National debt reduction proposals vary significantly, focusing on either increased revenue, decreased spending, or a combination of both. Common revenue-raising proposals include raising corporate and billionaire taxes, eliminating tax loopholes, or implementing new taxes like a value-added tax (VAT). Spending reduction ideas range from modernizing the Pentagon, cutting fossil fuel subsidies, and negotiating drug prices, to making broad cuts to social programs. Specific legislation, such as the Fiscal Responsibility Act of 2023, aims for targeted cuts and spending reductions, while other plans like the proposed Republican legislation aim for tax cuts that may increase the debt.  

Revenue-Generating Proposals

• Tax Reform: This can include increasing taxes on corporations and high-income individuals, closing tax loopholes, or eliminating the cap on Social Security contributions. 
• New Taxes: Ideas such as implementing a 5% value-added tax (VAT) or a national sales tax have been proposed to increase government revenue. 
• Ending Subsidies: Cutting or eliminating subsidies, such as those for fossil fuels, is another way to increase revenue and reduce spending. 

Spending Reduction Proposals

• Modernizing the Military: Proposals include modernizing the Pentagon to reduce unnecessary expenditures. 
• Healthcare Cost Reduction: Measures like tackling Medicare Advantage fraud, upcoding, and negotiating prescription drug prices are suggested to lower healthcare costs. 
• Cuts to Programs: Some proposals advocate for significant cuts to discretionary spending, which may include cuts to nutrition assistance and healthcare programs for low-income households. 
• Entitlement Reform: Reforming entitlement programs like Social Security and Medicare to extend their solvency is a key component of many debt reduction plans. 

Examples of Current Proposals and Legislation

• Congressman Ro Khanna‘s Progressive Deficit Reduction Plan: This plan combines modernizing the military, tackling Medicare fraud, and negotiating drug prices with increasing taxes on corporations and billionaires to reduce the deficit. 
• Fiscal Responsibility Act of 2023: This act, agreed upon by the Biden administration and former House Speaker McCarthy, aims to reduce deficits through projected reductions in discretionary spending. 
• House Republican Budget Plan: This budget proposal would significantly reduce federal taxes while also implementing spending cuts. However, some analyses suggest these tax cuts would be largely offset by cuts to vital programs and could ultimately increase the national debt, according to the Center for American Progress and the Center on Budget and Policy Priorities. 

76 Options for Reducing the Deficit

Debt in the United States is already the size of our entire economy and is projected to grow much higher. Fortunately, there are many ways to stabilize our fiscal outlook. Recently, the nonpartisan Congressional Budget Office (CBO) released 76 policy options — spanning both revenues and spending — that could help bring the country’s rising debt under control. Below are some of the policy options that would have the largest effects.

Options for Raising Federal Revenues

CBO presents 32 options that would affect revenues. Some provisions are likely to be part of the debate in 2025 as legislators revisit expiring provisions of the Tax Cuts and Jobs Act; others would modify unrelated provisions or create new types of taxes.

Eliminate or Limit Itemized Deductions: The largest option to reduce the deficit would be to eliminate all itemized deductions, which benefit taxpayers when the value of their deductions exceeds the amount of the standard deduction. That would reduce deficits by $3.4 trillion over the 10-year period from 2025 to 2034. Subsets of such reform include eliminating just the state and local tax deduction or limiting the tax benefit of itemized deductions to a certain percentage of their value.

Impose a 5 Percent Value-Added Tax: A value-added tax (VAT) is a consumption tax imposed on the incremental increase in the value of a good or service that occurs at each stage of a supply chain until the item is sold. Applying a 5 percent VAT would decrease the deficit by between $2.2 trillion and $3.4 trillion over 10 years, depending on the size of the base to which it is applied.

Impose a New Payroll Tax: The current payroll tax is levied on the earnings of people who work for an employer and on the net earnings of people who are self-employed and used to support programs such as Social Security and Medicare. CBO estimated the amount that could be raised by a new payroll tax that would be part of general revenues of either 1 percent ($1.3 trillion raised over the 2025-2034 period) or 2 percent ($2.5 trillion raised).

Impose a Surtax on Individuals’ Adjusted Gross Income: Most individual income is taxed on an amount that is reduced by certain deductions or exemptions. CBO estimated an option that would impose a surtax on a broader measure of income (adjusted gross income). Depending on the parameters of such a surtax (as defined in CBO’s option), it could garner between $1.1 trillion and $1.4 trillion in revenues over the 10-year period.

Alternative Minimum Tax (−$1.4 trillion)

The alternative minimum tax (AMT), which applies to individual income taxes, set limits on certain tax benefits to address concerns that high-income persons were avoiding paying income tax. The TCJA raised the AMT exemption amount, meaning the amount of income a taxpayer could earn before being subject to the AMT, and increased the phase-out income threshold (the gradual tax benefit reduction as the taxpayer’s income approaches the upper limit). In 2017, before the TCJA was enacted, about 3 percent of households paid the AMT. By 2019, just 0.1 percent of households paid it. Extending the TCJA AMT exemption level would keep the number of households subject to the AMT, most of which are high-income, comparatively low, and reduce revenues by $1.4 trillion through 2034.

Expansion of the Child Tax Credit (−$748 billion)

The TCJA expanded the child tax credit (CTC), which applies to qualifying dependents under the age of 17, doubling the maximum credit from $1,000 to $2,000 per child. It also increased the phase-out threshold from $75,000 for single and $110,000 for joint filers to $200,000 and $400,000, respectively. Extending the provision would reduce revenues by an estimated $748 billion over the following several years.

Changes to Standard and Itemized Deductions (Nearly Offsetting)

The TCJA doubled the standard deduction and made several changes to itemized deductions, which reduced the number of taxpayers who incorporated such itemizations. Extending the changes made to both standard and itemized deductions would effectively offset, reducing revenues by less than $7 billion through 2034.

• Increasing the standard deduction: −$1.3 trillion. The TCJA nearly doubled the standard deduction, the specific dollar amount that a taxpayer can earn before being subject to the income tax. The larger standard deduction simplifies tax filing for those whose itemized deductions would be less than the new standard deduction. In 2021, 92 percent of all taxpayers took the standard deduction instead of itemizing. Extending this provision would reduce revenues by an estimated $1.3 trillion through 2034.
• Eliminating or changing itemized deductions: $1.2 trillion. Itemized deductions allow individuals to subtract certain expenses from their taxable income. The most significant change to itemized deductions was capping the state and local tax deduction (SALT) at $10,000. Before the TCJA, when SALT was uncapped, about 30 percent of taxpayers claimed the deduction, with high-income households more likely to benefit. After the TCJA, the number of taxpayers claiming the now-capped deduction fell by nearly two-thirds, although the benefits are still disproportionately accrued by households with incomes over $200,000. Other itemized deductions were also affected (see table below). Extending all itemized deduction changes would increase revenues by $1.2 trillion through

Suspension of the Personal Exemption ($1.7 trillion)

The TCJA eliminated personal exemptions (a dollar amount that can be deducted from an individual’s total income for each dependent in the household). The TCJA increased the standard deduction and child tax credits to replace personal exemptions. Extending the suspension of the personal exemption in isolation would generate an estimated $1.7 trillion in revenues through 2034.

Pass-Through Deduction (−$684 billion)

The TCJA also created a new “pass-through” deduction for taxpayers with income earned from partnerships, sole proprietorships, and S corporations. Income from such sources is not subject to corporate income taxes, as opposed to C corporation income. Up to 20 percent of income from such sources can be deducted from fillers’ individual income taxes, although the deduction varies depending on factors such as the type of business and total income of its owner. Extending this provision reduces revenues by an estimated $684 billion.

Changes to Bonus Depreciation (−$378 billion)

The TCJA made a change to the tax treatment of certain qualified properties. If a taxpayer manufactures, constructs, or produces property for trade, business, or production, it can qualify for its first year of depreciation to be written off at 100 percent. The provision began phasing out at 20 percent a year in 2023 and is set to fully expire after 2026. Extending the change, including allowing amounts to be retroactively deducted, would reduce revenues by $378 billion through 2034.

Delayed Onset Business Tax Provisions (−$172 billion)

The TCJA enacted three business tax provisions that affect income earned abroad with formulas set to be modified at the end of 2025: the base erosion and anti-abuse tax, foreign-derived intangible income, and global intangible low-taxed income. Delaying the scheduled change of those formulas would reduce federal revenues by $172 billion through 2034.

Doubled Estate and Gift Tax Exemptions (−$167 billion)

In addition to tax provisions affecting individual income taxes, another major change in the TCJA affected estate and gift taxation.

The TCJA initially doubled the exemption for estate taxes (applied to property transferred from deceased persons to heirs) and gift taxes (applied to transfers between non-married individuals while alive) from $11.2 to $22.4 million for those filing jointly and $5.6 to $11.2 for single filers; those amounts were subsequently indexed for inflation. The TCJA retained a maximum rate of 40 percent on estates and gifts. Extending this provision would reduce revenues by an estimated $167 billion over the following decade.

How Would Extending Certain TCJA Provisions Impact Deficits and the Debt?

At the end of fiscal year 2024, debt held by the public represented nearly 100 percent of GDP. CBO currently projects that such debt, while assuming that provisions of the TCJA will expire as scheduled, will exceed its post-World War II high of 106 percent in 2028 and reach 122 percent in 2034. Extending the TCJA provisions in full would add an additional 11 percentage points to the debt, CBO reports, bringing it to 133 percent of GDP in 2034.

Options for Decreasing Mandatory Spending

CBO also presents 27 options that affect mandatory spending, which includes programs such as Social Security, Medicare, and Medicaid. As those three programs are the largest categories of mandatory spending in the U.S. budget, reforming them has the potential to create the most savings.

Modify Payments to Medicare Advantage Plans for Health Risk: Medicare Advantage plans cover more than half of all Medicare beneficiaries. CBO offers three options to save money in Medicare Advantage by reducing payments to the program across-the-board or by making changes to its risk-adjustment policy. Savings from those policy measures range from $124 billion to $1 trillion over 10 years.

Establish Caps on Federal Spending for Medicaid: Currently, the federal government provides the majority of Medicaid’s funding and that funding has no ceiling — larger federal payments are generated automatically if enrollment or cost per enrollee increases. CBO estimates that if caps were established for total funding provided for each state, the government could save $459 billion over the projection period; establishing caps for the cost per enrollee, as specified by CBO, could generate savings of $893 billion over 10 years.

Establish a Uniform Social Security Benefit: Social Security benefits are calculated based on an individual’s average lifetime earnings, so individuals with higher earnings receive more retirement benefits than beneficiaries with lower earnings. CBO estimates that providing every beneficiary the same amount — either 150 percent or 125 percent of the federal poverty level — could save $283 billion or $607 billion, respectively, over the 10-year period.

Options for Decreasing Discretionary Spending

CBO provides 17 options that would affect discretionary spending. As nearly half of all discretionary spending is for defense, the option reforming that budget category has the greatest potential for deficit reduction.

Reduce the Department of Defense’s Annual Budget: According to CBO, addressing the Department of Defense’s annual budget could save $959 billion over the next 10 years. Reducing the number of active-component military personnel, reducing ground combat and air combat units, or relying on allies to provide their own defenses rather than using a U.S. combat force are possible methods of achieving the reform.

A Bipartisan Plan to Stabilize the Long-Term Federal Budget

A realistic path to averting the country’s future debt crisis will require lawmakers to reject gimmicks, slogans, and empty budget targets in favor of plausible changes to the current arc of federal spending and taxes—specific changes whose effects on the federal budget can be scored by CBO methodology. And because deficit-reduction policies are never popular, major reforms need to be enacted on a bipartisan basis, much like the 1983 Social Security reforms. Any attempt to pass these major changes on a party-line vote would undermine their public legitimacy, would be politically suicidal, and would likely be repealed when the opposition party returns to power.

The path put forward in this report is meant to achieve the following objectives:

1. Long-term fiscal sustainability. Moving to a fully balanced budget is not possible anytime soon. However, stabilizing the national debt around the current level of 100% of GDP would likely stabilize the cost of interest on the national debt and the debt’s effect on the economy. This means annual budget deficits stabilizing near 3.5% of GDP. Sustainability also means that both spending and tax revenues stabilize as a percentage of GDP rather than continue to rise in tandem. Finally, long-term sustainability means that showy reforms, such as across-the-board discretionary spending cuts, are less important than subtle entitlement reforms that produce larger savings over time.
   
   This standard differs from the long-standing practice of measuring Social Security and Medicare finances against a general target of 75-year solvency. Blueprints showing such a target are often achieved by decades of program surpluses followed by decades of crushing deficits. History has shown that those initial surpluses get spent on other federal priorities, leaving no resources to finance the large deficits in the latter half of the period. Furthermore, as Social Security’s past four decades have shown, this intergenerational trust fund accounting requires that additional interest payments be transferred into the Social Security and Medicare systems—which are funded out of general revenues and thus increase budget deficits. Instead, basic intergenerational equity rejects having one generation run surpluses to balance another generation’s deficits.
   
2. Achieve most savings from major mandatory programs. There are three reasons for this objective:
   
   First, it’s the only solution that addresses the underlying problem. Mandatory spending is the primary factor driving the debt upward. CBO’s long-term baseline shows that 100% of the long-term increase in annual budget deficits as a share of the economy comes from the rising cost of Social Security, Medicare, and other health entitlements, as well as the resulting interest on the debt. Remaining federal spending is projected by CBO to continue falling as a share of the economy. Tax revenues are projected to rise above average levels. It is not sustainable to chase ever-rising entitlement costs with ever-rising tax rates, or to eviscerate all other federal programs.
   
   The second reason is generational equity. Drowning younger workers in ever-rising taxes is no more moral than drowning them in debt, particularly when the entire additional tax burden will finance the largest intergenerational wealth transfer in world history. Retirees are typically wealthier than working-age men and women; and over the years, Social Security and Medicare benefits have been enacted that far exceed retirees’ lifetime contributions to the programs. Rather than passing this burden on to their kids, they have a responsibility to pare back their benefits to affordable levels.
   
   The third reason is economic. The level of tax increases that would be necessary to keep pace with escalating entitlement spending—including gradually moving to a 29.6% payroll tax rate or a 36% VAT—would retard economic growth. Across other countries, the most successful fiscal consolidations—such as in Finland and the U.K. in the late 1990s—have averaged 85% spending restraint and 15% new taxes.
   
3. Specific and plausible changes only. Most other long-term budget proposals show larger and more immediate budget savings than this blueprint. Unfortunately, those savings usually rely on some combination of:
   • Overly optimistic economic growth assumptions;
   • The immediate implementation of extraordinarily complicated and controversial reforms to major programs that in reality would take several years to draft, pass, implement, and phase in;
   • Aggressive spending-cut or tax-increase targets (or unrealistically tight spending caps) that lack specific policy reforms to meet them;
   • Combining various tax increase proposals that collectively result in unrealistically high tax burdens for certain groups, or that generally duplicate or contradict one another.

Additionally, many long-term budget proposals are based on liberal or conservative fantasies such as taxing the rich at impossibly high rates or eliminating most welfare and domestic discretionary spending. This blueprint attempts to thread the needle of effective policy and the political reality that any major, lasting deal must be bipartisan.

This budget blueprint works within the current structure of government, rather than proposing complete rewrites of major programs or the tax code. It divides reforms into four tiers and seeks maximum savings in a given tier before moving to the next:

• Tier 1: Squeeze out inefficiencies from the major health programs driving spending upward (as close to a free lunch as is available).
• Tier 2: Trim Social Security and Medicare benefits primarily for upper-income retirees (who can most afford the changes).
• Tier 3: Trim other federal programs to the extent feasible on a bipartisan basis.
• Tier 4: Close the remaining gap with new taxes in the least damaging manner possible.

The blueprint also provides that: the lowest-income 40% of seniors are largely protected from Social Security and Medicare cuts (beyond raising the Social Security eligibility age); spending cuts to antipoverty programs are largely avoided; parity between discretionary defense and nondefense spending is maintained; Washington’s structural budget deficits are not passed on to the nation’s governors; tax increases are kept within reasonable limits; policy changes are phased in gradually, mostly beginning in 2026; and economic growth is assumed to be no faster than in CBO’s long-term projection.

The first step toward scoring a long-term budget is a credible 30-year baseline. Regarding this blueprint’s baseline:

• It begins with CBO’s March 2024 “Long-Term Budget Outlook,” which projects the 2024–54 baseline based on current law.
• Next, CBO’s current-law baseline is converted to a current-policy baseline by assuming that expiring tax cuts and spending policies are made permanent, for reasons explained below.
• Projections of future spending on discretionary programs (which has ranged between 6% and 9% of GDP for several decades) are adjusted to never fall below 6.0% of GDP. By contrast, CBO is required by Congress to instead rely on a simple mathematical formula that gradually drives the baseline level down to 4.9% of GDP over three decades.
• Similarly, this current-policy baseline assumes that smaller mandatory program budgets level off at their CBO-projected 2034 percentage of GDP (which is the final year of CBO’s more detailed 10-year baseline) rather than continue declining indefinitely as a percentage of GDP in the CBO current-law baseline. Such permanent declines are better classified as a legislative choice rather than the default.

The permanent extensions of recent policy changes do not necessarily reflect this author’s preferences but are based on the idea that the starting baseline should assume the continuation of current policies rather than the (highly unlikely) implementation of major changes down the road. Furthermore, even CBO’s current-law baseline already makes an enormous current-policy exception: it assumes, per lawmakers’ instructions, that Social Security and Medicare benefits will continue to be paid in full even after the trust funds of both programs are exhausted. A true current-law baseline would show that these benefits would be reduced at that point.

Under an updated, current-policy baseline, the 2024–54 period shows that:

• Federal tax revenues would rise from 17.4% to 17.9% of GDP.
• Federal spending would jump from 22.8% to 31.4% of GDP.
• Budget deficits would therefore rise from 5.4% to 13.4% of GDP.
• The national debt held by the public would jump from 99% to 236% of GDP.
• Absent fiscal consolidation, interest on the national debt would rise from 3.0% to 8.7% of GDP over this period.

Stabilizing the national debt at 100% of GDP would require tax-and-spending reforms producing net savings against the baseline that gradually rise to 5% of GDP annually by 2054:

• This blueprint eventually produces slightly larger savings and splits that year’s savings at 4.4% of GDP in spending cuts and 2.9% of GDP in tax increases. This is because many of the spending savings that are needed to minimize debt growth over the next two decades eventually produce larger savings thereafter, creating a virtuous circle of lower interest costs.
• The 4.4% of GDP in spending “cuts” can more accurately be described as the cancellation of the large spending surge scheduled in the baseline. Total spending would remain around 22% of GDP over the three decades.
• Over three decades, the noninterest breakdown is 52% spending cuts and 48% tax increases. The spending savings are initially small because most programmatic spending reforms (such as reductions in growth rates) take many years to ramp up their savings—requiring tax hikes to produce most of the required early savings. Those annual spending savings finally surpass the tax increases in 2037, and by the end of the 30-year window are producing 60% of all annual noninterest savings.
• Those reforms would not only directly save 7.3% of GDP annually by 2054; they would also shave 5.9% of GDP off the projected interest spending by that year, as a result of a smaller than projected national debt. Total deficit reduction is 13.2% of GDP by that point.
• The blueprint results in eventually matching spending at 21.0% of GDP, with taxes at 20.8% of GDP. Annual deficits fall to 0.2% of GDP, eventually reducing the national debt to 73% of GDP. The latter reduction in the debt ratio to 73% results from the cumulative spending savings ramping up and eventually reducing annual debt interest costs.

Getting from Here to There: Spending

Stabilizing the ratio of debt-to-GDP requires annual tax-and-spending savings (not including interest savings on the national debt) that gradually rise to 5% of GDP by 2054. These reforms are summarized in the table below:

Social Security benefits (1.4% of GDP trimmed from 2054 baseline). CBO projects Social Security to continue collecting 4.5% of GDP in payroll taxes and dedicated revenues. Yet its spending level is projected to rise from 5.0% to 5.9% of GDP over the next decade, and then level off. Instead, this blueprint would gradually phase in reforms that allow spending to peak at 5.6% of GDP and then gradually fall to 4.5% of GDP over three decades—eventually matching the revenues and ensuring a self-financing system. Social Security’s projected 30-year shortfall would fall from $20 trillion (excluding interest) to $8 trillion. Because the currently projected Social Security funding gap far exceeds the shortfalls that induced the 1983 reforms, this new round of reforms must be significantly more bold.

The proposed Social Security reforms do not raise the payroll-tax rate or wage cap because new upper-income taxes are needed to shore up Medicare’s large funding gap and other interest costs (as described in later sections). Instead, this proposal generally protects the bottom-earning 40% of seniors from significant benefit cuts while reducing the growth of benefits for higher-earning retirees. The result is a flatter benefit level across incomes.

First, the blueprint raises both the early and normal eligibility ages (currently 62 and rising to 67, respectively) by three months per year, beginning in 2030, until they reach 64 and 69 in 2037. It is simply not affordable for individuals to spend one-third of their adult life collecting Social Security benefits. The eligibility age has been rising gradually since the 1983 Social Security reforms, and that must continue for a while longer. However, to assist workers with delayed retirement, the blueprint would eliminate: 1) the Social Security payroll tax at age 62; and 2) the retirement earnings test, which temporarily reduces the earned benefits for seniors who claim benefits before the full retirement age.

Next, beginning in 2026, initial Social Security benefits would be calculated using price-indexing rather than wage-indexing. As background, Social Security calculates each worker’s initial benefits by inflation-adjusting decades of his/her prior earnings into current dollars, and then applying a percentage-payment rate to that amount. However, that initial inflation-adjusting is done by adjusting lifetime earnings for the historical growth of economy-wide wages rather than prices. Because wages typically grow faster than prices, this results in an over-adjustment for past inflation, which, in turn, means a higher initial benefit than otherwise (once this initial benefit is set, it grows annually by price inflation). This glitch explains why—even among workers with identical real wages—each generation of retirees will automatically receive higher inflation-adjusted benefits than the last. This blueprint would calculate the initial benefits of new retirees using price-indexing rather than wage-indexing.

However, to protect lower-income retirees from this reduction in the initial benefits, Social Security would guarantee a minimum benefit of 125% of the federal poverty line. This would ensure protection from poverty for every Social Security–eligible senior with a full work history.

Additional reforms also beginning in 2026 would:

• Grow annual Social Security benefits by the more accurate chained CPI, once a base benefit is established
• Cancel Social Security’s annual cost-of-living adjustment (COLA) for seniors whose income in the previous year exceeded $100,000 (single) and $200,000 (married), and adjust that threshold annually for inflation
• Gradually increase the number of work years used to calculate benefits for retirees and survivors (but not for disabled workers) from 35 to 38
• Reform the non-working spousal benefit, which is poorly targeted and designed
• Slightly expand the work history requirements for participation in the Social Security Disability Insurance system

The first effect of these reforms is to significantly flatten Social Security benefits, shrinking the benefit gap between high- and low-earners. This would return Social Security to its original social-insurance purpose of poverty protection, rather than distributing many of its largest benefits to high-earners. The other effect is to ensure that average benefit levels grow roughly by price inflation over the long-term (slightly faster for low-earners, slightly lower for high-earners), ensuring parity across generations as well as long-term fiscal sustainability.

Medicare benefits (1.5% of GDP trimmed from 2054 baseline). Medicare is projected to continue collecting between 1.6% and 1.8% of GDP in payroll taxes and related revenues. However, outlays (net of premiums) are projected to soar from 3.0% to 5.4% of GDP over the next few decades. The resulting deficit of 3.7% of GDP plus interest makes Medicare the single largest driver of long-term budget deficits.

This blueprint’s recommendations would: 1) limit 2054 Medicare’s spending to 3.9% of GDP; and 2) raise Medicare revenues to 2.1% of GDP through a 1% increase in the Medicare payroll tax (which is described in the tax section). By reducing spending by 1.5% of GDP and adding 0.35% of GDP in payroll-tax revenues, Medicare’s projected 2054 shortfall would fall in half, from 3.6% to 1.8% of GDP. While the remaining shortfall is still substantial, these recommendations likely represent the ceiling of plausible in-system reform savings in the absence of an unanticipated change in the health economy.

The first place to seek savings is by making Medicare more efficient. The largest efficiencies would come from implementing a premium support system for Medicare Parts A and B, much like the original Medicare Part D (the prescription-drug program), which cost far less than had been originally projected. Instead of the traditional Medicare system’s one-size-fits-all model (which is slightly improved by the Medicare Advantage option), premium support creates a health-care market where insurers must compete for retirees. This model has proved, in the case of Medicare Part D, to empower seniors, encourage innovation, and reduce premium growth. As applied to Medicare overall, this budget proposal’s federal premium support payment would equal the average bid of all competing plans, all of which would be required to offer benefits at least actuarily equivalent to the current system. CBO estimates that premiums paid by retirees would fall by 7%, and the federal Medicare savings for affected beneficiaries would total 8%, by the fifth year. In short, premium support means more choices for seniors, no reduction in benefits, and substantial cost savings both for seniors and the federal government.

In the past, premium support proposals were criticized for tying the payment level to a variable such as inflation or economic growth that might not keep up with the rising cost of health plans—or tying the payment level to one of the lowest-bid plans, thus making it likely that seniors would pay more out-of-pocket for a typical plan. By contrast, the premium support proposal in this report is more generously set at the average local bid. No matter how much health-care costs rise, the premium support payment would remain tied to the cost of the average plan.

Medicare can achieve additional savings by modestly tweaking other payment policies and curtailing spending such as graduate medical education (GME) subsidies and curtailing Medicare’s reimbursements to providers for failures to collect senior out-of-pocket costs (“bad debt”). Overall, efficiency savings could rise to 9% of projected program costs by 2054. The average annual growth rates of Medicare Parts A and B (per-capita) would fall from the current 4.8% projection down to 4.4% (and would decline significantly by the end of the 30-year period).

Once Medicare has maximized its efficiency savings, the next step is to rebalance the responsibility for funding Medicare Parts B and D. Currently, more than 90% of seniors are charged premiums that cover no more than 26% of the cost of their coverage. Taxpayers fund the rest. The federal subsidies for Medicare Parts B and D were not “earned” with earlier payroll taxes—which contribute only to Medicare Part A.

The blueprint gradually raises total senior premiums to cover 50% of Medicare Part B costs—which matches the original program design—and 30% of Medicare Part D costs. The monthly premiums would rise on a sliding scale, based on current, post-retirement income. Retirees whose income is at or below the 40th percentile would see no premium hikes. However, the Part B monthly premium would increase between the 41st and 80th income percentile, until it reaches 95% of the cost of the insurance plans. The Part D monthly premium would gradually rise for those above the 40th percentile until it reaches 85% of the cost.

These higher premiums will be more affordable because they are partially offset by efficiency gains from the premium support mechanism that should lower total Medicare Part B costs. Once fully phased in, total Medicare premiums would rise by approximately 3% of aggregate senior income relative to the baseline. The “group impacts” section later in this report breaks down the cost per retired family across incomes.

This blueprint leaves the Medicare eligibility age at 65. CBO estimates that raising the Medicare eligibility age would provide only limited federal budget savings. The small savings are not worth the upheaval.

Altogether, these policies would reduce Medicare’s (noninterest) shortfall projected over 30 years from $49.1 trillion to $25.7 trillion, as follows:

• Premium support would save $5.1 trillion over 30 years and 0.46% of GDP by 2054[64] 
• Hiking Part B premiums would save $10.4 trillion over 30 years and 0.85% of GDP by 2054
• Hiking Part D premiums would save $1.3 trillion over 30 years and 0.10% of GDP by 2054
• GME and “bad debt” reform would save $1.2 trillion over 30 years and 0.11% of GDP by 2054
• On the revenue side, raising the Medicare payroll tax would collect $5.5 trillion over 30 years and 0.35% of GDP by 2054 (this figure is excluded from the 1.5% of GDP listed above and is counted in the tax section below).

These reforms likely maximize Medicare’s conceivable budget saving, given the expanding retiree population and the persistence of even modest health inflation. Not much more can be saved from income-relating Medicare premiums without severely burdening the bottom 40% of earners. For those who consider these efficiency savings timid, saving another 0.5%–1.0% of GDP on efficiencies would require savings of 20%–30% below the 2054 spending projections—a worthy goal that is too bold to be assumed.

Medicaid (0.5% of GDP trimmed from 2054 baseline). Recent eligibility expansions and natural caseload increases have raised federal Medicaid spending from 1.13% to over 2.0% of GDP since 2007—and spending is projected to reach 2.5% of GDP within 30 years. Achievable reforms can maintain Medicaid spending at 2.0% of GDP while improving the program.

Congress should first address the 90% long-term federal reimbursement rate for the newly eligible population of nondisabled, working-age adults with higher incomes that was implemented as part of the Affordable Care Act (ACA) in 2014. States should continue to be allowed to include these newly added adults in their Medicaid programs; but no rational explanation exists for Washington subsidizing nondisabled, higher-earning, working-age adults on Medicaid with a much higher reimbursement rate than children, the elderly, and the disabled. Congress should repeal this higher reimbursement rate.

This blueprint would cap Washington’s per-capita Medicaid payments to states, beginning in 2026. The current system irrationally reimburses a preset percentage of state Medicaid costs, which means that the more a state spends, the larger its federal subsidy. The current system also restricts state innovation in health care, such as health savings accounts (HSAs). Per-capita caps would provide an incentive and the added flexibility for states to devise innovative coverage for low-income residents. States developing successful approaches will certainly be copied by other states.

In keeping with the principle that deficit reduction should not simply dump the federal budget deficit onto states, the per-capita caps would be significantly looser than those proposed by Senate Republicans in their 2017 proposal. They proposed limiting the annual growth rate of the per-capita caps to the CPI-U (Consumer Price Index for All Urban Consumers, currently projected at 2.3%) when fully phased in. By contrast, this blueprint would allow the caps to grow by 3.5% annually for children and adults and 4.0% annually for the elderly and disabled (a weighted average of 3.8%). This is not too far below the estimated 4.6% annual growth in per-capita Medicaid spending assumed in CBO’s long-term budget baseline. Innovative governors should be able to stay under these more generous caps without raising state taxes or deeply limiting eligibility.

Overall, under this blueprint, federal Medicaid spending would quickly dip from 2.0% to 1.7% of GDP because of resetting the payment rates for the ACA expansion population, before gradually rising back to 2.0% over three decades. Still, federal Medicaid spending is likely to grow somewhat faster than the economy after the initial ACA reset because the annual growth of proposed per-capita spending (3.8%) plus the Medicaid population (0.3%) will slightly exceed the 3.8% projected annual growth of the nominal GDP that is projected by CBO in its 30-year baseline. While the federal government could save another 0.5% of GDP off the projected 2054 total by capping annual growth at 2.7% for all populations, it is unlikely that governors could bring per-capita cost growth down near CPI. Thus, governors would strongly resist such tight federal caps, and the added federal savings would most likely translate into state tax increases, anyway.

Health exchanges and CHIP (no changes). No cost changes. Health spending on ACA subsidies and the Children’s Health Insurance Program (CHIP) are projected to remain around 0.4% of GDP during 2024–54 because of rising per-capita health costs. While the ACA subsidy system has many flaws, any reforms or replacement would likely involve a similar level of spending (and ACA’s Medicaid expansion is addressed in the previous section). As far as the national debt–GDP ratio is concerned, even somehow cutting the cost of ACA and CHIP by 25% would save just 0.1% of GDP.

Other mandatory programs (0.45% of GDP trimmed from 2054 baseline). The remaining mandatory programs are projected by CBO to dip from 3.0% to 2.5% over the next decade as more temporary pandemic costs expire, after which this report’s baseline freezes the spending at 2.5% of GDP. The reform proposals would gradually shave 0.45% off this spending over three decades, until it reaches 2.05% of GDP.

The full 0.45% of GDP in savings is achieved by limiting post-2034 spending growth to the inflation rate plus population growth (roughly 2.6% annually), rather than allowing it to grow with the nominal GDP at a 3.6% annual rate. However, this blueprint increases spending in two other areas:

• Ensuring that post-2034 veterans’ income benefits grow at the aforementioned 3.6% annual rate with the economy, rather than merely the 2.6% inflation plus population rate
• Renewing the Inflation Reduction Act’s added IRS enforcement funding after its scheduled 2031 expiration (which produces significant tax revenues).

Those two expansions are offset by:

• Consolidating student loan and income-driven repayment programs
• Extending the current mandatory spending sequester beyond 2031
• Raising premiums for the Pension Benefit Guaranty Corporation (PBGC)
• Reforming farm commodity, crop insurance, and conservation subsidies
• Switching annual inflation adjustments to the more accurate chained CPI

Conservative blueprints often claim that much greater savings can be achieved from this spending category. However, it is unclear where the plausible savings would come from. The largest portion of this category is the 1.3% of GDP spent on vulnerable populations. This includes SNAP (food stamps), the Earned Income Tax Credit (EITC), Supplemental Security Income (SSI), unemployment benefits, child nutrition programs, child tax credit outlays, adoption assistance, Temporary Assistance for Needy Families (TANF), child-care assistance, and similar programs. Even the most aggressive SNAP work requirements would save perhaps 0.1% of GDP, and recent legislative history shows that EITC and child tax credit will more likely be expanded rather than pared back. True enough, a more effective welfare system would devolve much of its spending to states; but shifting the address where taxes are mailed should not count as a major deficit reduction or savings to taxpayers. This proposal’s plan to limit this spending growth to inflation plus population growth beyond the 2025–34 CBO baseline would gradually save 0.2% of GDP between 2034 and 2054 without reducing eligibility or benefits. Limiting federal overpayments to beneficiaries can also provide budget savings of an indeterminate amount.

Nearly half of all “other mandatory” spending consists of veterans compensation and its toxic exposure fund (0.75% of GDP and rising), military pensions (0.2% of GDP), and federal employee pensions (0.25% of GDP). Recent wars and the aging of the population will increase these costs. Congress understandably will not rein in benefits for veterans’ and military personnel, and even reforms of the federal employees’ pension system would likely be phased in slowly. After staying on CBO’s baseline through 2034, the blueprint assumes that subsequent veterans’ income benefits grow with the economy, and civilian and military retirement benefits grow with inflation and population.

The remaining small sliver of mandatory program spending includes farm subsidies and student loans (which are each pared back above) as well as several other federal insurance and loan programs. This category of spending could also achieve significant offsets by privatizing or terminating lower-priority programs and selling excess federal land and assets. These savings could finance stronger growth in veterans’ benefits or an expanded EITC.

Discretionary programs (0.55% of GDP trimmed from 2054 baseline). Like “other mandatory spending,” discretionary spending is often a magnet for unrealistic budget-cutting proposals. Liberals often overestimate plausible defense cuts, while conservatives go overboard on unspecified nondefense cuts.

Discretionary spending is currently 6.2% of GDP, and this report’s baseline freezes it as 6.0% of GDP moving forward (unlike the CBO current-law baseline, which is required to assume drastic long-term reductions in this spending as a share of GDP). This blueprint would allow this spending to gradually decline to 5.45% of GDP over three decades—the lowest level since this spending category was first defined in the early 1960s. This would be accomplished by allowing the spending from the 2021 Infrastructure Investment and Jobs Act to expire on schedule in 2026, and then capping all remaining appropriations growth at 3.5% annually. This blueprint also proposes to maintain parity between defense and nondefense spending levels—as a bipartisan compromise and an acknowledgment that neither category can be reduced as deeply as partisans on either side wish.

It is fashionable in some quarters to criticize America’s “outlier” defense budget and advocate spending closer to the 2% of GDP targeted by major European allies. However, the U.S. has already moved substantially in that direction. After topping 9% of GDP during the Vietnam War, defense spending averaged 6% under President Reagan, before the end of the Cold War dropped defense spending to 2.9%. The wars in Iraq and Afghanistan briefly pushed defense spending as high as 4.7% of GDP; yet it has since fallen back to 2.9%. Because this blueprint caps annual defense spending growth at 3.5%—which is slower than the projected 3.8% nominal growth of the economy—defense spending would gradually fall to 2.7% of GDP (the lowest level since the 1930s). The Pentagon should be able to absorb a gradually lower percentage of GDP as long as annual spending can keep up with the cost of equipment and compensation. Deeper cuts would face bipartisan opposition from defense experts and from lawmakers who do not wish to surrender America’s status as a military superpower or slash troop compensation levels.

Nondefense discretionary spending is currently 3.3% of GDP on the lower end of the 3%–4% range that has prevailed for 40 years. The proposed 3.5% annual growth rate would nonetheless gradually bring spending down to 2.7% of GDP (the lowest level since the category’s creation) because the economy is projected to grow slightly faster than these appropriations.

Conservative blueprints have sought to eventually decrease nondefense discretionary spending from today’s 3.3% down to below 2% of GDP. In reality, neither party would likely consider drastic cuts to veterans’ health care—by far, this category’s largest expenditure—as well as highways and infrastructure, K–12 education, homeland security, and the National Institutes of Health. Whatever the merits of targeting the National Endowment for the Arts, public broadcasting, and congressional salaries, they are of vanishingly small budgetary consequence—about 0.005% of GDP. Many nondefense discretionary programs are candidates for devolution to states; yet those savings should not count as a major deficit reduction if they simply result in additional state taxes or deficits.

To be sure, permanently capping the growth of discretionary spending growth at 3.0% rather than 3.5% could save an additional 0.7% of GDP annually by 2054. However, that would leave little room for the steeply rising cost of veterans’ health care (which has averaged 10% annual growth since 2018). It would also push national security spending even further below levels deemed plausible, and also push domestic discretionary spending down to a share of economy that has not been seen in nearly a century. Tight discretionary caps are feasible for perhaps a decade, but it is unlikely that Americans will put all other major government initiatives on hold for 30 years, solely to maximize Social Security and Medicare benefits.

Getting from here to there: Taxes (2.9% of GDP raised from 2054 baseline). Relative to a current-policy baseline, the spending reforms in this blueprint would produce budget savings that gradually grow to 4.7% of GDP annually by 2054. To reach the blueprint’s overall target of more than 5% of GDP in noninterest savings, the rest must come from new taxes. Additional taxes are also necessary to reduce the debt ratio below 100% of GDP, or to provide budgetary space for unanticipated emergencies.

Tax revenues have averaged 17.4% of GDP since the 1960s. A current-policy baseline already assumes that revenues will gradually rise from the current 17.5% to 17.9% of GDP over three decades. This blueprint would gradually raise an additional 2.9% of GDP in taxes to reach 20.8% by 2054. The taxes can be grouped as follows:

1. Primarily businesses and upper-income families (1.3% of GDP in 2054)
   • Raise top income tax bracket from 37% to 39.6% (0.11% of GDP)
   • Cap value of itemized tax deductions at 15% of amount deducted (0.21%)
   • Impose a modest carbon tax with the cost rebated to all but top-earning 25% of households (0.09%)
   • Repeal Tax Cuts and Jobs Act’s (TCJA) 20% pass-through business deduction (0.40%)
   • Repeal step-up basis on inherited capital gains (0.07%)
   • Repeal energy credits in the Inflation Reduction Act (IRA) (0.18%)
   • Extend IRA’s funding for IRS tax enforcement beyond 2031 (0.07%)
   • Other small tax reforms (0.17%)
2. Broader tax increases (1.6% of GDP)
   • Cap tax exclusion for employer-provided health care at 50% of the average premium (1.09%)Raise Medicare payroll tax rate by 1 percentage point (split between employer and employee) (0.40%)Raise gas tax by 15 cents per gallon and index for inflation (0.08%)
3. New tax relief (no cost)
   • End Social Security payroll tax at age 62 (zero net cost)

It must be emphasized that this blueprint is based on a current-policy baseline that automatically incorporates an extension of the 2017 tax cuts. This is because, conceptually, a baseline should present a long-term budget projection of the default option of continuing today’s tax and spending policies. Once a baseline begins assuming changes to tax and spending policies along the way, it ceases to present a clear default scenario against which to measure changes from today’s policies. Thus, the report’s recommendation that Congress not renew TCJA’s 20% pass-through tax deduction or its reduced 37% top tax rate are scored as new tax increases relative to current policies.

Generally, this blueprint aims to include “tax the rich” policies that do not dramatically increase marginal tax rates. The top marginal tax rate on wages already approaches 50% when combining the 37% federal income-tax rate, 2.9% Medicare payroll tax, 0.9% additional Medicare tax, and state tax rates exceeding 10% in California and New York (where many of these high earners reside). This blueprint adds 3.6% to the top combined tax rate by raising the top income-tax bracket by 2.6% and hiking the Medicare payroll tax by another 1%. It does not eliminate the Social Security tax cap of $168,600 in wages because imposing that 12.4% Social Security payroll tax would push the top marginal tax rates into the mid-60s for many top-earners. That might exceed the revenue-maximizing tax rate because it would significantly reduce incentives to work, save, and invest among high-earners and pass-through business owners who have the flexibility to cut work hours, limit business expansions, and shift compensation out of wages and into lower-taxed benefits or investments. This would not only bring broader economic harm, it would also limit the amount of new tax revenues raised.

Instead, this blueprint focuses its “tax the rich” policies more on aggressively cracking down on tax preferences, tax evasion, and loopholes to avoid capital gains taxes. It also replaces the IRA’s new clean energy tax credits (which are already well over-budget) with a carbon tax.

Within broader tax increases, capping the employer health care tax exclusion is both sound tax policy and sound health policy. Many economists agree that the employer health exclusion encourages businesses to overspend on health benefits and downplay cost-containment, while disproportionately benefitting upper-income employees who would otherwise pay higher tax rates on that compensation. It also penalizes families that buy their own health insurance and do not get a tax break. Capping the exclusion will contribute to broader efficiency savings in health care. It will also raise revenue not only from businesses paying the tax on generous health plans, but also from families receiving more of their compensation in the form of (taxable) wages—which still might result in higher take-home pay.

Raising the 2.9% Medicare payroll-tax rate by 1 percentage point is necessary because Medicare faces a 30-year cash shortfall of $49 trillion ($87 trillion including interest costs) that cannot be addressed on the spending side alone. A tax-rate increase of 1 percentage point is also minimally disruptive to families and the economy. Given Medicare’s massive shortfalls, its modest 2.9% payroll tax (split between employee and employer) is surely insufficient.

Those who would prefer that all new taxes come from upper-income taxpayers should note that these taxpayers would already bear nearly the entire cost of 3% of GDP in Social Security and Medicare reforms—as well as 1.3% of GDP in new taxes and most of the cost of scaling back the employer health exclusion. The bottom half of earners would see only a 1% payroll tax hike (which will help finance their own Medicare benefits) and a small gas-tax increase (a user fee needed to close the shortfalls in the highway program)—plus the benefits of no Social Security payroll taxes beginning at age 62. Given the principle that everyone should contribute to closing these shortfalls, low-earners are overwhelmingly shielded from new costs.

Sticking to the Blueprint

Congress must ensure a budget process that aligns with any “grand deal” reforms and enforces budget discipline. To that end, Congress and the president should enact legislation capping the size of the federal debt at the current level of 100% of potential GDP (or slightly higher during a transition period when reforms are phased in). Measuring the debt against potential GDP (which adjusts for booms and recessions) would prevent painful consolidations whenever the economy slips into recession. Congress could require a supermajority vote to pass any bill that would push the projected long-term debt over the cap. Debt overages driven by automatic spending and tax policies could trigger automatic spending-and-tax changes (unless Congress enacts alternative savings reforms). Even supermajority-approved overages could require savings to return the debt gradually to its 100%-of-GDP target.

A potential danger arises from the political reality that major entitlement reforms will be highly controversial while producing small short-term savings. This might tempt Congress to meet near-term debt targets by replacing entitlement reforms with other less-controversial savings. Yet Social Security, Medicare, and Medicaid reforms must remain on schedule for their savings to significantly ramp up and provide most of the deficit reduction in the 2030s, 2040s, and 2050s.

To that end, every five years, lawmakers should be required to ensure that Social Security, Medicare, Medicaid, and tax revenues each remain on their original 30-year path and to enact further reforms for any category whose savings are not materializing. Failure to return any veering categories to their preset path would trigger automatic reforms to the given category.

Group Impacts

Seniors. Well-off retirees will shoulder most of the costs of bringing Social Security and Medicare finances to a sustainable level. As described earlier, the wealthiest half of seniors often have incomes and net worths (even excluding illiquid home equity) that exceed those of young workers, while typically not having mortgage or child-raising expenses.

Table 3 shows the costs of Social Security and Medicare reforms at various retirement income levels in the future. Incomes include Social Security benefits and retirement distributions, and all figures are adjusted for inflation. For Social Security, figures assume that the individuals turn 65 in the listed year.

• Seniors with household incomes below the 40th percentile come out largely unchanged in Social Security (although the eligibility age rises) and also come out roughly equal in Medicare.
• Senior households in the 41st–60th income percentile—with an average household income of $92,000 in 2035—would face approximately $2,700 less than currently estimated in annual Social Security benefits and $2,800 in higher Medicare premiums.[77] This 6%-of-income cost would rise to roughly 10% by 2054.
• Senior households in the 61st–80th income percentile—with an inflation-adjusted average household income of $137,000 in 2035—would face approximately $4,200 less than currently estimated in annual Social Security benefits and $7,300 in Medicare changes, totaling 8% of their income (and rising to 12% by 2054). This burden would not be easy, although the retirement income of this group would well exceed the income of many families that would otherwise be taxed to finance their benefits.
• Retiree households in the 81st–90th income percentile—with average household incomes of $257,000 by 2035—would experience a decline in their projected Social Security benefits of $5,700 and a rise in Medicare premiums of $15,000. This would average 8% of their income in 2035, rising to 11% by 2054.
• The highest-earning 10% of retiree households—with average household incomes of $478,000 by 2035—would experience a decline in their projected Social Security benefits of $7,400 and a rise in Medicare premiums of $5,700. This would average 3% of their income in 2035, rising to 5% by 2054. This figure is dampened by the fact that these households already pay as much as 85% of their Medicare Part B and D plan costs, which leaves less room to raise their premiums higher even if those premiums were set at 100% of the cost of coverage (this proposal raises their Part B premium to 95% of the cost of coverage).

As stated earlier, these figures might overstate the effect of the Social Security cuts because they are measured against a baseline in which future retirees would receive much higher benefits than current retirees, even adjusting for inflation. Under the proposed reforms, the average inflation-adjusted benefit level would remain roughly frozen after 2026. Below-average earners would continue to see benefits rising slightly faster than inflation, while high-earning retirees would see their benefits slightly trail the inflation rate. These effects would result in a more uniform, flat Social Security benefit across the income distribution.

To a degree, the costs of the blueprint’s changes to retirees (both current and future) could be mitigated by expanding 401(k) contribution limits and by further encouraging auto-enrollment and contribution auto-escalation of employer retirement accounts. This report also proposes eliminating Social Security payroll taxes for workers at age 62, in order to encourage seniors who wish to stay in the workforce and to essentially subsidize employers who hire them.

Working-age adults. To improve generational equity, this blueprint largely shields working families from what would otherwise be the largest intergenerational wealth transfer in world history. Yet most working adult earners would still receive their entire 2017 tax cuts extended and would be hit with only a 1% payroll-tax hike, a gradual capping of the tax exclusion for employer-provided health-insurance premiums, a modest gas-tax increase, and social programs growing at a slightly slower pace than the economy. Compared with the alternative of gradually imposing a 36% VAT or 29.6% payroll-tax rate—which would cost economic growth as well as direct taxes—this blueprint provides a much more affordable outcome for working families.

Poor families. This blueprint resists the common conservative tactic of assuming large and unrealistic cuts in antipoverty spending. From the perspective of good public policy, significant antipoverty reforms are needed to encourage work and opportunity. From the perspective of the federal budget, most realistic reform proposals do not provide significant savings, especially up front. For that reason, and despite large reductions elsewhere, this blueprint largely protects antipoverty spending from budget cuts. Health-care spending on Medicaid, CHIP, and ACA exchanges would remain at 2.4% of GDP. Other means-tested entitlement programs would grow with the CBO baseline for the next decade, and with inflation and population growth thereafter. Programs such as housing assistance, which are funded in annual appropriations, would see an average growth rate of 3.5%. Low-income seniors would be largely protected from Social Security and Medicare savings. Total antipoverty spending as a share of the economy would remain at roughly pre-pandemic levels and above all earlier levels. Given the size of the fiscal consolidation proposed in this blueprint, it is fair to say that the safety net is well protected.

State and local governments. Deficit reduction should not simply mean shifting taxes and debt onto state and local governments. This blueprint proposes Medicaid per-capita caps at levels that governors should be able to absorb within their existing budgets. It also assumes that most grant programs to state and local governments will grow by the inflation rate or even faster. Many state and local governments have their own unsustainable pension costs to tackle, and this blueprint avoids overburdening them with significant new costs.

Conclusion

For decades, economists and policy experts warned that a budgetary and economic tsunami would come when the 74 million baby boomers retire into Social Security and Medicare. Nevertheless, a parade of presidents and Congresses did nothing to avert the crisis. To the contrary, both parties added a new Medicare drug entitlement in 2003, after which the Affordable Care Act further expanded federal health obligations for Medicaid and new subsidized health-insurance exchanges.

Today, a large majority of all baby boomers have already retired, and nearly all the rest will retire by 2030. Annual budget deficits have already exceeded $2 trillion even during peace and prosperity, and are likely to surpass $3 trillion within a decade. Overall, the Social Security and Medicare systems face an unfathomable $124 trillion cash deficit over 30 years.

Without reform, runaway deficits all but guarantee a debt crisis that will profoundly damage the country’s economic and social order. There is still time to avoid that crisis, but it will require the nation’s fractious political leaders to leave their respective comfort zones and compromise.