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Would Medicare for All Require a Middle-Class Tax Hike?
October 22, 2019

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With several 2020 presidential candidates endorsing a move to single-payer health care (Medicare for All), there is an ongoing debate over whether such a plan would include higher taxes on the middle class. While no candidate has fully specified how he or she would pay for the cost of Medicare for All, our analysis finds fully offsetting the cost would require higher taxes on the middle class. Even with extremely aggressive revenue-raising policy changes, we only identify enough revenue increases from high earners and businesses to cover about 40 percent of the cost of Medicare for All. However, higher taxes don't necessarily mean higher costs, and depending on the details many households could end up paying less in taxes under Medicare for All than they currently pay in premiums and cost sharing.

For purpose of this Fact Check, we define Medicare for All as comprehensive single-payer health care that covers virtually all services with no (or only negligible) premiums, copayments, or other cost sharing, and we define middle class as individuals earning above $25,000 but less than $200,000 ($250,000 for families), based on a common political definition. The combination of a less generous version of Medicare for All and a broader definition of middle class might lead to a different result.

Background

Medicare for All is a relatively amorphous term that has historically been used to describe universal or universally-available, government-provided health insurance, and it is currently being used to describe a generous single-payer plan that covers virtually all medical interventions with no networks, premiums, or cost sharing. Based on a variety of estimates from credible sources, such a plan is likely to cost the federal government $28 trillion to $32 trillion more than it would spend under current law over the next decade (a new Urban Institute study suggests costs of $27 trillion to $35 trillion under several scenarios). These costs come from expanding coverage, increasing benefit generosity, and – most significantly – eliminating current premiums, deductibles, and copayments, which are partially offset by reductions in provider, drug, and administrative costs.

Advocates of Medicare for All have generally called for financing the costs through tax increases. However, there is disagreement over whether the tax hikes would apply to the middle class.

For example, former Vice President Joe Biden has argued Medicare for All "will require middle-class taxes to go up, not down," and Senator Bernie Sanders (I-VT) has said "I do think it is appropriate to acknowledge that taxes will go up" (though premiums and other costs will fall). On the other hand, Senator Kamala Harris (D-CA) has said her "vision for Medicare For All does not include a middle-class tax hike," and Senator Elizabeth Warren (D-MA) has largely evaded the question by simply saying "costs are going to go up for the wealthiest Americans, for big corporations…and hard-working middle-class families are going to see their costs going down.”

Others outside of the presidential field have made even bolder claims. For example, Chris Talgo of The Federalist has argued that "tax burdens would double, and for tens of millions of families, the increased taxes would far outweigh not needing to pay for health insurance," while economist Gabriel Zucman says that "Medicare for All would cut taxes for the vast majority of workers" (emphasis added).

Taxes on the Rich Cannot Cover the Full Cost of Medicare for All

While there are numerous policy options available to finance the costs of Medicare for All, there does not appear to be any plausible path to finance it with tax increases on just wealthy individuals and businesses.

To get a sense of how difficult it would be to raise $3 trillion per year from high-income earners alone, it may be helpful to understand how much income is available for taxation. Based on estimates from the Joint Committee of Taxation (with adjustments based on data from the Institute for Taxation and Economic Policy), tax units making over $200,000 per year will make about $4 trillion in after-tax income this year, while tax units with income above $500,000 will make about $2 trillion. These figures suggest that paying for Medicare for All from high earners alone would require an average tax rate close to or above 100 percent for higher earners. It would be impossible to achieve this revenue with an income tax alone.

To give a sense of how much could be raised from high earners, we compiled an extremely aggressive list of tax increases on the wealthy and corporations with very rough (and generally optimistic) estimates of how much revenue each option would raise. The table below assumes policymakers raise the top two tax rates from 35 and 37 percent up to 70 percent, phase out most deductions and exclusions for higher incomes, double the corporate income tax rate from 21 to 42 percent, impose a tax on wealth or tax capital gains mark-to-market for high net worth individuals, establish a tax on financial transactions and large financial institutions, and pass a variety of other tax increases. Using our very rough estimates and excluding many interactions and economic feedback, we estimate these policies would raise a total of $11 trillion over a decade, enough to cover roughly 40 percent of the cost of Medicare for All.

While the list above does not technically include all possible taxes that could be imposed on the wealthy, the policies it does include are extremely aggressive, more aggressive than may be politically or even technically possible. A top individual rate of 70 percent would almost certainly bring top marginal tax rates above their revenue-maximizing levels (including state and local rates). A 42 percent corporate income tax rate would put the total corporate tax rate at close to twice the international average and a third higher than the next highest developed nation. A wealth tax would likely lead to constitutional challenges. Moreover, these policies are likely to reduce incentives to work and invest, slowing economic growth and reducing their combined revenue stream.

It is unlikely that policymakers could agree to enact anywhere close to $11 trillion in tax increases only on the wealthy and corporations, let alone the $30 trillion needed to fund Medicare for All. As a result, funding Medicare for All will almost certainly require broad-based taxes that apply to the middle class, either directly or indirectly (for example through an employer payroll tax or consumption tax).

Taxes Would Go Up, but Premiums Would Go Down

While taxes would need to go up on the middle class in order to pay for Medicare for All, total costs for middle-class families may go up or down – and median costs are likely to fall, as most taxes are more progressive than current premiums. 

Currently, a large share of health care is financed from individual premiums, employer-paid premiums (which ultimately result in lower wages), and out-of-pocket costs paid by individuals and families. Under Medicare for All, the government would finance these costs, resulting in lower direct health care costs for individuals and families. Essentially, premiums and cost sharing would be replaced with taxes.

Whether a family pays more or less on net under Medicare for All will depend on how the program is financed and will also differ from person to person. For example, imagine Medicare for All were financed with a broad tax equal to 25 percent of income. In that case, a single 40-year-old making $100,000 and currently paying $10,000 in premiums and cost-sharing would end up paying $15,000 more; meanwhile, a family of four making $60,000 and paying $25,000 in premiums and cost sharing would end up paying $10,000 less (these figures exclude tax and wage interactions). The more progressive the revenue stream, the fewer people who will end up paying more but the larger net increase those people will face.

Importantly, whether net costs go up or down is not the only important metric. For some, costs may go up, but so too will the health services they receive. For others, average net costs may go down, but so will the flexibility to adjust spending based on preference, need, and ability to pay. Taxes may also distort behavior and slow income growth in ways that premiums and cost-sharing do not. 

It is impossible to assess whether the middle class is better off or worse off under Medicare for All until all the plan's details – especially how to pay for Medicare for All – are specified. Even then, data and analysis will need to be supplemented with judgement calls, as many of the costs and benefits associated with Medicare for All are intangible or not directly comparable.

****

Regardless of the overall impact of Medicare for All, it is clear that taxes on the middle class would have to rise in order to pay for it. Those taxes could be imposed directly on workers, indirectly through taxes on employers or consumption, or through a combination of direct or indirect taxes. There is simply not enough available revenue from high earners and businesses to cover the full cost of eliminating premiums, ending all cost-sharing, and expanding coverage to all Americans and for (virtually) all health services. But in exchange, the absence of premiums and cost-sharing could represent a net gain or loss to individuals' finances depending on how much they currently pay, how much they currently make, and how the ultimate financing is structured.

Policymakers would be wise to begin identifying possible financing sources so they can evaluate the relative merits of their choices. This year, the Committee for a Responsible Federal Budget will publish a paper designed to illuminate these choices and their consequences.

Claim: Middle-Class Taxes Will Need to Rise to Finance Medicare for All

Ruling: Largely True

This Fiscal FactCheck is a part of our US Budget Watch 2020 project, which will explain, score, and factcheck claims and policy proposals made during the 2020 campaign. If you think we missed an important claim and would like us to look into it, contact us at info@crfb.org and we'll do our best to look into it. Learn more about US Budget Watch 2020 here.

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Co-Chairs Daniels, Panetta, & Penny Statement on FY 2019 Deficit
October 25, 2019

Choices for Financing Medicare for All: A Preliminary Analysis
October 28, 2019

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The bulk of this expense represents the direct cost of eliminating premiums, copayments, and other out-of-pocket costs. That spending will total nearly $2 trillion this year alone. Replacing it will require significant new funds regardless of changes to national health expenditures.

Options for Financing Medicare for All

For the purpose of our analysis, we assume Medicare for All would cost $30 trillion over the next decade net of new revenue – roughly the midpoint of a variety of estimates. Though much of this cost represents savings to the private sector, it nonetheless needs to be financed through higher taxes, lower spending, more borrowing, or some combination of the three.

Our estimates are rough and preliminary, do not account for economic feedback, and may change modestly in our final analysis. Importantly, the options we present are illustrative rather than prescriptive. Their economic, distributional, and other consequences should be weighed relative to each other and against the effects of eliminating all premiums and out-of-pocket spending and providing comprehensive, universal health coverage through the federal government.

We estimate that policymakers could finance Medicare for All over the next decade in any of the following ways:

• Impose a 32 percent payroll tax. Currently, most wage income is subject to a 15.3 percent payroll tax divided evenly between workers and employers to fund Social Security and Medicare. Wages above $133,000 are subject to either a 2.9 percent or 3.8 percent payroll tax to fund Medicare. We estimate a new 32 percent payroll tax, divided evenly between workers and employers, would raise roughly $30 trillion over a decade. This tax would apply to all wages, not just those below a taxable maximum. An equivalent amount of revenue could be raised with a 23 percent payroll tax on the employee side only or a 48 percent tax on the employer side. A 32 percent payroll tax would raise the total payroll tax rate on most wage income to above 47 percent and the rate for high-wage earners to nearly 36 percent. It would apply to all earned income.

• Establish a 25 percent income surtax on adjusted gross income (AGI) above the standard deduction. Under current law, households pay taxes on their income under a progressive rate structure that ranges from 10 percent to 37 percent, with preferential rates for long-term capital gains and qualified dividends as well as deductions for mortgage interest, charitable giving, state and local taxes up to $10,000, pass-through business income, and other purposes. There is also a standard deduction of $12,200 for individuals and $24,400 for married couples. We estimate a 25 percent income surtax above the standard deduction threshold – which would apply to all AGI without deductions or preferences – would raise roughly $30 trillion over a decade. This surtax would effectively increase the bottom income tax rate from 10 to 35 percent, the top income tax rate from 37 to 62 percent, and the top capital gains and dividends rate from 24 to 49 percent.

• Enact a 42 percent value-added tax (VAT). Whereas most developed countries raise a substantial share of their revenue through a tax on consumption – known as a VAT – the United States only taxes consumption through state and local sales taxes. A VAT could be introduced at the federal level to finance Medicare for All. Based on estimates from the Congressional Budget Office (CBO), we project a broad-based VAT of 42 percent would raise about $30 trillion over a decade. The first-order effect of this VAT would be to increase the prices of most goods and services by 42 percent; the VAT would thus represent 30 percent of costs on a tax-inclusive basis, which is more comparable to an equivalent income or payroll tax rate increase. Importantly, a VAT can be designed in a number of different ways, and a different tax base would change the required tax rate.

• Require a mandatory public premium averaging $7,500 per capita – the equivalent of $12,000 per individual not otherwise on public insurance. Currently, most Americans are charged health insurance premiums – the majority of which are paid by employers on their behalf. Though current Medicare for All proposals call for ending premiums, policymakers could consider financing Medicare for All through mandatory fixed-dollar payments to the federal government. These payments would be a form of head tax but could resemble premiums in a number of ways. For example, they could vary based on household size and could be paid in part or in whole by employers. They could also be reduced or waived for some individuals, perhaps based on income. In 2021, we estimate those premiums would need to average about $7,500 per capita or $20,000 per household (including single-person households) and is the average applied to all individuals, including retirees, children, and low-income individuals. As an illustrative example, fully exempting everyone who would otherwise be on Medicare, Medicaid, or CHIP would increase the premiums by over 60 percent to more than $12,000 per individual.

• More than double all individual and corporate income tax rates. Under current law, ordinary income is taxed under a progressive rate structure with a bottom rate of 10 percent and a top rate of 37 percent, while long-term capital gains and qualified dividends are taxed at a top rate of 23.8 percent and corporate income at a rate of 21 percent. Assuming capital gains are taxed at death and pass-through income is no longer deductible, we estimate that doubling all individual income tax rates would raise $20 trillion to $25 trillion over a decade, and doubling the corporate rate would raise about $2 trillion. Some additional revenue would be needed on top of these increases to reach $30 trillion in total revenue. This option differs from the income surtax in a number of ways, especially because it would represent a much smaller tax increase for lower-income taxpayers. Under this scenario, the bottom ordinary income tax rate would be raised to 20 percent, the top ordinary rate would be 74 percent, capital gains would be taxed at a top rate of 47.6 percent, and the corporate tax rate would be 42 percent.

• Reduce non-health federal spending by 80 percent. The federal government is projected to spend $60 trillion over the next decade, including $16 trillion on health care and $6 trillion on interest costs. Accounting roughly for the taxation of certain federal benefits, we estimate that financing the full cost of Medicare for All with spending cuts would require cutting the remaining federal budget by 80 percent. Cuts of this magnitude are unrealistically large and certainly could not be imposed on a short timeline. For illustrative purposes, an 80 percent cut to Social Security would mean reducing the average new benefit from about $18,000 per year to $3,600 per year, and an 80 percent cut to the military would mean, among other things, reducing the number of soldiers and officers from about 1.3 million today to 270,000.

• More than double the national debt to 205 percent of the economy. Federal debt held by the public currently totals about $17 trillion, or 79 percent of GDP. Under current law, debt is projected to reach 97 percent of GDP by 2030. Assuming no changes in projected interest rates or economic growth, deficit-financing Medicare for All over the next decade would require about $34 trillion of new borrowing including interest, which is the equivalent of 108 percent of GDP by 2030. As a result, debt would rise above 205 percent of GDP, more than double its currently projected level. This would put debt in 2030 at almost five times its historic average of 42 percent and nearly twice the historic record of 106 percent (set after World War II). Under this scenario, debt would continue to grow rapidly beyond 2030.

• Impose impossibly high taxes on high earners, corporations, and the financial sector. There is not enough annual income available among higher earners to finance the full cost of Medicare for All. On a static basis, even increasing the top two income tax rates (applying to individuals making over $204,000 per year and couples making over $408,000 per year) to 100 percent would not raise $30 trillion over a decade. In reality, a tax increase that large would actually lose revenue because it would institute marginal tax rates above 100 percent when other taxes are incorporated – effectively requiring people to pay rather than be paid to work, earn business income, or sell capital assets. We previously found that an extremely aggressive package of tax hikes on high earners, corporations, and the financial sector might cover one-third of the $30 trillion cost of Medicare for All. Our very rough estimates showed that over the next decade raising the top two individual and pass-through rates to 70 percent would raise about $2 trillion, phasing out most tax breaks for higher earners (assuming that 70 percent top rate) could very generously raise another $2 trillion, and doubling the corporate tax rate would raise $2 trillion. We also found that a wealth tax or “mark-to-market” capital gains taxation could raise $3 trillion, and the combination of a financial transaction tax and a tax on large financial institutions could raise about $1 trillion. Other taxes on high earners and the wealthy could raise some additional funds.

• Enact a combination of approaches. Rather than identify a single revenue source to finance Medicare for All, policymakers could combine several options. For example, one could combine a 16 percent employer-side payroll tax with a public premium averaging $8,000 per household ($3,000 per person), $5 trillion of taxes on high earners and corporations, and $1 trillion of spending cuts. Other small options, such as a higher excise taxes on alcohol, tobacco, or sugary drinks, could also be included, as could policies to require or encourage state governments to contribute to offsetting the cost of Medicare for All. Adopting smaller versions of several policies may prove more viable than adopting any one policy in full.

While the financing options above are quite large in magnitude, they could be reduced significantly by reducing the cost of Medicare for All itself.

These cost reductions could be achieved in part by reforming or reducing provider payments, improving care coordination, and identifying policies to reduce excessive utilization of care. Our Budget Offsets Bank incudes numerous options to reduce the cost of traditional Medicare; some of these options would save much more if applied to a comprehensive Medicare for All program.

Cost reductions could also be achieved by scaling back the generosity of a Medicare for All program. For example, the Urban Institute recently estimated that a Medicare for All plan that required cost sharing to cover between 5 and 20 percent of medical costs (depending on income) and covered only core health benefits (not vision, dental, hearing, or long-term services and supports) would cost the federal government half as much per person as a comprehensive Medicare for All plan. A $15 trillion cost could be financed with a 15 percent payroll tax, as compared to the 32 percent payroll tax required to fund $30 trillion.

Choices and Trade-Offs in Financing Medicare for All

Deciding how to finance Medicare for All involves weighing significant trade-offs amongst options as well as relative to the current system. Indeed, the design of Medicare for All financing may have as much distributional, economic, and policy importance as the adoption of Medicare for All itself.

While many Americans are enrolled in heavily subsidized Medicare, Medicaid, or private insurance plans, the majority of Americans pay for their health care through premiums (especially employer-paid premiums), deductibles, copayments, and coinsurance.

While premiums and cost sharing are not a form of taxation, they do share some features in common with a “head tax” – a fixed-dollar tax imposed on every person. For those with employer-provided health insurance especially, premiums generally remain fixed regardless of changes in income. Like head taxes, insurance premiums would thus be regressive if measured relative to income among those who pay them (though many of the lowest earners on Medicaid or receiving exchange subsidies pay little or no premiums). Also like a head tax, premiums are economically efficient in the sense that they create very little economic distortion and do not generally disincentivize more work, investment, or productivity. Finally, because premiums and cost sharing don’t affect marginal tax rates or returns to work and investment, they have little effect on the government’s ability to raise revenue.

Any plan to replace current premiums and cost sharing must weigh how the new finance scheme will impact income distribution, economic output, and tax capacity. In the coming months, the Committee for a Responsible Federal Budget will release a full report evaluating the various effects of most of the options mentioned in this paper.

From a distributional standpoint, most of the options we put forward above would be more progressive on average than current law, though the impact would vary person to person and many of the options would represent a cost increase for lower-income individuals and families who currently benefit from Medicaid and exchange subsidies. Options would differ in their distributional impact. To get a broad sense of how distribution may differ, a recent CBO study shows that in 2016 the top income quintile (indirectly) paid less than 40 percent of employer-side health premiums, but they paid more than 85 percent of individual and corporate income taxes and would have paid over 50 percent of a new flat payroll tax. The top percentile paid about 2 percent of premiums, but they paid over 40 percent of income taxes and would have paid 10 percent of a new flat payroll tax.

At the same time, most of the options we present would shrink the economy compared to the current system. The 32 percent payroll tax hike, for example, would increase the effective marginal tax rate on labor by about 23 percent after accounting for various interactions. Penn Wharton Budget Model recently estimated that an 11.25 percent payroll tax increase used to pay for a Universal Basic Income (UBI) would reduce GDP by 1.7 percent. This suggests that financing Medicare for All with a payroll tax would shrink the size of the economy by about 3.5 percent by 2030 – though the actual effect may differ. This economic impact would be the equivalent of a $3,200 reduction in per-person income and would result in a 6.5 percent reduction in hours worked – a 9 million person reduction in full-time equivalent (FTE) workers in 2030.

Deficit-financing Medicare for All would be far more damaging to the economy. Assuming that such a massive increase in the debt would not roil financial markets or lead to high inflation, we estimate that a 108 percent of GDP increase in the federal debt would shrink the size of the economy by roughly 5 percent in 2030 – the equivalent of a $4,500 reduction in per-person income – and far more in the following years. This is a low-end estimate of economic impact because it implicitly assumes few limits on the amount of foreign savings available to purchase Treasury bonds. Because deficit-financing would have little direct impact on the incentive to work, we estimate a 0.7 percent or 1 million FTE reduction in work hours by 2030.

An additional consideration is how much tax capacity any of these financing options might leave for future policymakers aiming to raise revenue to pay for new programs, fund existing ones, or reduce deficits. The best economic literature suggests a revenue-maximizing tax rate of between 63 and 73 percent, after which further rate increases actually lose revenue. Tax rates approaching these high levels would reduce the ability of policymakers to raise revenue in the future.

Under current law, the top effective marginal tax rate (accounting for state and local taxes in a typical state) is about 48 percent. That rate would rise to 69 percent after a 32 percent payroll tax hike (the increase is smaller than the tax due to interactions with the tax base), 73 percent after a 25 percent income surtax, and 85 percent if income tax rates were doubled. In other words, each of these options would bring the top rate close to or above the revenue-maximizing rate.

Conclusion

Regardless of its impact on national health expenditures, Medicare for All would shift substantial costs from the private sector to the federal government. By most estimates, a comprehensive Medicare for All plan that expands coverage to every U.S. resident for nearly all medical services and eliminates premiums and cost sharing would cost the federal government roughly $30 trillion over a decade.

Policymakers have a number of options available to finance the $30 trillion cost of Medicare for All, but each option would come with its own set of trade-offs.

In this preliminary analysis, we estimate the cost could be covered with a 32 percent payroll tax, a 25 percent income surtax, a 42 percent value-added tax, or a public premium averaging $7,500 per capita or more than $12,000 per individual who wouldn’t otherwise be enrolled in Medicare,  Medicaid, or CHIP. Medicare for All could also be paid for by more than doubling individual and corporate income tax rates, reducing federal spending by 80 percent, or increasing the national debt by 108 percent of GDP. Tax increases on high earners, corporations, and the financial sector by themselves could not cover much more than one-third of the cost of Medicare for All.

Rather than adopting any one of the proposals above, policymakers could also consider a combination of approaches to finance Medicare for All. Reducing the cost, scope, or generosity of Medicare for All would also reduce the magnitude of needed financing.

In deciding how to finance Medicare for All, policymakers must consider the distributional, economic, and policy consequences of replacing premiums and cost sharing with various alternatives. Most of the options we put forward are more progressive on average than current law but would shrink economic output and bring the top tax rate up to its revenue-maximizing level – leaving little capacity for further taxes.

This paper will be followed by a more detailed analysis of the various consequences of different financing options.

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Committee for a Responsible Federal Budget and West Health
Launch Health Savers Initiative
October 29, 2019

Statement on Bipartisan TRUST Act
October 29, 2019

Fair and Smart Budget Reforms Deserve Vote
November 1, 2019

Bernie Sanders's Social Security Expansion Act
US Budget Watch 2020
November 7, 2019

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Presidential candidate Senator Bernie Sanders (I-VT) has proposed the Social Security Expansion Act, which would increase Social Security benefits, raise taxes on high earners, and extend the solvency of the program’s trust fund.

The plan:

• Only partially closes Social Security’s shortfall because two-fifths of the new revenue goes to paying new benefits. The plan closes three-quarters of the 75-year shortfall, but only half of the structural shortfall in the last year.
• Extends solvency from 2034 to 2071, when today’s college graduates would be reaching the normal retirement age
• Reduces overall deficits by $1.4 trillion over ten years, using ordinary scoring conventions relative to current law. Debt would be 141 percent of GDP in 2050, 14 percentage points lower than under current law
• Relative to the amount of benefits that can actually be paid out of the trust fund and current revenues, debt would be 18 percent of GDP higher in 2050 under the plan.

Under current projections, the Social Security trust fund is only 13 to 16 years from insolvency, at which point all beneficiaries would face a 20 to 25 percent benefit cut without new legislation.

According to Social Security’s Chief Actuary, Senator Sanders's Social Security Expansion Act would restore Social Security surpluses for 8 years, extend solvency by 37 years until 2071, and close 78 percent of the program's 75-year financing gap. However, much of this improvement is the net effect of immediate increases in revenue and very gradual benefit increases. By 2093, about two-fifths of the new revenue will go to pay for new benefits. As a result, the proposal will close only about half of Social Security’s structural shortfall.

The improvements to Social Security’s finances would reduce unified budget deficits relative to the Congressional Budget Office's (CBO) baseline – which assumes full benefits will continue to be paid beyond the trust fund’s ability to pay them. Partially offsetting these gains, the legislation would also significantly increase “on-budget” deficits due mainly to interactions with the income tax.

On net, we estimate (based on CBO’s methods) the proposal would reduce deficits by about $1.4 trillion over the next decade, 0.50 percent of GDP by 2030, and 0.45 percent by 2050 relative to CBO’s baseline. Relative to a payable benefits baseline where benefits are reduced to match revenue once the trust funds are depleted, the proposal would increase the budget deficit by 1.35 percent of GDP by 2050. We estimate the proposal would reduce projected debt by 14 percent of GDP in 2050 relative to CBO’s baseline, and increase it by 18 percent relative to a payable benefits scenario.

Incorporating dynamic scoring could lead to somewhat less favorable results as higher tax rates and benefit levels would likely reduce the incentive to work, save, and invest.

What’s in the Social Security Expansion Act?

The Social Security Expansion Act both expands benefits and increases taxes.

The proposed benefit expansions would:

• Gradually increase the lowest Primary Insurance Amount (PIA) factor in the benefit formula from 90 percent of a workers first $11,000 of average income (roughly) to 105 percent by 2040 – increasing benefits for most workers by about $2,200 per year in 2040 (the increase would be about $1,000 per year if in place today)
• Adopt the faster-growing, experimental Consumer Price Index for the Elderly (CPI-E) for Cost-of-Living Adjustments (COLAs)
• Create a minimum benefit of 125 percent of the poverty line for people who have worked 30 years or more
• Allow children of disabled or deceased workers to continue receiving benefits until age 22, as long as they remain in school

Proposed revenue increases would:

• Apply the 12.4 percent payroll tax – currently imposed on income up to $132,900 – to earnings above $250,000 without including wages above $250,000 in benefit calculations.
• Close the “donut hole” between $132,900 and $250,000 over time by allowing the lower threshold, which is wage indexed, to catch up with the frozen higher threshold.
• Apply a new 6.2 percent tax on net investment income – including capital gains, dividends, and most business income – in excess of $200,000 for single filers and $250,000 for married couples filing jointly
• Combine the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) trust funds into one Social Security trust fund

How Would the Social Security Expansion Act Impact Social Security's Solvency?

According to an analysis from the Social Security Chief Actuary, Senator Sanders’s Social Security plan would improve but not restore solvency. While the revenue increases by themselves would be sufficient to close 110 percent of Social Security’s 75-year gap, the benefit increases and expansions would worsen the shortfall by approximately one-third.

Overall, the Social Security Expansion Act would close about three-quarters of Social Security’s 75-year shortfall, extending the date of insolvency by 37 years from 2034 at the time of the estimate (2035 under newer projections) to 2071 under the plan. Upon insolvency, all benefits would be cut by 11 percent.

The plan would do less to close Social Security’s structural gap. Under current projections, Social Security faces a deficit of 1.06 percent of taxable payroll this year, which is projected to rise to 4.11 percent by 2093. Senator Sanders’s bill restores surpluses for 8 years though 2027, after which deficits would return and would widen over time. Ultimately, the proposal would close about half of Social Security’s structural gap – with revenue increases closing about 85 percent of the gap and benefit increases widening it by about one-third.

CBO estimates a larger Social Security shortfall. Under its shortfall estimates and methods, we would expect the proposal to be less effective in improving solvency. In very rough terms, we predict CBO would estimate the proposal to close about half of the solvency gap and one-third of the structural gap.

What Effect Would the Social Security Expansion Act Have on Deficits and Debt?

Projections from CBO and others assume full Social Security benefits will be paid even after the trust fund exhausts its reserves. Compared to this baseline, Senator Sanders’s plan would significantly reduce budget deficits – particularly in the early years when revenue increases are in full effect but benefit increases are still phasing in. However, these savings would be partially offset by reductions in income tax revenue resulting from the bill. The proposal would represent a significant deficit increase relative to a payable benefits scenario where Social Security benefits were reduced to match incoming revenue after trust fund depletion.

Adapting the Chief Actuary’s estimates to CBO’s economic assumptions, we estimate the Social Security Expansion Act would reduce Social Security’s deficits by $2.3 trillion over the first decade. However, the proposed tax increases would expand deficits for the rest of the federal government. In particular, increasing the amount of payroll taxes employers pay for high earners will lead employers to pay less in wages, resulting in lower income tax collection. At the same time, increasing the tax rate on net investment income will have significant behavioral effects for capital gains realization, resulting in lower collections on ordinary capital gains. Revenue is gained for the Social Security trust fund, but a lesser amount of revenue would be lost to the rest of the federal government.

We estimate these interactions would result in about $900 billion of “on-budget” revenue losses, for a total reduction in unified budget deficits of about $1.4 trillion through 2030 (both excluding interest).

By 2030, we estimate the proposal would reduce the annual deficit (excluding interest) by over 0.50 percent of GDP (the equivalent of $1.4 trillion over the next decade) – the net result of 1.05 percent of GDP in higher payroll tax revenue, 0.15 percent of GDP more in benefits paid, and over 0.35 percent of GDP in lost income (and other) tax revenue.

By 2050, we estimate the proposal would reduce the annual deficit (excluding interest) by about 0.45 percent of GDP (the equivalent of $1.2 trillion over the next decade) – the net result of over 1.30 percent of GDP in higher payroll tax revenue, over 0.45 percent of GDP more in benefits paid, and nearly 0.45 percent of GDP in lost income (and other) tax revenue.

Relative to a payable benefits scenario, the plan would reduce deficits by the same amounts through the insolvency date, but increase deficits thereafter. By 2050, we estimate the proposal would increase deficits by a total of 1.35 percent of GDP (the equivalent of $3.7 trillion over the next decade). We would expect that gap to widen further beyond 2050.

Senator Sanders’s plan would have a similar effect on debt; debt-to-GDP would grow slower relative to CBO’s baseline but faster relative to a payable benefits scenario. Under CBO’s baseline, debt would reach about 155 percent of GDP by 2050, as opposed to 123 percent under a payable benefits scenario. We estimate debt under Senator Sander’s plan would rise to 141 percent of GDP by 2050 (including interest) – a 14 percentage point reduction from baseline but still 18 percentage points above payable benefits levels.

These numbers could differ somewhat if dynamic feedback were included. Lower deficits resulting from the plan would tend to improve the economy by increasing investment and reducing interest rates. However, higher taxes and benefits would weaken the economy by reducing the incentive to work, save, and invest, and increasing the incentive to retire early.

The net effect of the proposal on the economy is ambiguous. However, it would most certainly do less to grow the economy than the Goldwein-MacGuineas-Towner pro-growth framework (which the authors estimate would increase GNP by 3.5 to 13 percent by 2050) or the payable benefits scenario (which CBO says would raise GNP by 2.3 percent by 2049), and it is likely to shrink the economy relative to CBO’s baseline – particularly in conjunction with Senator Sanders’s other proposed tax increases, which could bring tax rates near or above their revenue maximizing levels.

CBO estimates that under the payable benefits scenario, the 2.3 percent of additional GNP would further reduce debt by about 7 percent of GDP. If the Sanders plan resulted in slower economic growth, it could lead to slightly higher debt and reverse some of the savings from the plan.

Where Can I Read More?

• Senator Sanders's Senate Website – Social Security Expansion Act Fact Sheet
• Legislative Text – Social Security Expansion Act
• Social Security Administration – Actuarial Assessment of the Social Security Expansion Act
• Washington Post – Bernie Sanders Would Like to Talk About Social Security
• Roll Call – Social Security Could Go Broke by 2035, but Lawmakers Have New Ideas to Fix It
• Third Way – How the Sanders Social Security Plan is Not Progressive
• National Review – On Social Security, Bernie Sanders is Now the Leader of the Democratic Party
• Forbes – Bernie Sanders Wants a Scandinavian-Model Social Insurance System. Sure, Why Not? (For Retirement Anyway)
• The Motley Fool – Bernie Sanders' Social Security Reform Will Fail, Here's Why
• Economic Policy Institute – Social Security Expansion Would Likely Bolster, Not Hurt, Economic Growth
• Penn Wharton Budget Model – Options to Return Social Security to Financial Balance: The Impact on Economic Growth
• Penn Wharton Budget Model – The Social Security 2100 Act: Updated Analysis of Effects on Social Security Finances and the Economy
• CBO – Analysis of Effects on Social Security of H.R. 860, the Social Security 2100 Act
• Committee for a Responsible Federal Budget – What Would Social Security 2100 Mean for the Debt
• Committee for a Responsible Federal Budget – Promoting Economic Growth through Social Security Reform
• Committee for a Responsible Federal Budget – Could Eliminating the Payroll Tax Cap Extend Solvency to 2061 and Allow for Expanded Benefits?
• Committee for a Responsible Federal Budget – An ‘Interactive’ Analysis of Christie’s and Sanders’s Social Security Plans
• Committee for a Responsible Federal Budget – Social Security Reformer Interactive Tool

****

With the 2020 campaign now in full gear, the presidential candidates are putting forward many ambitious proposals aimed at solving very real problems and concerns. The voting public deserves to know how much these proposals will cost, and what it means for the debt we will be leaving to our children and grandchildren.

This policy explainer is part of our US Budget Watch 2020 series covering the 2020 presidential election. In the coming weeks and months, we will continue to publish analyses of candidate proposals that are having the greatest impact on the debate over our nation’s future. You can read more of our policy explainers and factchecks here.

Read the blog.

Fly-In Speakers on the Budget Available

Washington Should Pursue Clean Appropriations Bill 
November 13, 2019

Win $5,000 from Our Fiscal Fallout Contest
November 15, 2019

The Committee for a Responsible Federal Budget is now accepting submissions for our new Fiscal Fallout Contest, where students are given the opportunity to put a human face on the consequences of high and rising federal debt. The winner will receive $5,000.

Committee staff lead a Debt Fixer budgeting exercise at the University of Michigan.

Jeffrey,

Today is Giving Tuesday. On this day of charitable giving, we ask you to support the critical work being done by the nonpartisan, non-profit Committee for a Responsible Federal Budget.

Whether issuing objective policy analyses, leading budgeting exercises in classrooms across the country, or working with lawmakers to find bipartisan solutions to our nation's fiscal challenges, your generosity makes our work possible.

As the federal budget deficit approaches $1 trillion, our work takes on renewed purpose. Below are just a few ways we seek to restore fiscal sanity to Washington:

• US Budget Watch 2020, which is already bringing transparency and accountability to next year’s presidential election by analyzing candidates' fiscal proposals and fact-checking their claims in real time;
• FixUS, an initiative that seeks to better understand the root causes of our nation’s growing divisions and deteriorating political system and to build support for necessary changes;
• Our popular online, educational, and interactive Debt Fixer and Is It Worth It tools, which have been used by more than 180,000 people in the last year, many of them students; and
• Publishing objective, timely, and nonpartisan policy analyses on issues with a significant fiscal policy impact.

2020 is already shaping up to be a year of consequence. We have a real opportunity to advance the principles of fiscal responsibility while also seeking to bridge the divisions in our country.

None of it, though, can be accomplished without your support.

This Giving Tuesday, we hope to count on your support. A tax-deductible contribution from you would help to ensure that our important work continues and expands at this critical juncture.

All the best,
Committee for a Responsible Federal Budget

Committee president Maya MacGuineas speaks with Senators Chuck Grassley (R-IA) and Ron Wyden (D-OR), respectively Chairman and Ranking Member of the Senate Finance Committee, at our Opportunities for Lowering Health Care Costs event.

Washington Must Avoid Budget-Busting Christmas Tree Legislation
December 3, 2019

Statement on the Passing of Paul Volcker
December 9, 2019

Year-End Tax Cuts Would Add $470 Billion to the Debt
December 16, 2019

Let Zombie Tax Extenders Remain Dead
December 17, 2019

Cory Booker's "Baby Bonds" Plan
US Budget Watch 2020
December 18, 2019

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Presidential candidate and Senator Cory Booker (D-NJ) has put forward a proposal to establish savings accounts for every child born in America funded annually by contributions from the federal government – a concept commonly referred to as “Baby Bonds.” In October of 2018, he introduced legislation based on this concept, the American Opportunity Accounts Act.

Senator Booker estimates his plan would cost approximately $60 billion per year. By our estimates, it would cost roughly $650 billion over a decade. To offset this cost, the legislation would increase the top tax rate on capital gains and dividends to 28% (including the 3.8% Net Investment Income Tax, or NIIT), eliminate step-up basis of capital gains at death, and increase the estate tax in a number of ways.

We estimate these revenue increases would more than offset the cost of the legislation, raising about $700 billion over a decade.

What’s In the Baby Bonds Plan?

Under Senator Booker’s Baby Bonds proposal, the federal government would create an “opportunity account” for every child born in the United States, funded with an initial contribution of $1,000 as well as ongoing contributions.

Specifically, the government would make annual contributions until a child reaches 18 years of age. The size of these contributions would be based on family income, ranging from $2,000 per year for children in families with income below the federal poverty line to $0 for children in families with income above 500 percent of the federal poverty line. Contributions would be indexed to inflation. We estimate average annual payments would total approximately $850 per child in today's dollars.

The funds in these accounts would be invested in 30-year Treasury bonds and would be expected to grow at an average rate of 3 percent per year, roughly 1 percentage point above inflation. By the time a child turns 18, these accounts could hold as much as $46,000 or as little as $1,700 (in 2019 dollars), depending on the size of annual contributions from the federal government.

Funds in these tax-free accounts would be off-limits until after a child reaches 18 years of age, except for higher education expenses. Even then, the funds could only be used for specific “asset-building” purposes, such as paying college tuition or making a down payment on a house.

In addition to creating accounts for children born after the date of enactment, the plan would allow children under the age of 15 to establish accounts and receive annual contributions from the government as well. These accounts would only be created upon request, as opposed to automatically, and would not receive the initial $1,000 contribution.

How Would the Baby Bonds Plan be Paid For?

To offset the cost of his Baby Bonds plan, Senator Booker would increase tax rates on investment income and inherited assets and estates.

Specifically, the plan would increase the top rate on long-term capital gains and dividends (inclusive of the NIIT) from 23.8 percent to 28 percent. It would also eliminate step-up basis of capital gains at death. Under current law, gains from assets passed on through inheritance are essentially exempt from taxation, even upon realization. Under Senator Booker’s proposal, those gains would generally be taxed at the time of death (with some exceptions). 

Senator Booker would also increase the estate tax, which taxes very large inheritances, in a number of ways. A decade ago, the estate tax applied a 45 percent tax to inherences above $3.5 million. As a result of the American Taxpayer Relief Act in 2013 and the Tax Cuts and Jobs Act (TCJA) in 2017, the rate was reduced to 40 percent and the exemption increased to over $11 million per individual and $22 million for couples (that exemption falls by roughly half after 2025).

The Baby Bonds plan would restore the 2009 estate tax parameters and further increase rates in a manner similar to Senator Bernie Sanders’s (D-VT) Responsible Estate Tax Act. Specifically, it would set the estate tax rate to 45 percent above $3.5 million of assets for a deceased individual, 55 percent above $10 million, and 65 percent above $50 million. It would also close or restrict various estate and gift tax loopholes.

It is worth noting that taxing capital gains at death, in combination with a higher estate tax, could potentially result in a very high effective top tax rate on capital gains held until death. Assuming capital gains payments are deductible from estate taxes, the top effective federal rate on capital gains at death – for those with over $50 million in taxable assets – would rise from 40 percent under current law to about 75 percent under the proposal (excluding state and local taxes). Assuming half of assets represent gains, the top effective tax on estates as a whole would rise from 40 percent to 70 percent.

On one hand, these high rates may encourage more pre-tax redistribution and charitable giving. On the other hand, they may also discourage saving and investment among the wealthy in a way that would shrink the economy.

How Much Would the Baby Bonds Plan Cost and How Would It Affect the Deficit?

The Booker campaign estimates its Baby Bonds proposal would cost about $60 billion per year. This is consistent with our estimate of $650 billion over a decade.

Based on the Census Bureau’s projections for births over the next decade, we estimate that issuing Baby Bonds to newborn children would cost about $250 billion. We estimate another $400 billion of new spending in the first decade from making annual contributions to accounts created for children who have already been born. While parents of already-born children would have to opt-in to the program, we assume the participation rate would be high – 90 percent of eligible children – since the program effectively represents free money for beneficiaries.

Importantly, our estimates score the cost as being imposed on the federal government at the time funds are contributed into accounts. Since federal money would be used directly to purchase federal bonds, an argument could be made that costs should instead be estimated at the time funds are withdrawn from accounts by beneficiaries. Scoring the proposal this way would result in dramatically reduced costs over the first decade but increased costs in subsequent decades.

We estimate increases in capital gains and estate taxes would more than offset the $650 billion cost of the plan. The estate tax increases would raise about $400 billion over a decade and the capital gains increases about $300 billion for $700 billion in total. While these estimates are rough, they demonstrate that the plan is essentially paid for and may in fact reduce deficits by roughly $50 billion over the next ten years.

Revenue will drop off somewhat in 2026, after temporary changes to the estate tax included in the TCJA expire. However, the cost of the Baby Bonds proposal would grow more slowly than other revenue increases over time. As a result, we expect the plan would reduce deficits even more over the long term. In the second decade, we expect net deficit reduction in the neighborhood of $200 to $500 billion.  

Where Can I Read More?

• Legislative Text – American Opportunity Accounts Act
• Senator Booker’s Senate Website – Booker Announces New Bill Aimed at Combating Wealth Inequality
• Naomi Zewde – Universal Baby Bonds Reduce Black-White Wealth Inequality, Progressively Raise Net Worth of all Young Adults
• Vox – An exclusive look at Cory Booker’s plan to fight wealth inequality: give poor kids money
• Vox – Cory Booker’s baby bonds nearly close the racial wealth gap for young adults
• People’s Policy Project – Cory Booker’s $700 Billion Social Wealth Fund Proposal
• CATO Institute – Cory Booker’s ‘Baby Bonds’ Wouldn’t Support a Savings Culture — It’s Just More Government Subsidies
• Washington Post – Booker wants a ‘baby bond’ for every U.S. child. Would it work?
• Fatherly – Senator Corey Booker Wants to Close the Wealth Gap By Giving Every Newborn a Trust Fund. Could It Work?
• New America – 'Give People Money' Comes to Child Savings
• CNBC – Cory Booker wants to give ‘baby bonds’ to every newborn. Here’s how that would work

****

With the 2020 campaign now in full gear, the presidential candidates are putting forward many ambitious proposals aimed at solving very real problems and concerns. The voting public deserves to know how much these proposals will cost, and what it means for the debt we will be leaving to our children and grandchildren.

This policy explainer is part of our US Budget Watch series covering 2020 presidential election. In the coming weeks and months, we will continue to publish analyses of candidate proposals that are having the greatest impact on the debate over our nation’s future. You can read more of our policy explainers and factchecks here.

• Bernie Sanders’s Social Security Expansion Act
• Kamala Harris’s LIFT the Middle Class Act
• Elizabeth Warren's Higher Education Plan
• After the 2020 Election, Fiscal Challenges Await

Read the blog.

Budget Deal Shows Bipartisan Failure of Leadership
December 20, 2019

Dear Jeffrey:

Next year is already shaping up to be one of consequence.

Between the presidential campaign and the return of trillion-dollar budget deficits, there is a real opportunity to reassert the principles of fiscal responsibility while also seeking to bridge the divisions in our country.

Whether issuing objective policy analyses, working with lawmakers to find bipartisan solutions to our nation's fiscal challenges, or leading budgeting exercises in classrooms across the country, our work is made possible by your generosity.

That’s why I’m writing: to ask you to support the Committee for a Responsible Federal Budget and propel us into this consequential year with a monetary gift.

Because of your support, the Committee has accomplished so much this year:

• Producing Objective, Nonpartisan Policy Analysis: Produced more than 170 publications and analyses, including over 30 policy papers and submissions to Congress. From highlighting the consequences of our high and rising debt to explaining how a Medicare for All program could be financed, we provided timely, objective, and non-partisan analysis that lawmakers, the media, and the public can trust.

• Engaging Policymakers: As part of our Congressional engagement, the Committee participated in more than 285 meetings with Members of Congress and their key staffers from 135 Congressional offices. As part of our effort to establish relationships with the new Members of the 116^th Congress and cultivate those on key committees, we held five events with Members themselves and 13 staff briefings.

• Holding Candidates Accountable: In advance of the first presidential primary debate, we launched US Budget Watch 2020. This initiative is already bringing transparency and accountability to next year’s presidential election by analyzing candidates' fiscal proposals and fact-checking their claims in real time.

• Identifying Proactive Solutions: With the debt and deficit continuing to grow, we provided proactive policy ideas for addressing our nation’s most pressing fiscal challenges. This included outlining a plan for pro-growth Social Security reform and launching a new initiative to produce policy options focused on making health care more affordable across payers.

• Bringing Leaders Together: What makes the Committee unique is our ability to bring leaders together. This year we hosted multiple conversations with Members of Congress about the future of capitalism and what effect it might have on our democracy. More than 50 Members have attended, with future gatherings planned for next year.

• Healing Our National Divisions: Based on the premise that our polarized political environment is preventing us from dealing with a range of critical threats and challenges, our FixUS Nationwide Roadshow and Listening Tour continues to travel the country. We have spoken to 70 audiences in 25 states about what they believe is causing our divisions and to identify potential solutions. We’ll soon be issuing a report with these findings and outlining a path forward.

• Educating the Public: Throughout 2019, the Committee sought to engage a wide variety of audiences and stakeholders about our unprecedented fiscal situation. We participated in two debt-focused town halls with Members of Congress, hosted Senators James Lankford (R-OK) and Maggie Hassan (D-NH) for a nationwide stakeholder call, and updated our interactive debt fixer tool, which has been used by 180,000 people – many of them educators and students.

• Trusted Media Source: The Committee’s work with the media is a testament to our reputation as a leading authority on issues with a significant fiscal impact. This year, we were cited by more than 330 media outlets, including: The New York Times, The Washington Post, USA Today, Wall Street Journal, Financial Times, MSNBC, Fox Business, PBS NewsHour, and CNN, to name just a few.

Nevertheless, two realities remain: trillion-dollar deficits are returning, and whomever is sworn in as President on January 20, 2021 will face daunting fiscal challenges.

Achieving a comprehensive solution to our debt and deficits requires providing quality, objective analysis that can be trusted; bringing leaders together for meaningful dialogues; holding presidential candidates accountable and working with them to develop fiscally responsible platforms; engaging the public in a meaningful and impactful manner; and seeking solutions to the hyper-partisanship and tribalism gripping Washington.

This is why I hope you will consider financially supporting the Committee for a Responsible Federal Budget. Your support makes our work possible.

Please know that while the fiscal problems facing our nation are complicated, the Committee is steadfast in our commitment to making progress, finding solutions, and ensuring that the principles of fiscal responsibility are represented in Washington and the larger national conversation.

In this consequential year ahead, I hope we can count on your support.

All the best,

Maya MacGuineas
President

Our Top Fiscal Charts of 2019
December 31, 2019

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The Decade in the Federal Budget
December 30, 2019

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When it comes to fiscal policy, the 2010s have been quite a rollercoaster. Below, we’ve identified a few major budgetary trends and patterns of the last decade.

A Growing National Debt

Over the past decade, debt has grown significantly as a share of the economy. In January 2010, debt totaled 53 percent of Gross Domestic Product (GDP) – up 18 points from the mid-2000s due to the Great Recession. Since then, debt has risen to 79 percent of GDP at the end of fiscal year 2019.

The Rise, Fall, and Return of Trillion-Dollar Deficits

The beginning of the decade saw the emergence of deficits exceeding a trillion dollars as a result of the Great Recession and the measures enacted to combat it. Deficits were $1.3 trillion in 2010 and 2011 and $1.1 trillion in 2012 – before the improving economy and deficit reduction measures shrunk the deficit to $680 billion in 2013 and to a low of $442 billion in 2015. After that, deficit-increasing legislation along with other factors caused deficits to grow continuously to $665 billion in 2017 and $984 billion in 2019. As a share of the economy, revenues shrank and spending remained constant between 2015 and 2018.

The deficit is expected to top $1 trillion again in 2020 and grow in future years.

The Building and Breaking of Discretionary Spending Caps

2010 represented a high water mark for discretionary spending in real dollars. Then, the Budget Control Act of 2011, the major piece of deficit reduction legislation enacted this decade, reduced and capped discretionary spending for ten years. It called for further spending reductions after a "Super Committee" failed to negotiate an additional $1.2 trillion of savings. Budget agreements in 2013 and 2015 partially rolled back the sequester and, fortunately, fully offset the cost, but agreements in 2018 and 2019 fully repealed the sequester and increased spending further, largely without offsets.

As a result, spending levels are almost back up to 2010 levels after adjusting for inflation. Spending caps are set to end entirely after 2021.

Tax Cut After Tax Cut After Tax Cut

Several major tax cuts were enacted throughout the decade. The early part of the decade saw lawmakers grappling with the expiration of the 2001/2003 tax cuts, which they dealt with by temporarily extending all of them in 2010 then permanently extending most of them without offsets in 2013. Further cuts in 2015 extended or made permanent several tax extenders and delayed three taxes from the Affordable Care Act (ACA). 2017 saw the passage of the Tax Cuts and Jobs Act, which reduced individual and corporate income taxes. Earlier this month, lawmakers permanently repealed the three ACA taxes.

A Lost Decade for Saving Social Security and Medicare

Lawmakers have not addressed Social Security solvency despite long-term projections that have told a consistent story throughout the decade reiterating that action is needed. In 2010, the combined Social Security Trust Funds were projected to become insolvent in 2037 – 27 years later. Today, Social Security's exhaustion date is still projected for around the same time (2035), but insolvency is a decade closer.

The passage of the ACA at the beginning of the decade extended the solvency of the Medicare Hospital Insurance (HI) trust fund by several years, but nothing has been done to improve Social Security's and Medicare's finances since then. While lawmakers and policy experts have proposed plans to achieve solvency for both programs, no proposals have actually passed. The HI trust fund is projected to be exhausted in seven years, while the Social Security trust funds are projected for insolvency within 15 years.

Read the blog.

State of the Union Ignores Trillion-Dollar Deficits
February 5, 2020

For Immediate Release

Play Debt-O During State of the Union 2020!
February 4, 2020

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Tonight, President Donald Trump will give his third State of the Union Address at 9 p.m. EST. During the address, we will be live tweeting, providing analysis and links to our relevant content, as well as providing fact-checks through our Fiscal FactCheck project.

The speech will presumably cover a variety of topics, but we hope the President addresses deficits and the national debt, as the deficit will total $1.02 trillion this year, marking the first trillion-dollar deficit in history not caused by the Great Recession. The current debt trajectory is unsustainable, and legislation passed during the past three years has worsened it, with the President signing legislation that has added $4.7 trillion to projected debt over the next decade and that is responsible for about half of the yearly deficit.

Throughout the speech, play along with our annual fiscal bingo game, Debt-O! Five customized boards make it easy to play with friends as you keep track of various budget-related words and terms used by the President.

Click here for a printable PDF of the Debt-O game boards.

After the address, be sure to visit our website for subsequent analysis and follow us on Twitter (@BudgetHawks) as we live tweet during the speech with the hashtag #SOTU.

Play Debt-O.

President’s Budget Mixes Real Proposals and Fantasy Assumptions
February 10, 2020

For Immediate Release

• Senator Mike Enzi (R-WY), Chairman, Senate Budget Committee
• Senator Sheldon Whitehouse (D-RI), Senate Budget Committee
• Maya MacGuineas, Committee for a Responsible Federal Budget
• Bill Dauster, University of Pennsylvania
• Bill Hoagland, Bipartisan Policy Center

Additional speakers and agenda forthcoming.

Description:

The 2020 Better Budget Process Summit will convene lawmakers, Congressional staff, policy experts, journalists, and members of the public interested in reforming our broken budget process. The summit will be headlined by Senate Budget Committee Chairman Mike Enzi (R-WY) and Senator Sheldon Whitehouse (D-RI). The Senators will discuss their Bipartisan Congressional Budget Reform Act, the first bipartisan budget process reform bill to pass the Senate Budget Committee in 30 years.

In addition, the summit will include commentary from seasoned budget practitioners, budget reform experts, and members of Congress who will highlight and discuss reform proposals.

We are in the final weeks of our Fiscal Fallout Contest! Students (high school, trade school, two- or four-year colleges, or graduate school) are eligible to win $5,000. Has the student you know submitted their multimedia entry yet? Here is everything you need to know:

• The Committee for a Responsible Federal Budget will award three prizes ($5,000, $1,000, $500) to the top entries for the Fiscal Fallout Contest.

• Students should submit a compelling multimedia presentation (video, podcast, short story, song, storyboard, etc.) that portrays the social and human impact of unsustainable government debt. 

• Entries could focus on any possible fiscal fallout scenario, whether it be slow income growth, a potential spike in interest rates, Social Security insolvency, or shrinking federal investments.

• Entries are due on March 1, 2020. 

You can learn more here: http://www.crfb.org/fiscal-fallout-contest. 

Please share this with any students and teachers you know. We are hoping to have diverse applicant pool and a creative mix of entries. For questions or to learn more, please contact Ben Tomchik at tomchik@crfb.org.

FixUS Initiative Launches to Better Understand & Address Growing National Divisions
January 13, 2020

For Immediate Release