Column first appeared in the Wall Street Journal
By Gary W. Loveman
Chairman, President & CEO, Caesars Entertainment Corp.
Chair, Business Roundtable Health and Retirement Committee.
The fiscal cliff has been averted, preventing immediate economic calamity. But for long-term economic growth, we must get serious about entitlement reform and government spending.
In December, I joined more than 170 CEOs of America's leading companies to call upon President Obama and Congress to demonstrate principled compromise and put America on a path toward fiscal stability by increasing revenue, modernizing entitlement programs, and reducing overall spending.
They acted on the first part by increasing revenue. But they delayed action on spending reforms that are essential if we are to address our nation's deficits and debt.
The math on debt is clear: Medicare, Medicaid and Social Security consume 42% of the federal budget and are projected to account for half of the budget by 2020. Addressing debt and deficits means tackling the projected spending growth without undermining the retirement security that Americans rely on.
The good news is that Americans are living longer, healthier lives. Yet Gene Steuerle of the Urban Institute notes that current policy is leading to a future where one-third of Americans will be retired and will spend one-third of their lives in retirement. Nobody anticipated this development. Medicare and Social Security, as currently structured, cannot deliver on their ever-increasing promises to future retirees.
CEOs have incomes and retirement plans that will stand us in good stead in the future. But many Americans depend on Medicare and Social Security programs for a dignified retirement. Failure to adjust them now to address demographic realities puts the important safety net of these programs at risk.
As America's CEOs call upon our elected leaders to agree to structural entitlement reforms, we also offer our help in the form of recommendations for gradual changes that would stabilize and improve Medicare and protect Social Security for current retirees and for future generations.
- The basic eligibility age for Medicare and Social Security should be gradually increased. Acting now means we can avoid drastic and abrupt changes in the future.
- Medicare beneficiaries should be allowed access to expanded private health-care options within Medicare that will encourage competition on quality and cost while reducing fraud and wasteful spending.
- Medicare and Social Security benefits should better target those most in need. This would include means-testing eligibility for high-income individuals and providing a new minimum Social Security benefit that ensures that career workers will receive benefits that keep them out of poverty.
- About one in four state and local government workers is exempt from Social Security payroll taxes. Congress and the White House should eliminate that special exemption for all new state and local government workers (as was done for federal workers after 1983).
- Congress and the White House should fix the technical problems with the Consumer Price Index methodology by moving to a chained price index that better accounts for consumer responses to price changes and more accurately reflects what consumers actually pay. The short-term impact on Social Security benefits would be small, but over many decades the more accurate measure of inflation would dramatically improve the program's finances.
Even though most of these modernization initiatives would be phased in gradually, the immediate benefits would be enormous. First, they would put Medicare and Social Security on the sound financial footing needed to provide a sustainable retirement safety net. This would represent a major step forward in reducing the growth of government spending.
Most important, spending reforms that begin to address America's unsustainable budget deficits would send a signal to U.S. consumers, business owners and the world that our political system can make the tough decisions. The result? New investment that spurs economic growth and creates jobs.
Keeping the U.S. economy from careening over the fiscal cliff was a first step, but our elected leaders must not stop there. Although economic recovery has been stalled, renewed expansion is possible if conditions are set in a comprehensive budget agreement that includes entitlement reform and long-term changes to reduce deficits. In this way will we ensure the viability of the health and retirement safety net for future generations of Americans.