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enough. To uphold American greatness the country will have to do more than get its debt-to-GDP ratio to a reasonable and sustainable level, although it will certainly have to do that. It will also have to equip its people with the skills and the tools that have always been part of our formula for economic growth. Providing them will cost money and require new long-term investments. To assure the nation’s economic future we will have to spend more, not less, on some things: certainly infrastructure and research and development, and probably education as well. This will be especially difficult to accomplish at a time when valued programs are shrinking and taxes are rising; but if we do not invest in upgrading our formula, we will forfeit the indispensable condition for sustaining the American dream and maintaining American power in the world: economic growth. Anyone who says we can forgo spending of this kind does not understand either American history or the world in which we are now living.

The third guideline is that the cuts have to take place across the board. One thing we must not do is try to bring the budget back toward balance by making most, let alone all, of the spending cuts in “nonsecurity discretionary spending”—the 12 percent of the budget that does not include Social Security, Medicare, Medicaid, defense, and interest on the national debt. That is the part of the budget where all the education, innovation, and infrastructure programs, essential to our formula for prosperity, reside. To destroy them to save money would be akin to trying to lose weight by cutting off two of your fingers. You won’t lose much weight, but you will be forever handicapped in securing and keeping a good job.

That means that reductions in entitlement programs such as Social Security and Medicare are inevitable, as are measures to slow the rate of increase in general health-care costs. Everything has to be on the table, and everything is going to get cut one way or another. Anyone who says that these programs can continue exactly as they are is not being serious. Reform will likely require some form of means-testing Medicare and Social Security benefits; pushing back the retirement ages for Social Security and adjusting the cost of living index; and, most important, finding ways to slow the growth in the costs of Medicare, which covers health insurance for all those over sixty-five, as well as Medicaid and the Children’s Health Insurance Program to support the poor. In the 1950s, health-care spending accounted for 4 percent of GDP. Today it is around 17 percent and heading for 30 percent by 2030, but without better outcomes than in countries such as Canada, which spends only 10 percent of its GDP on health care. More than 20 percent of all Medicare spending occurs in the last two months of life, and 30 percent in the last year, using the remarkable new technologies we have invented.

According to CBS’s 60 Minutes (August 8, 2010), in 2009 “Medicare paid $55 billion just for doctor and hospital bills during the last two months of patients’ lives. That’s more than the budget for the Department of Homeland Security, or the Department of Education. And it has been estimated that 20 to 30 percent of these medical expenses may have had no meaningful impact. Most of the bills are paid for by the federal government with few or no questions asked.” Indeed, Medicare is barred by law from rejecting any treatment based on cost. As people live longer and more expensive technology and drugs become available to prolong their lives, the combination becomes a prescription for bankrupting the country—unless we slow down the growth in health spending across the board. This will require some implicit rationing of the end-of-life care for which the government will pay.

“We need a budget for how much we can afford to spend on Medicare,” said David Walker. “We cannot keep writing a blank check. Right now Medicare has no budget. We are the only major industrialized nation that does not have a budget for how much public resources are allocated for health