PA 581 Week 8 Final Paper; Strengthening Fiscal Sustainability Through Targeted Reform

STRENGTHENING FISCAL SUSTAINABILITY THROUGH TARGETED REFORM Table of Contents Introduction: Purpose and Intent….....................................................................1 Policy Focus Areas A. Mandatory Spending Reform…................................................................2 B. Discretionary Spending Control...............................................................3 Addressing Unfunded Liabilities.............................................................................4 Stakeholder Engagement Strategy.........................................................................5 Implementation Timeline and Oversight..............................................................6 Economic Analysis.......................................................................................................7 Expected Outcome…....................................................................................................8 Conclusion and Recommendation.............................................................................9 References ……………………………………………………………………………………………,….....10 STRENGTHENING FISCAL SUSTAINABILITY THROUGH TARGETED REFORM II. Policy Focus Areas A.Mandatory Spending Reform Mandatory spending reform to strengthen fiscal sustainability requires adjustments to the retirement age, means testing, revision of the cost-of-living formula, and revenue enhancements. Specifically, the eligibility age for Social Security and Medicare at retirement must be adjusted gradually from 67 to 70 over a 10-year period. This corresponds to the benefits of demographic reality and mirrors rising life expectancy. Additionally, the means testing would involve introducing income-based benefit cuts for those earning over $250,000 per year. This ensures that funds are allocated to those who need them most. In revising the cost-of-living formula, the COLA calculations shift from the CPI-W to the chained CPI, thereby more accurately reflecting consumer behavior and slowing the growth of benefits. Furthermore, the enhancement of revenue ultimately requires the removal of the income ceiling on taxable earnings exceeding $400,000 and an increase in the payroll tax rate from 6.2% to 6.5%. Over the course of 10 years, this would produce an estimated $1.2 trillion (Urban Institute, 2022). STRENGTHENING FISCAL SUSTAINABILITY THROUGH TARGETED REFORM III. Addressing Unfunded Federal Liabilities The element of addressing unfunded federal liabilities to strengthen fiscal sustainability through targeted reform involves transparency measures, the use of automatic adjustment mechanisms, and fostering public educational campaigns. The transparency measures require that long-term obligations, including unfunded liabilities for Social Security, Medicare, and Federal pensions, be disclosed in federal budget documents. The automatic adjustment mechanisms encompass the index, which benefits from economic variables such as GDP growth and demographics. The drive of public education campaigns aids in funding outreach efforts to explain to the American people the reason for reform and the need for tradeoffs. STRENGTHENING FISCAL SUSTAINABILITY THROUGH TARGETED REFORM V.Implementation Timeline and Oversight Again, in strengthening fiscal sustainability through targeted reform, the implementation timeline and oversight element are very significant. The implementation timeline consists of phase-in periods, legislative benchmarks, and oversight bodies. Specifically, the phase-in periods involve a 5–10 year design period for the full implementation of changes, aiming to avoid significant disruptions and allow for adjustments. The legislative benchmark element establishes annual milestones to review financial impacts and gather input from stakeholders. The oversight bodies function to strengthen the authority of the GAO and CBO to track adherence and report results. STRENGTHENING FISCAL SUSTAINABILITY THROUGH TARGETED REFORM VII. Expected Outcomes Again, strengthening fiscal sustainability through targeted reform is expected to yield specific outcomes. The outcomes include the stabilization of Trust Funds, deficit reduction, debt containment, and public confidence. Specifically, the solvency of Social Security and Medicare trust funds is increased by at least 15 years. In the reduction process, projected deficits for the next 10 years are reduced by 20%. As for debt, federal debt held by the