Debt Deal Leaves Lots of Work Left Undone

The debt ceiling debate is now behind America—at least temporarily. But the real threat—an explosion of debt—and the real work—entitlement reform—remains.

A river of red ink emanates from the U.S. social safety net entitlement programs. Social Security is running a cash-flow deficit of $49 billion that will explode to $211 billion annually in 10 years. Medicare's hospital program (Part A) has an annual cash-flow deficit of $66 billion, while the doctor program (Part B) and drug program (Part D) cost $216 billion more than is paid in premiums. Medicaid has no dedicated federal funding. In effect, each year our children are ponying up $405 billion in federal deficit-financed costs. Altogether healthcare entitlements will combine to form a crushing annual burden of $1.4 trillion by the end of the decade. The upshot is that these crucial safety net programs will implode without reforms. Liberals tout their defense of this status quo, when in fact business-as-usual is a callous political calculation that cruelly abandons future seniors and poor Americans without a durable safety net. (Top 10 Government Showdowns.)

The river of entitlement red ink courses through a broken budgetary landscape. America is borrowing $58,000 every second—more than the median income of its households—and the gross debt already exceeds the level (90% of gross domestic product) that has historically been seen as toying with danger. Even worse, the federal debt promises to explode in the next decade, which will surely result in a Greece-style debt crisis. Erskine Bowles, co-chair of the President's fiscal reform commission has called it the "most predictable crisis in history."

When the crisis inevitably arises, the painful memories of 2008—panic; no credit; monthly job losses in the hundreds of thousands; Main Street businesses shuttering their windows and closing their doors; highly-qualified college graduates despairing of ever finding real work—will seem quaint and mild by comparison.

Now the focus should shift to solving the real problem of moving to a durable, fiscally-realistic social safety net that lifts the threat of a crushing recession from American workers. Some have argued that it is wrong to introduce such a debate during a Presidential election season. Nonsense. Nothing is more important than solving this problem. Nothing goes more to the heart of shaping America's future. Nothing is more meriting of a spirited public debate than the nature of the needed reforms.

It's time to get to work.

Douglas Holtz-Eakin is the president of right-leaning think tank The American Action Forum. He was John McCain's chief economic policy advisor during the 2008 presidential campaign.

Originally published in TIME on 8/4/11.