Unlike prior budgets, the plan has a 15-year time horizon. And the budget attempts to address the health of the Social Security Trust Fund over a 75-year period. The long-term picture is more favorable than it has been in decades large and growing surpluses allow the nation to prepare for the economic and budgetary effects of an aging population. The President's 15-year budget plan responds to the projected surpluses and the threats against them in five ways. As a result, both the economy and the budget will be better positioned to bear the coming demographic strains.
Debt reduction is the only sure way to achieve that result.
The Treasury uses surplus funds to buy back securities it previously issued in years of war, recession, or profligacy. 1 Most economists from Alan Greenspan and June O'Neill to Henry Aaron and Bob Reischauer strongly support reducing debt, because businesses, pension funds, and other private investors will instead turn their savings to more productive uses, such as modernizing factories and expanding research and development. The likely outcome is even faster gains in productivity and economic growth. Under the President's plan, the publicly held federal debt shrinks from 42 percent of GDP to 7 percent by 2015. Even with the demographically fueled growth in Social Security, Medicare, and Medicaid, by 2015 total federal spending will be a smaller share of the economy than in any year since 1965.