By Paul Ryan

America emerged from the 20th century as the world’s sole superpower, having achieved unprecedented strength and prosperity. Our constitutional republic created a miracle of human progress emulated throughout much of the world. Today, this great American triumph is facing enormous political and economic challenges, from without but also from within.

Key Points:

  • America’s fiscal policy is on a collision course with our monetary policy, and policymakers should prioritize curbing a potential debt and currency crisis.
  • It is not too late for policymakers to enact crucial reforms that would preserve retirement and health security for all Americans, secure a vibrant safety net that helps people rise, and support an economy that grows and increases the living standards of all citizens.
  • The chapters in American Renewal offer specific, concrete, achievable policy proposals that would reform America’s social safety net, health and retirement security programs, tax code, and monetary system in a way that revitalizes upward mobility and strengthens the social contract.

The system of self-governance we founded nearly 250 years ago is being challenged worldwide—by China’s repressive regime and other authoritarian strongholds. Totalitarianism, once thought to be consigned to history in the wake of the West’s victory in the Cold War, is back, competing for dominance in our digitized world. The digitally fueled polarization characterizing the free world invites the question of whether democracies can muster the durable political consensus to tackle the major challenges confronting our societies.

In this third decade of the 21st century, I believe America will face an inflection point. Our fiscal policy is on a collision course with our monetary policy, and the economic devastation resulting from a debt and currency crisis could inflict enormous, possibly irreparable, damage.

Predicting at precisely what point a huge debt—and running high deficits—will catalyze an economic disaster is inherently difficult and speculative, in part because of the United States’ unique economic status, including holding the world’s reserve currency. The rules that apply to other nations don’t always apply to the United States, or at least not in the exact same way. Yet the US cannot forever defy the laws of economic gravity. The US has run up large budget deficits and debts in the past, but those moments of national emergency, such as world wars and global financial crises, were usually—at least until recently—followed by periods of fiscal repair.

The difference now is that various factors—demographics, health, inflation, and declining labor force growth and productivity—have built in an unsustainable rise in our national debt. (See Figure 1.) What’s more, the federal government’s unfunded liability for our present three generations of Americans—retirees, workers, and children—falls somewhere between an estimated $100 and $200 trillion.1

The federal government is making promises to its citizens that it cannot keep.

Figure 1. The Tidal Wave of Debt (Federal Debt Held by the Public, 1950–2052)

Source: Congressional Budget Office, The Budget and Economic Outlook: 2022 to 2032, May 25, 2022, 19, Figure 1-8,

Because of this trend, the Congressional Budget Office (CBO) projects that real gross domestic product (GDP) will grow much more slowly over the next 30 years than it did over the past 30. The most positive outlook for this indebted future is a slower, more stagnant American economy. Rather than a currency or debt crisis, like the 2008 financial crisis, a long slump would set in. While Japan, with similar structural fiscal problems, is known for its “lost decade,” America could easily fall into a lost generation—in which income mobility, growth, and innovation slow to a crawl. If we stay on our present path, that projection is the better-case scenario. There are worse ones.

According to the CBO, 

Persistently rising debt would . . . elevate the risk of a fiscal crisis—that is, a situation in which investors lose confidence in the U.S. government’s ability to service and repay its debt, causing interest rates to increase abruptly, inflation to spiral upward, or other disruptions to occur.2

The CBO goes on to say, 

It would increase the likelihood of less abrupt, but still significant, adverse effects, such as creating widespread expectations of higher rates of inflation, eroding confidence in the U.S. dollar as the dominant international reserve currency, or making it more difficult to secure financing for public and private activities in international markets.3

It is perfectly natural and can even be prudent for a government to borrow money to pay for important national objectives, so long as it has a reasonable chance of paying off such debt. This is where the US today parts company with past generations. We cannot possibly pay off the upcoming tidal wave of debt as our system is presently constructed without massively debasing our currency, the dollar, which would wipe out the savings and purchasing power of the American people. Unless we change course, the forthcoming debt and currency crisis will at some point dramatically reduce Americans’ living standards.

The story of America is one of historic human accomplishment—but the future is not secured. The dollar’s dominance as the world’s reserve currency is in jeopardy of being displaced. Upward mobility is stalling—and in some cases reversing. The twin American ideas that the economic condition of one’s birth does not determine the outcome of one’s life and that each generation is better off than the past generation are no longer true for millions of Americans.

Imagine a situation unfolding in which our fellow citizens, who depend on the promise of health and retirement security, see their Social Security and Medicare benefits cut in real terms. Or consider the fate of those living on the edge of poverty when the safety net becomes unaffordable. If we think we live in angry, polarizing times today, imagine the civil strife that would happen if this scenario unfolded. Add to that how our adversaries would respond if our military were slashed as the result of emergency budget surgery.

America is facing a fiscal crisis entirely of its own making. All of this is well-known. All of this was predictable. All of this is avoidable. But we are where we are. And, today, our politics are fundamentally unserious. That’s the bad news.

The good news is that these problems are solvable. And we are not helpless or powerless before them. The solutions to these monumental challenges are achievable; it’s a matter of summoning the will.

The best news is that we do not have to sacrifice the mission of our essential programs. It’s imperative that we have retirement and health security for all Americans, a vibrant safety net that helps people rise, and an economy that grows and increases the living standards of all citizens. We need inclusive prosperity. In the process, we must maintain the world’s greatest military to protect our nation and safeguard freedom.

To accomplish these essential objectives, we must reform and redesign an array of federal government programs. We need to begin soon. And American Renewal: A Conservative Plan to Strengthen the Social Contract and Save the Country’s Finances shows us the way.

This book is a joint effort at offering solutions to America’s generational challenge. It is a plan to confront our main socioeconomic problems with specific, concrete, achievable policy solutions—ones that restore our social contract while avoiding a debt catastrophe. This needs to be done for us, and it especially needs to be done for future generations. The American idea needs defenders.

Taken together, the chapters in this book offer a sweeping set of policy proposals from 19 scholars—including 16 from the American Enterprise Institute—that seeks to reform the social safety net, America’s major entitlement programs, the tax code, and our monetary system in a way that revitalizes upward mobility, makes our health and retirement programs solvent, grows the economy, and importantly, avoids a debt crisis. These chapters focus on policy, and each author realizes that polices exist to promote human flourishing and human dignity.

A 21st-Century Tax Code

As Austin Smythe argues in his contribution, to maintain the strength of the US, “Washington needs to implement policies that sustain a healthy economy, slow the growth in federal spending, and maintain stable prices.” The primary ingredient for any flourishing society is a growing economy. And a crucial component of a durable and growing economy is the tax code.

I consider the Tax Cuts and Jobs Act (TCJA) of 2017 one of the greatest achievements of my 20-year career in Congress. The TCJA made substantial, pro-growth improvements in our tax code, but there are major opportunities for even better reforms.

Kyle Pomerleau and Alex Brill propose “a set of reforms to the individual and business tax systems that would create a broader, more neutral, and simpler tax base and encourage economic growth by reducing marginal tax rates on investment.”

The proposal for individuals would simplify the tax code while maintaining a progressive tax code with four rates: 10 percent, 20 percent, 30 percent, and 33 percent. This would streamline taxes on capital gains, interest, and dividends and dramatically broaden the tax base, improving incentives for work, family, and charity.

The proposal for businesses focuses on addressing the remaining problems with business taxation after the TCJA. This plan would eliminate the tax burden on new investment and reduce distortions across different types of investment, forms of financing, and legal forms of organization. It would also improve the tax treatment of US multinationals by reducing incentives to shift profits out of the United States while maintaining competitiveness.

As Pomerleau and Brill note, “Under this reform, all businesses would be subject to the same tax regime, no matter their form of organization.” The present business tax system would be converted into a destination-based cash flow tax with a 15 percent rate on the business entity. This would dramatically simplify and improve the international competitiveness of US businesses while igniting faster economic growth, higher productivity, and wage gains. Building a tax code for faster economic growth and higher living standards is an essential component of our plan.

The proposal also makes a key compromise between our two parties on a matter of great importance in the 21st century: carbon. This proposal builds within the destination-based tax system a border-adjustment tax on carbon. This is the cleanest, simplest, and most economically advantageous way to address the global priority of decarbonizing the global economy.

By sending price signals on carbon through an efficient, pro-growth tax code, America can take a leading role in promoting innovative global decarbonization while staying focused on faster economic growth. The alternative—a poorly designed and ineffective crony capitalism policy of spending and tax subsidies for existing and dated technologies—would be a terrible mistake. In essence, the bargain we conservatives are offering our friends on the left, who are rightly focused on removing carbon from the atmosphere, is a better carbon policy in exchange for a pro-growth tax code.

We believe this tax proposal is best suited to the demands of this century, promoting growth, opportunity, global competitiveness, and healthy environmental stewardship.

Sound Money: A Central Bank Digital Currency

It is troubling enough that our present fiscal policy threatens the dollar’s status as the world’s reserve currency. This “exorbitant privilege” allows the US to finance its debts at low interest rates and settle international business transactions in our native currency, and it provides our government unparalleled tools to advance our national interests. As such, losing this status would inflict severe costs on the nation and the global economy. Today, an additional challenge (and opportunity) confronts our dollar dominance: digital currencies.

In his proposal for a central bank digital currency (CBDC), Hoover Institution scholar Kevin Warsh makes the case for a uniquely American-style CBDC. He proposes a digital dollar regime that is “most conducive to monetary soundness, sovereign control, financial innovation and competition, and individual privacy.” Specifically, he proposes that the US create a new wholesale digital dollar framework to intermediate dollar payments between the US government and wholesale providers of banking services. This two-tier system maintains an important separation between the central bank money and commercial bank money. Unlike with the Chinese e-CNY (their CBDC), Warsh proposes that citizens continue to interface with the private retail banking sector for their digital dollar deposits and banking services as a way to encourage innovation and competition and guarantee privacy from government intrusion into citizens’ financial lives.

A New Safety Net for Upward Mobility

Nicholas Eberstadt describes a “New Misery” spreading in America, where real net worth for the bottom half of households is distinctly lower than it was 30 years ago, income mobility has stalled, and more citizens than ever depend on poverty-conditioned, means-tested benefits. The duplicative, contradictory, and confusing programs that make up our social safety net desperately need repair. “If we are to redeem the promise of the American future,” Eberstadt writes, “we need to be thinking right now about how to achieve escape velocity from a future of stagnation and dependence.”

A great portion of this book focuses on rewiring our safety net to provide people the means to escape stagnation and dependence. As the CBO’s forecast makes clear, a key to avoiding stagnation is a safety net focused on promoting work, family, and education.4 The more people work and the better skills they attain, the faster the US economy grows and upward mobility rises. This “virtue cycle” of growth and opportunity can only come from rebuilding the key components of our social safety net. Fortunately, there is great promise in growing evidence-based solutions and new technologies that can assist in this rebuild.

To begin with, the digitization of money and benefits holds tremendous promise toward advancing breakthrough solutions. One challenge for safety-net programs is the ability to measure outcomes. For the most part, program budgets are allocated at a high level with crude qualifying criteria. As a result, it can be difficult to make adjustments based on real-time behaviors or customize programs to target specific circumstances.

Today, many commercial institutions such as banks, insurance companies, and health care organizations are using digital assets. They use these assets and the technology that underpins them (blockchain) to improve operational efficiency, reduce risk, remove expensive intermediaries, and allow for the creation of better business models.

Like with many other digital technologies, all parties using a digital asset platform can typically access their assets and data in real time. In addition, the transfer of value is clear, seamless, and immediate. Social safety-net programs can benefit significantly from these features as they will allow administrators to instantly measure program outcomes and make targeted improvements as necessary. A/B testing methodologies at all levels—federal, state, and local—could be applied to assess different initiatives even before their implementation, which will also result in higher levels of program efficacy.

Digital assets will also allow programs to apply conditions or criteria that ensure compliance with the program mandate and provide more immediate access to benefits for participants. For example, consider food stamps and the countless Government Accountability Office and inspector general reports of waste, fraud, and abuse that have plagued this important benefit. With programmable digital money, a food stamp dollar may be used only to buy food. Period. Or consider Temporary Assistance for Needy Families benefits with work requirements and time limits. Such criteria could be built into the programming of the money so that it performs as intended. Or consider the chronic problem known as “benefit cliffs” in which beneficiaries lose more in accumulated benefits than they gain as they attempt to rise out of poverty, thus discouraging their rise. This is no doubt the function of crude, across-the-board benefit designs that are incapable of customizing to a person’s particular situation—until now. A coordinated digital asset platform could be designed to “smooth” such cliffs while maintaining the core program’s intentions and designs.

As Warsh’s CBDC proposal outlines, such programmable dollars, or benefits, would be disseminated to people via the private banking service provider chosen by the recipient. Rather than the Federal Reserve placing conditions on money—an impossibility under Warsh’s proposal—a person would open their digital wallet, and the issuing agency or authority would add the appropriate conditions at that retail level for the benefit to commence. Imagine the endless possibilities for local, state, federal, philanthropic, and fintech entities to pilot and test these digital benefits to rid the system of the incredible amounts of waste, fraud, and abuse that have consistently plagued our national web of poverty programs.

In their proposal to reform the safety net for low-income families, Angela Rachidi, Matt Weidinger, and Scott Winship propose a comprehensive overhaul that builds “a safety net for the 21st century that better promotes work and strong families, strengthens the social contract, aligns federal and state incentives, and slows the growth in safety-net spending.” The purpose of these reforms is to learn from clear evidence on what works and what doesn’t, in order to build a safety net that leads families to upward mobility and long-term prosperity.

Specifically, Rachidi and Weidinger propose combining the earned income tax credit, the child tax credit, and the head-of-household filing status into one “working family credit,” which would simplify and align the various programs rules, thereby providing one tax tool to address poverty and provide tax relief to offset child-rearing costs.

The authors propose a new framework in the role that states play to better align policies while encouraging state innovation. The purpose of this reformed safety-net system is to shift our emphasis from merely “accommodating poverty in the US to supporting the principles that will lead to family prosperity—more work, less government dependence, more marriage, and a larger stake in the results at the state level.”

Another crucial component of the safety net is the child welfare system. To be blunt, it is failing. In her chapter, Naomi Schaefer Riley lays out a series of reforms based on clear evidence and a respect for the leading role that states, localities, and nonprofit groups play in protecting the welfare of the most vulnerable among us.

An additional component of a modernized safety net is a policy for paid parental leave. Abby M. McCloskey lays out a few policy options, such as advancing child tax credit payments or Social Security benefits and creating a stand-alone parental leave program that offers a limited benefit funded by repurposed government spending to blend pro-work and pro-family benefits for new parents as they begin their journey of working while raising a family.

And in one of the most vexing issues of our time, education, Max Eden, Frederick M. Hess, and Brent Orrell propose a specific agenda for family-centered early childhood education (Eden), K–12 schooling (Hess), and workforce training (Orrell). It is nearly impossible to overstate the importance of education, from early childhood to adulthood, and its direct impact on lifting people out of poverty.

Government, however, is not the only safety-net source. Civil society must also play a role, and Howard Husock proposes several ways to strengthen this sector, including tax preferences for charitable contributions and reinvigorating the federal government’s volunteer service programs.

Given the status quo, much of the predicted stagnation derives from the assumption that millions of our fellow citizens continue to stay trapped in a welfare system that does not encourage work or teach the hard and soft skills needed to achieve self-reliance. If we break with this status quo, we can, to once again use Eberstadt’s vivid words, “achieve escape velocity from a future of stagnation and dependence.”

A Reformed and Solvent Social Contract

Along with interest on the debt, the greatest driver of our coming debt crisis is a collection of major entitlement programs that have come to define our basic social contract: health and retirement security. Specifically, spending on our major health care programs such as Medicare, Medicaid, and the Affordable Care Act, along with Social Security, are projected to consume 15.2 percent of GDP by 2052. By that year, interest payments on the national debt are projected to total 7.2 percent of GDP.5

In other words, spending on just three basic policies and functions of our federal government—health security, retirement security, and interest payments—together would consume 22.4 percent of GDP. To put that into perspective, the average costs of the entire federal government from 1972 to 2021 totaled 20.8 percent of GDP.6

It is obvious, but bears repeating, that the American people greatly value the mission of these programs. Health and retirement security are core components of the American social contract that have been counted on for generations. Unfortunately, these programs—particularly Medicare and Social Security—are the primary drivers of our coming debt crisis.

Fortunately, the best developed solutions are to be found in this book. We must maintain the mission of health and retirement security for all Americans. Yet, to do so while avoiding a debt crisis will require reforming the way these programs deliver on their core missions.

By far the largest fiscal challenges lie in the Medicare program. James C. Capretta proposes a comprehensive set of reforms that offer the best chance of delivering on Medicare’s core mission while bringing program cost growth under control. The key policy ingredient is bringing more choice and competition to Medicare so that beneficiaries can gain from the improvements in costs and quality of services that come with real competition.

The method for doing this is converting Medicare to a premium support system, which works like the Federal Employees Health Benefits Program. This effectively builds on the popular Medicare Advantage program that seniors enjoy today. By combining the hospital insurance and supplementary medical insurance trust funds into a single Medicare trust fund and adding a means-testing feature to the premium support, in which the wealthy shoulder more of the premium burden than low- and middle-income seniors do, these reforms would deliver substantial savings over the long term. This in turn would bring substantial relief to our fiscal burden.

Similarly, Thomas P. Miller proposes a series of reforms to the Medicaid and Affordable Care Act programs to bring costs down while improving the delivery of quality health coverage to millions of lower-income Americans. His suggested reforms, such as state per capita allotments and mega-waivers, would reinvigorate the benefits of federalism and state innovation while aligning the fiscal priorities of the state and federal governments.

The primary Social Security program is the Old-Age, Survivors, and Disability Insurance program. In his proposal to save Social Security from its pending insolvency, Andrew G. Biggs proposes reforms “modeled on systems in countries such as Australia, New Zealand, and the United Kingdom, [that] could pave the way for a more affordable Social Security program without sacrificing Americans’ retirement income security.”

A smaller, yet important part of the Social Security program is Social Security Disability Insurance. Richard Burkhauser examines various European disability programs and their attempts to continue to encourage work among the disabled community. He concludes:

Efforts to shift to more work-first policies over the past two decades in Europe suggest that fundamental disability reforms, if done well, can lower projected long-term costs for taxpayers, make the job of disability administrators less difficult, and, importantly, improve the short- and long-run opportunities of people with disabilities.

A Great American Century

America has shown the world what self-determining people can achieve. We introduced democracy to the world. We built a society based on the consent of the governed that established a social contract to provide for the basic necessities of life and aid those most in need. Other democracies have done the same.

What is consistent among the policies discussed in this book is that they were mostly designed during the 20th century in ways that are proving unsustainable in the 21st century. Thankfully, and primarily due to advancements in the private sector, prudent reforms and policy changes taken soon can fulfill the promise of these programs sustainably. What’s more, the economic dynamism that we came to enjoy in the 20th century can be repeated in the rest of the 21st—if we act.

The fiscal challenges addressed in this book have become a great test of American democracy. Ours is the first generation that runs the risk of leaving our children worse off than we are. The fiscal and economic calamities that await us if we do nothing should not come as a shock. And we can’t say we weren’t warned.

This plan represents a reconciliation with some of the great policy disputes of the 20th century. It is a viable path to a durable safety net and solvent social contract. We must break out of the economic malaise and forge a path for America to lead the free world in showing that democracy still has what it takes to solve its great problems.

The policy recommendations laid out in this book, taken together, will grow federal spending more predictably and sustainably, which will stabilize our national debt at levels we can afford, modernize the dollar, demonstrate that we can deliver a health and retirement system free from near-term insolvency, and make those systems more reliable to those who count on them. By harnessing new technologies, we can advance a solvent and effective social safety net. By reinvigorating federalism and strengthening civil society, we can rebuild our communities. With a modernized tax code wired for growth, we can make American businesses more competitive, raise living standards, and demonstrate to the world that we can advance both economic growth and responsible environmental stewardship.

The purpose of American Renewal: A Conservative Plan to Strengthen the Social Contract and Save the Country’s Finances is to promote thoughtful and informed discussions, offer serious policy solutions, and demonstrate real reasons for hope.

In this enormous economic challenge lies an opportunity of renewal. If we stabilize our debt, revitalize our economy, and restore the promise of upward mobility, we will be the authors of a great new chapter in the remarkable American story.