How to Fix Our Fiscal Crisis

Release Date
May 3, 2011

Topic

Gov't Debt & Spending
Description

What is the single most important thing that can be done to fix the U.S. budget deficit? Harvard economist Jeff Miron says the answer is clear: cut entitlements. Miron explains that as currently structured, the costs of Medicare, Medicaid, and Social Security will continue to grow rapidly, eclipsing all other U.S. spending in the next couple of decades. Miron argues that without making cuts to these programs, there is no hope of getting spending under control.

How to Fix Our Fiscal Crisis
Cut entitlements, and then cut entitlements, and then cut entitlements some more.
My name is Jeff Miron. I’m the Director of Undergraduate Studies in Economics at Harvard University. Entitlements are the thing that are driving the huge increases in our debt to GDP. As you can see from the attached chart, which shows a projection according to the Congressional Budget Office of our debt–to-GDP ratio over time, the part of it that is growing at this huge rate is Medicare, Medicaid, and the expenditure for insurance exchanges under Obamacare. Other parts of the budget deficit are significant, such as the military, interest payments, and so on, but what’s growing so fast is the Medicare and Medicaid portion. So unless you cut that, it doesn’t matter what you do to anything else. The incredibly fast growth of the health care spending will overtake everything else within a couple of decades if not sooner. And so we have to address that to have any hope of getting the deficits and the fiscal situation under control.