www.fiscalcommission.gov/The Presidents Debt Commission Draft:
www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/CoChair_Draft.pdfspecific to the federal government:
www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/Illustrative_List_11.10.2010.pdfPolitical Punch
Power, pop, and probings from ABC News Senior White House Correspondent Jake TapperThe President's Debt Commission Proposal – Something to Offend Everyone: Doctors, Lawyers, Even Indian Chiefs
November 10, 2010 3:47 PM
On the same day the nation learned that the US started its new budget year with a the third highest monthly debt on record -- $140.4 billion – the co-chairs of President Obama’s National Commission on Fiscal Responsibility and Reform issued a report detailing ways to reduce the national debt by $4 trillion over the next ten years with a program of $2 trillion in spending cuts, $1 trillion tax increases, means-testing Social Security, and increasing the retirement age to 69 by 2075.The report has something in it to upset everyone: those opposed to tax increases, those opposed to Social Security cuts, health insurance companies, farmers, doctors, lawyers, and yes, even Indian chiefs.
“We must stabilize then reduce the national debt, or we could spend $1 trillion a year in interest alone by 2020,” says the Commission, co-chaired by former Clinton White House chief of staff Erskine Bowles and former Sen. Alan Simpson, R-Wyoming. “A sensible, real plan requires shared sacrifice –and Washington should lead the way and tighten its belt.”
White House deputy press secretary Bill Burton said that President Obama “will wait until the bipartisan fiscal commission finishes its work before commenting.” Burton said that the ideas in today’s report “are only a step in the process towards coming up with a set of recommendations and the President looks forward to reviewing their final product early next month.”
Liberals were not so reticent.
"This proposal is simply unacceptable," said outgoing House Speaker Nancy Pelosi, D-Calif. "Any final proposal from the Commission should do what is right for our children and grandchildren’s economic security as well as for our nation’s fiscal security, and it must do what is right for our seniors, who are counting on the bedrock promises of Social Security and Medicare. And it must strengthen America's middle class families--under siege for the last decade, and unable to withstand further encroachment on their economic security.”
AFL-CIO chairman Richard Trumka said that “the chairmen of the Deficit Commission just told working Americans to ‘Drop Dead.’ Especially in these tough economic times, it is unconscionable to be proposing cuts to the critical economic lifelines for working people, Social Security and Medicare…This deficit talk reeks of rank hypocrisy: The very people who want to slash Social Security and Medicare spent this week clamoring for more unpaid Bush tax cuts for millionaires.”
The report states that the US government needs to eliminate all “excess spending –defense spending, domestic discretionary spending, entitlement spending, & spending in the tax code.” Because of the “fragile” economic recovery, the commission recommends not commencing with any spending cuts until FY 2012.
The report looks at Social Security spending, saying that the government should make the “benefit formula” for Social Security more progressive – meaning benefits would target those who need them the most. Social Security would reduce payments to upper income recipients, and the retirement age would be increased based on the average American’s greater longevity, increasing the age to 68 by 2050 and 69 in 2075.
The commission proposes three options for reforming the tax code:
Three packages that do different things including increasing the gas tax, eliminating tax expenditures; and cutting tax credits for the oil and gas industries.
One, called the zero option, would:
* Consolidate the tax code into three individual rates and one corporate rate;
* Eliminate the AMT, Pease, and PEP;
* Eliminate all $1.1 trillion of tax expenditures -- requiring income tax to be paid on the money you spend on health insurance coverage, charitable contributions, mortgage interest deductions and employer contributions to employee 401(k)/pension plans;
* Dedicate a portion of savings to deficit reduction and apply the rest to reduce all marginal tax rates; and
* Add back in any desired tax expenditures, and pay for them by increasing one or all of the rates from their zero-expenditure low.
A second, based on tax reform work by Sens. Ron Wyden, D-Ore., and Judd Gregg, R-NH, would:
* Establish three tax rates for individuals –15%, 25% and 35%
* Triple the standard deduction to $30,000 ($15,000 for individuals)
* Repeal the AMT, PEP, and Pease;
* Repeal state & local tax deductions and miscellaneous itemized deductions;
* Limit mortgage deductions to exclude 2nd residences, home equity loans, and mortgages over $500,000;
* Limit charitable deductions;
* Reduce the corporate tax rate to 26%; and
* Eliminate and modify several business tax expenditures, including domestic production deduction and energy tax preferences for the oil and gas industry.
A third option, called the tax reform trigger:
* Calls on the Senate Finance and House Ways & Means Committees and the Treasury Department to develop and enact comprehensive tax reform by end of 2012;
* Puts in place across-the-board “haircut” for itemized deductions, employer health exclusion, and general business credits that would automatically take effect in 2013 if reform is not yet enacted. The triggered haircut would increase over time until tax reform is enacted, limiting the proportion of deductions and exclusions individuals could take to around 85% in 2015 with corporations only able to take some proportion of their general business credits; and
* Gradually increases the gas tax to fund transportation spending, increasing it by 15¢ per gallon beginning in 2013.
The conservative group Americans for Tax Reform issued a statement saying "this commission is merely an excuse to raise net taxes on the American people. Support for the commission chair plan would be a violation of the Taxpayer Protection Pledge which over 235 Congressmen and 41 Senators have made to their constituents."
"The report deceptively calls their net tax hikes 'spending in the tax code,' ATR said in a statement. "There is no such thing, unless you assume the government has a right to all your money, and when they cut your taxes this is the same thing as 'spending money on you.'"
The co-chairs of the Commission offered an example of $200 billion in possible cuts including:
* rolling back discretionary spending back to FY2010 levels for FY2012, requiring a 1% cut in discretionary budget authority every year from FY2013 though 2015
* budgeting ahead of time for disaster funds;
* limiting transportation spending;
* freezing for three years all federal salaries, bonuses, and other compensation, including freezing all noncombat military pay at 2011 levels;
* reducing by one third all overseas bases;
* reducing Congressional & White House budgets by 15%;
* cutting the federal workforce by 10%;
* slowing the growth of foreign aid; and
* eliminating all earmarks.
Other cost savings would come from:
* eliminating $3 billion in farm subsidies per year;
* requiring federal workers to contribute ½ the cost of their pensions instead of 1/14th;
* reducing civilian & military early retirees’ cost of living adjustments; and
* ending payments to states and Native American tribes for abandoned mines.
Health care costs would also be addressed.
The cost of the Medicare “Doc Fix” – which Congress passes periodically so as to avoid steep reductions in payments to doctors who accept Medicare – would be absorbed in other ways besides deficit spending, the commission recommends: “by asking doctors and other health providers, lawyers, and individuals to take responsibility for slowing health care cost growth.” This would be done by paying doctors and other health care providers less, among other tactics.
The Commission embraces tort reform - Enact specifically capping non-economic and punitive damages -- which it says would “reduce the cost of defensive medicine.”
As for other health care savings, the Commission co-chairs recommend strengthening the Independent Payment Advisory Board and eliminating the trigger that could kill IPAD in 2019. For government plans such as Medicare, Medicaid, and CHIP, health care spending would be limited to growing at a rate of the Gross Domestic Product plus 1%. If that savings is not realized, premiums could be increased, or a “robust” public health care option could be created.
Those who have been long sounding the alarm about the national debt applauded the proposal today.
"It is truly a remarkable plan," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. "This plan does it all - allows time for the economy to strengthen, brings down future deficits and debt, protects the most disadvantaged, makes government more effective and efficient, and promotes economic growth and competiveness."
David Walker, the former Comptroller General of the United States, called the proposal a “commendable, comprehensive, aggressive and good faith effort” that “puts ‘everything on the table.’”
--Jake Tapper
November 10, 2010 in Current Affairs, Jake Tapper, Political Punch, President Obama, Weblogs, White House | Permalink | Share | User Comments (35)
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Obama's debt commission warns of fiscal 'cancer'
By Dan Balz
Washington Post Staff Writer
Monday, July 12, 2010; A02
BOSTON -- The co-chairmen of President Obama's debt and deficit commission offered an ominous assessment of the nation's fiscal future here Sunday, calling current budgetary trends a cancer "that will destroy the country from within" unless checked by tough action in Washington.
The two leaders -- former Republican senator Alan Simpson of Wyoming and Erskine Bowles, White House chief of staff under President Bill Clinton -- sought to build support for the work of the commission, whose recommendations due later this year are likely to spark a fierce debate in Congress.
"There are many who hope we fail," Simpson said at the closing session of the National Governors Association annual meeting. He called the 18-member commission "good people with deep, deep differences" who know the odds of success "are rather harrowing."
(Graphic: President Obama's proposed 2011 budget explained)
Bowles said that unlike the current economic crisis, which was largely unforeseen before it hit in fall 2008, the coming fiscal calamity is staring the country in the face. "This one is as clear as a bell," he said. "This debt is like a cancer."
The commission leaders said that, at present, federal revenue is fully consumed by three programs: Social Security, Medicare and Medicaid. "The rest of the federal government, including fighting two wars, homeland security, education, art, culture, you name it, veterans -- the whole rest of the discretionary budget is being financed by China and other countries," Simpson said.
"We can't grow our way out of this," Bowles said. "We could have decades of double-digit growth and not grow our way out of this enormous debt problem. We can't tax our way out. . . . The reality is we've got to do exactly what you all do every day as governors. We've got to cut spending or increase revenues or do some combination of that."
Bowles pointed to steps taken recently by the new coalition government in Britain, which also faces an acute budgetary problem, as a guide to what the commission might use in its recommendations. That would mean about three-quarters of the deficit reduction would be accomplished through spending cuts, and the remainder with additional revenue.
Most Republicans in Congress are opposed to any tax increases, which has made the work of the commission far more difficult. Bowles and Simpson appealed for support to the governors, who have been forced by their states' constitutions to balance their budgets with deep spending cuts and, in many cases, tax increases.
Bowles and Simpson said the commission would have had a stronger hand politically had it been created by Congress, rather than through an executive order. Simpson was pointed in his criticism of seven Republicans who once co-sponsored such a measure but who helped block it in the Senate.
"As far as I can discern, it was to stick it to the president," Simpson said. "That's where we are in Washington." He later added that all seven "have now come to us to say, 'We're ready to help.' "
The presentation by Simpson and Bowles, which included repeated statements of determination to produce a bipartisan set of recommendations, drew praise from the governors.
"I don't know that I've every heard a gloomier picture painted that created more hope for me," said Arkansas Gov. Mike Beebe (D).
Washington Gov. Chris Gregoire (D) said that many governors fear that the commission's recommendations will result in more demands on the states.
Bowles, who noted that the 1997 balanced-budget agreement between the Clinton White House and the Republican-controlled Congress included many provisions that put more burdens on the states, said that wasn't likely.
"I don't think you're going to see a lot of devolution coming from us because the states are all broke," he said.
Simpson also warned that the November elections could add another wild card to the work of the commission. "I have no idea what's going to happen on Election Day but it's going to be disruptive . . .," he said. "It's going to be a big wake-up call around the whole United States. I have no idea where it's going, but thank heaven we have a month then to work through the wreckage."
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New York Times
November 10, 2010
Panel Seeks Deep Cuts in Tax Breaks and Spending
By JACKIE CALMESWASHINGTON — The chairmen of President Obama’s bipartisan commission on reducing the national debt outlined a politically provocative and economically ambitious package of spending cuts and tax increases on Wednesday, igniting a debate that is likely to grip the country for years.
The plan calls for deep cuts in domestic and military spending, a gradual 15-cents-a-gallon increase in the federal gasoline tax, limiting or eliminating popular tax breaks in return for lower rates, and benefit cuts and an increased retirement age for Social Security.
Those changes and others, none of which would take effect before 2012 to avoid undermining the tepid economic recovery, would erase nearly $4 trillion from projected deficits through 2020, the proposal says, and stabilize the accumulated debt.
“It’s time to lay it out on the table and let the American people start to chew on it,” said Alan K. Simpson, the former Republican Senate leader who is one of the co-chairmen, along with Erskine B. Bowles, who was White House chief of staff under President Bill Clinton.
Their outline will be the basis for negotiation within the commission, which has a Dec. 1 deadline for submitting a final plan. It represents a challenge to both parties: to Mr. Obama and the Democrats, to show in the wake of the midterm election that they are serious about their pledges to address long-term deficits, and to Republicans, who for the most part have ruled out consideration of tax increases even as they have promised new adherence to fiscal responsibility.
Liberal groups immediately condemned the plan when news of it broke, for its Social Security and Medicare changes and for the scope of the spending cuts. The House speaker, Nancy Pelosi, in a statement called it “simply unacceptable.”
The furor on the left was not matched — yet — by a similar outcry from the right to the draft’s proposed revenue increases, cuts to the military or other options.
The plan has many elements with the potential to draw intense political fire. It lays out options for overhauling the tax code that include limiting or eliminating the mortgage interest deduction, the child tax credit and the earned income tax credit. It envisions cutting Pentagon weapons programs and paring back almost all domestic programs.
The plan would reduce cost-of-living increases for all federal programs, including Social Security. It would reduce projected Social Security benefits to most retirees in later decades, though low-income people would get higher benefits. The retirement age for full benefits would be slowly raised to 69 from 67 by 2075, with a “hardship exemption” for people who physically cannot work past 62. And higher levels of income would be subject to payroll taxes.
But the plan would not count Social Security savings toward the overall deficit-reduction goal that Mr. Obama set for fiscal year 2015, reflecting the chairmen’s sensitivity to liberal critics who have complained that Social Security should be fixed only for its own sake, not to help balance the nation’s books.
Mr. Obama created the commission last February in the hope it would provide political cover for bold action against deficits in 2011. His stance now, in the wake of his party’s drubbing, will go a long way toward telling whether he tacks to the political center — by embracing such proposals — or shifts to the left and leaves them on a shelf.
For Republicans, the chairmen’s proposals and a similar report coming next week from a private bipartisan group will challenge their contention that the budget can be balanced by spending cuts alone. That is a claim that many conservative economists and budget analysts reject, given the scale of projected debt as the baby boom generation retires and begins claiming costly federal benefits, after a severe recession.
Mr. Bowles and Mr. Simpson said their plan was “a starting point” as members of the commission met behind closed doors to consider it.
That was clear from the initial reactions of the members, nine of them Democrats, seven Republicans. None embraced the package and several made clear they would not support it without big changes.
“I think every member of the commission would agree that this is not the plan,” said Representative Jan Schakowsky, Democrat of Illinois, who is perhaps the panel’s most liberal member.
The group had made no decisions before the midterm elections, to avoid politicizing the painful options. Even so, the election results — by emboldening victorious antitax conservatives and having led to the defeat of many fiscally conservative Congressional Democrats — are widely seen as having reduced the already slim chance that a supermajority of the commission could agree to a package of proposals by Dec. 1.
Under Mr. Obama’s executive order creating the panel of 12 members of Congress and six private citizens, 14 of the 18 commissioners must agree in order to send any package to Congress for a vote in December. The Senate majority leader, Harry Reid of Nevada, and Ms. Pelosi, who will remain the speaker until January, have promised in writing that the Senate would vote first and, if it approves a plan, the House would vote.
“I think it’s possible” that 14 members will agree, said Senator Tom Coburn, a conservative Oklahoma Republican who worked closely with the chairmen on proposed reductions from the military and in so-called tax expenditures, the myriad tax breaks for individuals and businesses that cost more than $1 trillion a year. “You don’t know until you see what the final plan is.”
In five hours of deliberations on Wednesday, the commission did not discuss the plan’s particulars much but instead talked at length about whether a lame-duck Congress would have time to write specific legislation and then vote, members said in interviews. It was unclear, they said, whether that was a sign other members thought the commission actually could reach agreement, or whether they were hiding behind concerns about legislative procedures to avoid tough policy decisions.
“At least people stayed in the room,” Andy Stern, the former president of the Service Employees International Union, said in an interview, recalling his concerns and others’ that Republicans would walk out if taxes were on the table and Democrats if Social Security and other spending programs were.
Right now the biggest issue facing the lame-duck Congress is whether to extend the Bush-era income tax cuts, which expire Dec. 31, for all taxpayers, as Republicans want, or for income below $250,000, as Mr. Obama and Democrats want. The Bowles-Simpson plan includes one option that assumes only the lower-income rates are extended and another that ends all Bush tax rates and replaces the tax code with simpler, lower rates and many fewer tax breaks.
Extending all the Bush tax cuts through 2020 would add more than $4 trillion to the debt — coincidentally, about the same amount that the chairmen’s painful options are designed to cut in the same time frame.
Their proposed simplification of the tax code would repeal or modify a number of popular tax breaks — including the deductibility of mortgage interest payments — so that income tax rates could be reduced across the board. Under one option, individual income tax rates would decline to as low as 8 percent for the lowest income bracket (it is now 10 percent) and to 23 percent for the highest bracket (now 35 percent). The corporate tax rate, now 35 percent, would be reduced to as low as 26 percent.
But how low the rates are set would depend on how many tax breaks are reduced or eliminated. Some of them, including the mortgage interest deduction and the exemption from taxes for employees’ health benefits, are political sacred cows.
The 18.4-cents-a-gallon federal gasoline tax would rise by 15 cents between 2013 and 2015 so that transportation spending no longer requires money from the general treasury.
The plan would cut $2 from spending for every $1 in new revenues. Total spending would be about 22 percent of the nation’s gross domestic product, and revenues would be held to 21 percent.
Cuts in annual discretionary spending, domestic and military, would be the largest in recent decades. Farm subsidies would be reduced. To further reduce growth in the fast-growing entitlement programs, the plan would expand on the hard-won Medicare cost savings in Mr. Obama’s health care law. And it would limit malpractice awards, long a Republican goal.
David M. Herszenhorn contributed reporting.
This article has been revised to reflect the following correction:
Correction: November 10, 2010
An earlier version of this article misstated the amount of the current federal tax on gasoline and referred imprecisely to the amount by which it would increase. It also stated incorrectly that Senator Kent Conrad was chairman of the Senate Finance Commitee.
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