Reining in entitlements

Yes, President’s Bush 2007 budget is massive, a full trillion dollars over the budget he submitted in his first year in the White House. But his lack of fiscal conservatism is mitigated by a meaningful approach to Medicare reform. Here’s National Review’s editorial "Entitlement Credit":

The reality, though, is that it doesn’t much matter whether the budget is balanced in 2012 or 2013, or whether the deficit in 2010 is $90 billion or $150 billion. The true crisis lies in the long-term unfunded liabilities of our entitlement programs. Bush's budget begins to grapple with this fact by reducing the subsidies to upper-income retirees for services they receive under parts B and D of Medicare. Parts B (outpatient services, as contrasted with hospital visits) and D (the prescription-drug benefit) are not covered by the payroll tax, and retirees must currently pay a premium for them. Bush’s plan would use means testing to adjust premiums more appropriately based on a recipient's ability to pay. There is no good reason retirees who could easily pay their own premiums should receive public assistance that dumps trillions of dollars in liabilities onto future generations.

And it is trillions. Bush’s changes to Medicare would, over the next five years, save some $66 billion; other savings would raise that number to just under $96 billion. These are not impressive numbers in the context of the overall budget. But over the long term, Bush's plan would slice $8 trillion - or more than 20 percent - off of Medicare’s $39 trillion unfunded liability. That is nothing to scoff at.

I don’t focus on Medicare as much as Social Security but the fact is that Medicare's unfunded liability is projected to rise at a much higher rate than Social Security. This is a step in the right direction.