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Are Cuts to Entitlements Inevitable?

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    Heritage Foundation Research Fellow Brian Riedl on why entitlement reforms are a necessity.

  • Duration 6:43
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We continue now with our special weeklong series entitlement nation.

While accounts those long sacred programs everybody -- relies on social security and Medicare.

Are set to run out of money if long term changes aren't made Heritage Foundation has come up with a reform plan they say will bounce -- federal budget while building better retirement security for all Americans.

Joining me now my -- a research fellow for the marriage foundation -- welcome to the show.

Glad to be here.

-- so you know and these programs Social Security Medicare.

They are facing up problems for their budgets right now big time deficits already Social Security goes bust in 25 years Medicare and thirteen.

I mean the crisis is here now I would say.

Can we save them by simply cutting -- -- cutting the benefits for Americans.

Well first.

Let me say it.

You could -- security goes bath and 25 years -- -- we have a trust fund with actual economic assets even last 25 years.

The reality is Social Security -- deficit now.

And the trust fund is just an -- the -- and at the IOU its.

There's no way to escape the reformers that we have to make to these programs.

If we -- to keep social security and Medicare and not change them at all we would have to put the middle class.

Eventually into with 63%.

Tax bracket -- in the upper class and small businesses into an 88% tax bracket.

That's if you make no changes to the program that is complete.

The unsustainable we can't -- that the taxpayers we can't do that our children and grandchildren -- into that well I mean.

And -- is here -- is that you have some kind of solution Heritage Foundation has come up with plants for both programs.

And I will work through this ad point by point because I feel like.

It's pretty and deep -- and I think people would like to hear about it.

First of all when it comes to Social Security reform the first thing you say.

Is that people should get a flat rate benefit greater than today's average benefit.

House so what does that mean.

What it means that eventually over the long haul as an over the last forty years.

We would convert Social Security into with that grant that would guarantee that every senior citizen is it earns at least 120%.

Of the poverty line.

But actually -- higher than the minimum benefit today.

No senior would have an income below a 120% of the poverty line.

But what that means is that the Warren Buffett's of the world wouldn't continue to be getting huge -- to -- there.

We would actually convert Social Security into a true insurance program and an insurance program focuses more on those in need it than those at that at the upper levels.

And the LU would go any higher -- benefits would be phased down for wealthier retirees.

And affluent retirees would receive no benefit at all so -- gets cut off and how fair is that big is they've been putting money in this program.

Well we're not talking about cutting off people who are pretty low what we're saying is.

For married couples earning a 1101000.

Dollars a year or more after retirement.

We're gonna see a slight reduction your benefits.

By that time we talk about people earning over a 165000.

Dollars.

You know it won't work work.

Under our plan they would not receive benefits keep in mind these are think these are low income individuals -- if we're gonna have to make our reforms of Social Security.

And we absolutely do have to -- I think it's better to start with the Warren -- of the world that it is a start with low income seniors.

Once you acknowledged full well that something's gotta give.

So something's gotta give and obviously you would tailor these benefits to assist you -- a much more a smaller proportion of the total population very interest thank.

Let's move now to your -- but here.

Or orally or if you are immutable right top it would be fewer people.

Well.

With the well being -- means testing would affect the upper 9%.

Hot the end of benefits would only be the highest 4%.

Lots of people who are suggesting reforms of this -- say that you gotta take the wealthiest folks out of it.

That is a common suggestion.

About Medicare for a second you've got some interesting things here to say to you see it should be -- defined contribution system what do you mean like a 401K.

Well what we're thinking of -- the same thing that most federal employees have been both members of congress enjoy.

We're senior citizens would be able to pick their own qualified plan bed -- suits them.

And then the government would it would pay a large portion of the premium for the senior citizen.

What you have there is choice and competition.

You turn patients into true consumer -- choice and competition brings down costs we have we can have programs that better tailor -- needs.

It'll cost -- over the long term while promoting choice in competition.

So you would have participation and cost by the people getting -- the benefits.

It would be so lowly paid for by the government nag you say this would help -- folks stronger health security for the poor house.

-- look -- Help everybody.

From from the both of the bottom we would actually.

-- outside of Medicare we would create a universal health care tax credit that would actually be largest for -- that the bottom.

It would make sure that they can -- sold off your take their employer health plan or they don't have an employer health plan.

Like if they're on Medicaid right now they would be able to pick their own health care plan that best suit them.

And the government would pay -- -- -- high proportion of the premium for them again you have choice and competition.

This is very different from the president's model our president wants to reduce Medicare spending by taking -- choices we want to reduce bank right.

By meter reading here Reuters I want that we don't have a lot of time left obviously -- -- totally refundable tax credit because a lot of people in this category would not have income.

To be -- correct.

Also you career plan would also have more -- would pay a higher share premiums very -- would pay.

Full Medicare premiums so again you're gonna staging this solution so that people who make less money have less money to call on would get more help from the federal government.

Brian what -- do we yet can you tell us that this will allow us to be debt free adding wind it wind -- these.

These programs become solvent and you're under your plan.

We balance the budget within ten years without raising a nickel in taxes on -- that plant and we -- he couldn't balance.

While eventually paying off that that the it's not pain free.

But if we want to preserve what's made this country great and preserve these programs for our children and grandchildren this is what it takes.

Are trying to keep the turbulent and if there are.

Thank you so much for your help today I'm sorry to cut you off we're just out of time thank you for explaining your plan very very -- thing.

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