This week, we have a special Thanksgiving edition of Facing the Future, taken from a recent Concord Coalition panel discussion held at Fresno State University in California, moderated by Concord field director Phil Smith. Phil and the panelists focused on some of the major challenges facing our economy and the federal budget over the next 30 years, such as growing deficits in Social Security and Medicare that are on a path to insolvency hin just a few years; combined with declining American birth rates as nearly 80 million baby boomers become eligible for retirement benefits.
Featured on the panel were Brian Riedl, Senior Fellow at the Manhattan Institute focusing on budget, tax and economic policy. He previously served on the staff of retiring Ohio Republican Senator Rob Portman, as well as the Senate Finance Subcommittee on fiscal responsibility and economic growth. Riedl discussed entitlement reform. Concord Coalition policy director Tori Gorman focused on projected lackluster economic growth and how immigration reform could help. We were also joined by Adam Shifriss, the Senior Director of Legislative Strategy for the Committee for a Responsible Federal Budget. Adam proposed ways we can raise more revenue equitably and efficiently.
Riedl presented information showing that the expected combined deficit in Social Security and Medicare over the next 30 years is $116 trillion. He says the problem this will cause for the rest of the budget is way too big to eliminate simply using some popular proposals such as taxing the rich or cutting defense spending.
“If we were to just say we’re going to raise taxes to close the gap, your choices would be to raise the payroll tax from 15% to 33%, or you could raise all income tax rates by 18%, or you could impose a 30-40% national sales tax. Those are pretty brutal,” said Riedl. “Those who say – well, just tax the rich – maybe we should tax the rich, but it’s not going to close the whole gap. Even if you seized all billionaire wealth in existence, you would only fund about nine months of government spending. Even if you imposed 100% tax rates on everybody earning $500,000 or more, you still wouldn’t close the gap. Even if you eliminated the entire defense department – not cut but eliminated – you would only close about half the gap.”
Instead, Riedl says the only way to really solve the problem of funding Medicare and Social Security is for everyone to feel a bit of pain, and one thing he says we will absolutely need to dig our way out of this debt hole is more revenue. On the question of revenue, Adam Shifriss of the Committee for a Responsible Federal Budget says we need a better revenue strategy over the next 30 years.
“Raising revenue can distort the economy and harm economic growth, so we want to do it in the smartest way possible to maximize economic growth,” said Shifriss. “We can do that by streamlining the tax code and removing unnecessary distortions. These are what we call tax expenditures – all the deductions and credits that are littered throughout the tax code that pile up year over year over year. The annual cost of tax expenditures is $1.7 trillion. We lose more money from tax expenditures than we raise through the individual income tax. We lose more money through tax expenditures than we spend on our major health care programs, on Social Security, on defense. It’s like huge swiss cheese holes in our tax code. We also want to tax things that we don’t want, such as carbon emissions, instead of things that we do want, like income.”
Shifriss shared a proposal to limit the ability to write off deductions to 28% of an individual’s annual taxable income – a change that he estimates would raise $500 billion over 10 years. He also proposes a 5% national value added tax (VAT) that would tax consumption, as well as impose a carbon emissions tax. Another key element to solving the ratio of national debt to our gross domestic product (GDP) is actually growing the economy over the long-term. And there, current demographic trends are not in our favor. Birth rates are declining and working age population growth is slowing dramatically as the percentage of Americans reaching or nearing retirement age grows rapidly. Concord Coalition policy director Tori Gorman says increasing immigration can help solve this problem, which will have a positive impact on productivity.
“The number of new immigrants admitted each year has fallen from over a million in 2015 and 2016 to just a little over 260,000 in 2021,” said Gorman. “Immigration is a sensitive issue today, and trust and bipartisanship are hard to find in Washington D.C. But if lawmakers allow the weight of these obstacles to hamstring reforms, they have only themselves to blame for the draconian tax increases and spending cuts that they will have to impose in order to get our fiscal house in order. Lawmakers can begin by building rapport with each other and with their constituents and other stakeholders by starting with some small-ball reforms. For example, right now there is an enormous backlog of visa applications on file with the U.S. Citizenship and Immigration Services. Congress could step in and provide a temporary influx of discretionary appropriations to help the agency eliminate its backlog and increase the number of workers we have in the United States.”
Gorman also mentions potential reform of the H1-B visa process to help fill more than 3,000,000 manufacturing job openings over the next decade, and the potential for comprehensive immigration reform that will legalize the status of the undocumented.
Video from the event is available here:
Hear more on Facing the Future. I host the program each week on WKXL in Concord N.H., and it is also available via podcast. Join our guests as we discuss issues relating to national fiscal policy with budget experts, industry leaders, and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Podcasts, Stitcher, or with an RSS feed. Follow Facing the Future on Facebook, and watch videos from past episodes on The Concord Coalition YouTube channel.