The Math Hasn’t Changed: Entitlement Solvency and a Warning Washington Keeps Ignoring

Good Saturday morning.

When Erskine Bowles took the stage in Washington last October, he sounded like an exasperated coach watching the game clock approach zero.

“Clearly there are lots of reasons why we have an arithmetic problem,” he told a room full of economists and policymakers gathered by the nonpartisan Committee for a Responsible Federal Budget (CRFB). “Not only must we get it done, but I’m here to tell you we can get it done…Lord knows we need to, and by God, our time is running out.”

Bowles is no stranger to government, politics, and fiscal management. He served as White House Chief of Staff under President Bill Clinton, and was president of the University of North Carolina System from 2005 to 2010. Bowles also co-chaired, along with the late former U.S. Senator Alan Simpson (R-WY), the National Commission on Fiscal Responsibility and Reform under President Barack Obama (called the “Simpson-Bowles Commission”). It was the nation’s last serious effort to control entitlement spending.

When Bowles issued this warning, he was speaking just as the U.S. Treasury confirmed that the national debt had surpassed $38 trillion. And his warning came with bluntness formed by decades of experience: “We know how to save these trust funds,” he said. “It’s not a question of smart people like you all here not having the answers to what we should do.”

The CRFB event, where Bowles made his latest warning, launched a new Trust Fund Solutions Initiative aimed at saving Social Security and Medicare from insolvency. Budget forecasters expect both programs to exhaust their reserves within the next decade, triggering automatic, across-the-board benefit cuts. For Social Security, that would mean a 24 percent benefits reduction for retirees beginning around 2033, or roughly an $18,000 loss in annual benefits for a typical couple.

CRFB’s proposal set out a slate of pragmatic, if politically uncomfortable, reforms. One of the most discussed: a Cost-of-Living Adjustment (COLA) cap that would limit benefit increases for high-income retirees while preserving full inflation protection for middle and lower-income beneficiaries. Other recommendations include broadening the payroll-tax base to cover all total compensation, increasing the eligibility and retirement ages for Social Security and Medicare benefits, and implementing cost-control reforms in Medicare. These proposals attempt to finish what Simpson-Bowles started: modernizing the country’s entitlement system before a fiscal crisis threatens collapse.

Bowles’ appearance was part history lesson and part call-to-arms. He recounted how 15 years earlier, his bipartisan commission crafted a plan that would have restored long-term solvency to both programs through a mix of spending restraint and new revenues. It was politically perilous, but it earned support from a bipartisan majority of the Commission’s members.

“How did we bring these people together?” Bowles asked. “We took the time…to build up trust. With trust and a common set of facts, you can almost get any deal done.”

That word – trust – hung over the event. It’s a theme that resonates beyond Washington, and the logic is familiar. Every sustainable enterprise depends on shared values, disciplined management, and a willingness to face hard truths before they become emergencies. Bowles’ urgent plea to policymakers mirrors the way a seasoned executive might address a serious organizational challenge with a board of directors – if we wait to solve a problem today, it will only get more painful down the road.

CRFB’s campaign arrives at a moment when the numbers themselves tell a sobering story. Federal debt service payments exceeded $1 trillion last year and are on track to surpass even defense spending. Every dollar the federal government spends on interest is a dollar not spent on innovation, infrastructure, or security. As Bowles put it, if we don’t act, “the price we’ll pay is way, way too large.”

CRFB’s board recently took a step further in an open letter to lawmakers, urging them to commit to a clear fiscal goal: reducing deficits to 3% of GDP to stabilize growth. The benchmark, modeled on European standards and supported by both the Trump and Obama administrations, represents what the group calls a realistic first step toward restoring fiscal balance.

In 2024, CRFB named three of our state’s congressional leaders – former U.S. Rep. Patrick McHenry, current U.S. Reps. Virginia Foxx (R-NC-5) and Chuck Edwards (R-NC-11) – as “Fiscal Heroes” for their efforts to prioritize the debt and budget process. McHenry had been one of the few senior federal lawmakers willing to talk openly about entitlement reform. Foxx, chair of the House Education and Workforce Committee, and Edwards, a freshman representative from the mountains, were both recognized for advocating long-term fiscal planning. 

Bowles’ warning also hits close to home here in North Carolina – perhaps for the opposite reasons it might in D.C. While the federal government is deeply mired in historic debt, our own state is on strong financial footing. 

In fact, Moody’s recently reaffirmed North Carolina as one of just 15 states with a AAA rating from all three major national bond agencies, describing it as “one of the strongest states according to nearly every measure.” Treasurer Brad Briner echoed that confidence last year, noting that the state’s general obligation bonds were again assigned AAA ratings, evidence of sound and steady fiscal management.

Unlike Washington, D.C., North Carolina is constitutionally required to balance its budget. And for nearly a decade, the General Assembly has done just that, posting surpluses in nine of the last ten years and building one of the strongest reserve cushions in the nation. As of last spring, the state held more than $7 billion across savings and contingency accounts, including a $3.7 billion Rainy Day Fund, and over $700 million in economic development and disaster reserves. All this, in addition to a half-a-billion-dollar surplus projected for this fiscal year. 

North Carolina and the federal government have different rules governing their budget processes. But just because they are different doesn’t mean the Tar Heel State shouldn’t serve as an example for strong fiscal governance and effective management. Every business leader and every family knows the truth Washington keeps ignoring: spending more than you have year after year is a recipe for failure.