative economic assumptions." He also remained leery of a panel whose success would be based on long-term projections: "I can't think of a better way to hang up a commission." Before anything can be done, Aaron said, "we have to wait for the economy to improve, and we absolutely require presidential leadership in order to deal with this problem."
--AMY RODEN
Speaker biographies
Henry Aaron is the Bruce and Virginia MacLaury senior fellow in economic studies at the Brookings Institution, where he was director of economics studies from 1990 to 1996. Mr. Aaron has written extensively on health and retirement issues, budgetary issues, and tax policy. He chaired the 1978 Advisory Council on Social Security and the board of directors for the National Academy of Social Insurance, taught at the University of Maryland, and conducted affiliated research with the Center for Retirement Research at Boston College. Mr. Aaron currently serves on the board of directors for Abt Associates and the Center on Budget and Policy Priorities.
Andrew G. Biggs is a resident scholar at AEI, specializing in Social Security and retirement policy. He previously served as the principal deputy commissioner of the Social Security Administration (SSA), where he oversaw SSA's policy research efforts and led the agency's participation in the Social Security Trustees working group. In 2005, he worked on Social Security reform at the White House National Economic Council, and in 2001, he was on the staff of the President's Commission to Strengthen Social Security. Mr. Biggs has written about Social Security reform for numerous publications including the Wall Street Journal, the Washington Post, and the Christian Science Monitor. He is also the author of AEI's Retirement Policy Outlook series.
Chuck Blahous is a senior fellow at the Hudson Institute, specializing in domestic economic policy. His areas of expertise include retirement security, with an emphasis on Social Security and employer-provided defined benefit pensions, as well as Federal fiscal policy, entitlements, demographic change, economic stimulus, financial markets, housing, tax, and energy issues. Previously, Mr. Blahous served as deputy director of President George W. Bush's National Economic Council. From 2001 to 2007, he served as a special assistant to the president for economic policy, first covering retirement security issues and later also encompassing energy policy. In 2001, Mr. Blahous served as the executive director of the bipartisan President's Commission to Strengthen Social Security, cochaired by Dick Parsons and the late Senator Daniel P. Moynihan (D-N.Y.), which submitted a unanimous report to President Bush in December 2001. From 2000 to 2001, Mr. Blahous led the Alliance for Worker Retirement Security, a private-sector coalition dedicated to fiscally responsible reform of Social Security. From 1996 to 2000, he served as policy director for Senator Judd Gregg (R-N.H.), staffing the senator's cochairmanship of the National Commission on Retirement Policy, as well as the senator's initiatives in retirement and health care reform.
Jim Cooper (D-Tenn.) represents Tennessee's Fifth Congressional District. He has been in the House of Representatives since 2002 and has served on the Armed Services Committee and the Government Reform Committee. Along with Representative Frank Wolf (R-Va.), Representative Cooper introduced the Securing America's Future Economy Commission Act, with cosponsorship from over one hundred members of the House. Representative Cooper has been involved in reform efforts on federal oversight and earmarking, including cosponsoring the Bipartisan Earmark Reform Commission Act in 2008. He also teaches a graduate health policy course at Vanderbilt University's Owen School of Management.
Kevin A. Hassett is the director of economic policy studies and a resident scholar at AEI. He is also a weekly columnist for Bloomberg. Before joining AEI, Mr. Hassett was a senior economist at the Board of Governors of the Federal Reserve System and an associate professor of economics and finance at Columbia Business School. He was an economic adviser to the George W. Bush campaign in the 2004 presidential election and was the chief economic adviser to Senator John McCain during the 2000 presidential primaries and the 2008 presidential campaign. He has also served as a policy consultant to the U.S. Department of the Treasury during both the former Bush and Clinton administrations. Mr. Hassett is a member of the Joint Committee on Taxation's Dynamic Scoring Advisory Panel. He is the author, coauthor, or editor of six books on economics and economic policy, including Toward Fundamental Tax Reform (AEI Press, 2005). He has published scholarly articles in the American Economic Review, Economic Journal, the Quarterly Journal of Economics, the Review of Economics and Statistics, the Journal of Public Economics, and many other professional journals. Mr. Hassett's popular writings have been published in the Wall Street Journal, The Atlantic Monthly, USA Today, the Washington Post, and numerous other outlets. His economic commentaries are regularly aired on radio and television, including recent appearances on the Today Show, CBS's Morning Show, The NewsHour with Jim Lehrer, Hardball, Moneyline, and Power Lunch.
Frank Wolf (R-Va.) represents Virginia's Tenth Congressional District and is currently serving his fifteenth term in the House of Representatives. He serves on the Appropriations Committee and is the leading Republican on the Commerce-Justice-Science Subcommittee. Representative Wolf also serves on the Transportation, Housing and Urban Development Subcommittee. Along with Representative Jim Cooper (D-Tenn.), he introduced the Securing America's Future Economy Commission Act, with cosponsorship from over one hundred members of the House. Representative Wolf has sponsored previous versions of this legislation.
