Jagadeesh Gokhale and Kent Smetters argue that short-term deficit projections are inadequate to address the growing fiscal imbalance in Medicare and Social Security. At the very least, the OMB should return to 10-year projections rather than their current 5-year horizon.

How to Balance a $43 Trillion Checkbook

Medicare now faces an imbalance exceeding $36 trillion--yes, trillion. That is the amount of money in present value that Medicare is projected to pay out for future benefits in excess of the money in its trust fund, plus the money it is projected to collect in future taxes and premiums. Social Security's imbalance exceeds $7 trillion. Both of these imbalances dwarf the $3.5 trillion that the government officially reports as its current level of debt held by the public.

These calculations are based on the economic and demographic assumptions of the administration's budget for fiscal year 2004. The numbers are available for anyone to confirm these results. So why don't we see real entitlement reform? Why does Congress seem more interested in expanding these entitlements without also proposing real reforms that would put both systems on a sustainable course?

An important reason, we believe, is that CBO and OMB budget reports are not sufficiently forward looking. Instead of showing the large imbalances facing Medicare and Social Security, these reports direct attention to the level of government debt and annual deficits over the next few years, which very likely biases policymakers' choices against real reform.