Former Treasury Secretary Paul O'Neill commissioned a study (free PDF) that was written by Jagadeesh Gokhale and Kent Smetters. To give a sense of how serious the fiscal imbalance is, consider some of the painful measures that the study said would be necessary to balance the books:
- More than double the payroll tax, from 15.3% to 32% of wages
- Raise income taxes by two thirds
- Cut Social Security and Medicare benefits by 45%
- Eliminate all "discretionary" spending (including such constitutionally mandated government functions as the military and the judiciary)
Peter G. Peterson has written a book about the issue: "Running On Empty: How the Democratic and Republican Parties Are Bankrupting Our Future and What Americans Can Do about It." He recently gave an interview at the Council on Foreign Relations. He prefers to express the issue in terms of cash flow, because Social Security and Medicare are "pay as you go" systems (there is essentially no trust fund). The cash flow impacts will be an estimated $783 billion in 2020, increasing to trillions later.
Peterson offers some concrete proposals in the interview, and offers some political cover to the candidates in saying "I have never thought that a political campaign is an optimum environment for serious discussion or practical proposals.