does. However, imposing direct limits on Medicare and Medicaid spending runs the risk of reducing either access to care or the quality of care, with potentially negative consequences for some people’s health. For the Medicare and Medicaid programs, there is a limit to how much cost containment can be achieved, without doing harm, and without reorganizing the nation’s overall health care system. In the medium term, major reforms that change incentives for providers and consumers, provide better information to both about costs and benefits, and reorganize health care delivery can both improve care and yield budget savings. Such reforms will ease the pain imposed by—and eventually perhaps obviate the need for—an overall budget limit for health spending.

Options for Social Security

The committee’s options for Social Security are among many that have received wide discussion. Unlike the options for health, it is possible to estimate their budgetary effects with a good deal of confidence. Absent policy changes, future spending for Social Security benefits and future payroll tax revenues are relatively predictable from data on population aging, work and retirement patterns, immigration, and trends in wages.

The range of options for Social Security is wide, and a set of frequently discussed and relatively incremental reforms can put the program on a financially self-sustaining trajectory. Moreover, there is precedent from the early 1980s for agreement on significant changes, although the adjustments required now to bring Social Security revenues and benefits into alignment over the long run would be larger than those adopted earlier.

The options the committee presents would eliminate the now-projected Social Security shortfall in different ways, showing how it is possible to preserve benefits scheduled under current law by increasing payroll taxes or what adjustments to the rate of the growth of benefits would be needed to avoid payroll tax increases. The committee’s options illustrate the broad range of choices available to keep Social Security solvent without changing the fundamental nature of the program. Restoring Social Security to solvency is not a prerequisite for putting the entire budget on a sustainable path, but it is desirable in itself and can make an important contribution to the broader goal of budget sustainability.

Options for Defense and Other Domestic Spending

In 2008, 56 percent of all spending (excluding interest on the national debt) was for programs other than Medicare, Medicaid, and Social Security.1 The hundreds of programs in this broad category address a wide range of goals pursued by the federal government: for national and homeland



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