President-elect Obama's right to target entitlement programs

President-elect Obama says his administration will examine the big federal entitlement programs with an eye to lowering future deficits. This is a welcome idea. The time to reform entitlements programs may be when people's guilt and fear about current borrowing is greatest.

That would be now. The Congressional Budget Office estimates a $1.2 trillion deficit this year. Count in Obama's economic-rescue money and we're at about $1.6 trillion. That's more than $5,000 per American to be added to the federal debt in one year.

The total debt is $10,638,425,293,000 — that's $10.6 trillion — which amounts to $35,000 per American. It is about to increase by one-seventh in one year. Some of this increase is still debatable, but most of it is not. It is done.

It could be offset in some way, with things that may have little effect now, but a contribution in the long run.

Social Security is one place to do it. It is heading into a cash deficit in eight years. Its tax and benefit rates need to be adjusted — and the sooner done, the smaller the adjustments need to be.

Two such adjustments are most obvious and least painful. One is to increase benefits at a slower rate, by adjusting the benefit formula. The other is to raise the maximum salary subject to Social Security tax — now $106,800 of annual pay — at a faster rate. Obama suggested raising the benefit cap two years ago.

Another place to reduce federal liabilities is to review the financial guarantees passed out in the past four months. This is crisis medicine — temporary medicine for such players as investment banks, insurance companies and money-market funds. It will be very easy to make these guarantees permanent, especially on the fear that the crisis might return. But at some point, that fear has to be disregarded and the emergency guarantees removed.

In the rush to tackle a short-term economic problem, legislators should make progress on the long-term one. Balance borrowing with reforms. Otherwise, the long-term debt of America grows dramatically worse.