REFINING THE BUDGET PROCESS
June 26, 2006
The federal government spent $2.5 trillion in 2005, or about 20 percent of gross domestic product and 33 percent more than it spent in 2001. However, the bigger concern is that Social Security, Medicare, and Medicaid spending will explode when the baby boomers retire, doubling the total federal budget to nearly 50 percent of GDP by 2050.
Congress has no plan to pay for these promises, and the budget rules actually hide the total cost from Congress and the voters, says Alison Acosta Fraser of the Heritage Foundation.
- In 2005, unfunded Social Security and Medicare obligations totaled $36 trillion.
- When public debt and other traditional federal liabilities are included, the total U.S. federal debt is over $46 trillion -- the equivalent of a $375,000 home mortgage for every full-time worker in America, but without the house.
Consequently, Congress should act now by:
- Imposing responsible fiscal management on the budget process; annual federal financial statements should fully disclose the unfunded obligations of entitlement programs, not just the debt and other traditional liabilities.
- Requiring that annual budget planning recognize changes in long-term liabilities and obligations; proposals to add or expand entitlement programs should include a measure of the long-term budgetary implications.
- Adopting a limit for federal liabilities and obligations; this would work like the debt limit, which lets Congress incur public and intergovernmental debt (e.g., the Social Security Trust Fund) up to a limit.
Congress should change the federal budget process to reflect changes in long-term liabilities and obligations as the first step in addressing $36 trillion in unfunded entitlement obligations, says Fraser.
Source: Alison Acosta Fraser, "Federal Budget Should Include Long-Term Obligations from Entitlement Programs," Heritage Foundation, Executive Memorandum #1004, June 22, 2006.|
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