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Budget / BUDGET

Fiscal Commission Unveils Preliminary Plan

President Obama walks down the West Wing Colonnade with Erskine Bowles and former Sen. Alan Simpson, the co-chairs of the National Commission on Fiscal Responsibility and Reform.(SAUL LOEB/AFP/Getty Images)

photo of Humberto Sanchez
November 10, 2010

The chairmen of President Obama’s fiscal commission proposed a sweeping collection of spending cuts and tax increases today in a bid to jolt the panel's 16 other members away from their Republican and Democratic orthodoxies.

The proposals call for significant reductions in future Social Security benefits -- an untouchable issue for many Democrats -- and a top-to-bottom tax overhaul that would raise tax burdens by $80 billion a year in 2015 and $160 billion a year by 2020.

Their plan calls for slashing annual discretionary spending, including defense, by $184 billion by 2015. "Mandatory" spending, from Social Security and Medicare to certain farm subsidy programs, would be cut by $78 billion a year in 2015 and more after that.

 

But while the proposals represent an agreement between the panel's two co-chairs -- Erskine Bowles, a Democrat and a former White House chief of staff under President Clinton; and former Sen. Alan Simpson, R-Wyo. -- they hardly signal a consensus among the panel's 18 members.

Indeed, several lawmakers on the panel immediately said they disagreed with many of the ideas. 

The White House said it would wait and see.

“The president will wait until the bipartisan fiscal commission finishes its work before commenting," said White House spokesman Bill Burton. "These ideas, however, are only a step in the process toward coming up with a set of recommendations, and the president looks forward to reviewing their final product early next month.”

The deficit commission is supposed to present recommendations to Congress by December 1, less than three weeks from now. Experts are skeptical it will be able to reach a consensus, because 14 of the 18 members need to support any recommendations. With 12 of those members being current lawmakers in Congress -- six Democrats and six Republicans -- lawmakers from either party can veto any proposal they don't like.

Nevertheless, Bowles and Simpson outlined the stark measures that are likely to be necessary to stabilize the federal debt, even at relatively high levels, by 2015. It outlines $100 billion in “illustrative’’ cuts in defense spending and comparable cuts in domestic programs. It proposes an increase in the retirement age for collecting Social Security benefits, cuts in the future growth of payments and more cuts yet to higher-income retirees.

Last but not least, the co-chairs outlined several proposals for a sweeping tax reform that would wipe out most or all of the $1.1 trillion a year in "tax expenditures" -- budget jargon for tax breaks that range from the mortgage-interest deduction to countless corporate breaks. In exchange, the plan calls for reducing individual tax rates across the board. The top marginal tax rate for individuals would drop to as little as 24 percent, down from 35 percent today and 39.6 percent if the Bush tax cuts are allowed to expire.

Republicans and Democrats alike have preached about tax reform for years, but Republicans have almost uniformly vowed to fight any net increase in taxes. Democrats, meanwhile, have increasingly used tax credits as an alternate method of distributing benefits to lower-income people. The Earned Income Tax for low-income working parents is one of the government's biggest anti-poverty programs.

Bowles and Simpson presented their package to the panel's other members at a closed-door meeting Wednesday morning.  But many said they could not support it in its current form.

“The chairmen have made their proposal, it’s a serious proposal,” said Senate Majority Whip Dick Durbin, D-Ill., who stressed that the package “is the starting point of our conversation.”

While commission members were reticent on offering details of the plan, Durbin said that the proposal exceeds the president’s goal of bringing down the deficit to about 3 percent of gross domestic product by 2015.

Rep. Jan Schakowsky, D-Ill., said that the chairmen have proposed to make Social Security solvent and make adjustments to Medicare, both of which she characterized as cuts.

"It's not a proposal I can support right now," she said.

"I think if there were to be a vote of 14, it would look very different from the proposal that was made by the chairmen and I can't imagine that they didn't understand that," Schakowsky said.

Republican commission members, Reps. Jeb Hensarling of Texas, House Ways and Means Committee ranking member Dave Camp of Michigan, and House Budget Committee ranking member Paul Ryan of Wisconsin, called the plan "provocative" and pledged to keep working.

"While we have concerns with some of their specifics, we commend the co-chairs for advancing the debate," the Republican lawmakers said in a statement.

Deficit Commission Draft Document:
$200 Billion In Savings
(Click a column header to sort the table accordingly.)

AMOUNT (Billions) Item No. DESCRIPTION
$0.80 1 Reduce Congressional & White House budgets by 15 percent
$15.10 2 Freeze federal salaries, bonuses, and other compensation at non-defense agencies for three years.
$13.20 3 Cut the federal workforce by 10 percent
$18.40 4 Eliminate 250,000 non-defense service and staff augmentee contractors
$0.10 5 Cap the number of federal political appointments at 2,000
$0.40 6 Cut federal travel budget
$0.70 7 Establish Veterans Administration (VA) health co-pays
$0.40 8 Reduce unnecessary printing costs
$0.30 9 Trim the Federal Vehicle Budget
$1.00 10 Other efficiencies
$11.00 11 Create a Cut-and-Invest Committee charged with trimming waste and targeting investment
$1.00 12 Merge the Department of Commerce and Small Business Administration into a single agency and trim its budget by 10 percent
$1.00 13 Terminate low-priority Corps construction projects
$1.30 14 Reduce overhead cost of diplomatic operations
$4.60 15 Slow the growth of foreign aid
$1.80 16 Eliminate the Office of Safe & Drug Free Schools
$0.30 17 Eliminate the Economic Development Administration
$0.50 18 Eliminate a number of programs administered by the Rural Utility Service (RUS)
$1.60 19 Reduce wasteful spending at the Department of Justice
$0.10 20 Eliminate certain regional subsidies
$0.10 21 Eliminate the Hollings Manufacturing Extension Partnership and the Baldrige National Quality Program
$16.00 22 Eliminate all earmarks
$0.90 23 Cut research funding for fossil fuels.
$1.20 24 Eliminate funding for commercial spaceflight
$0.50 25 Drop wealthier communities from the Community Development Block Grant program
$0.30 26 Reduce voluntary contributions to the United Nations
$0.20 27 Eliminate administrative fees paid to schools for student aid programs
$0.10 28 Eliminate the Overseas Private Investment Corporation
$1.00 29 Sell excess federal property
$0.30 30 Reduce funding to the Smithsonian and the National Park Service and allow the programs to offset the reduction through fees
$1.20 31 Eliminate grants to large and medium-sized hub airports
$0.50 32 Cut funding for the Corporation for Public Broadcasting
$0.90 33 Require food processing facilities to finance food safety and inspection services
$0.50 34 Change inland water systems to be fully self-funded
$1.90 35 Require airports to fund a larger portion of the cost of aviation security
$0.30 36 Charge beneficiaries for the cost of the International Trade Administration’s trade promotion activities
$0.30 37 Reduce land acquisition under the Land and Water Conservation Fund
$0.40 38 Create a more cohesive and cost-effective fire management service
$28.00 39 Apply the overhead savings Secretary Gates has promised to deficit reduction
$5.30 40 Freeze federal salaries, bonuses, and other compensation for the civilian workforce at the Department of Defense for three years
$9.20 41 Freeze non-combat military pay at 2011 levels for 3 years
$5.40 42 Double Secretary Gates’ cuts to defense contracting
$20.00 43 Reduce procurement by 15 percent
  44 End procurement of the V-22 Osprey
  45 Cancel the Expeditionary Fighting Vehicle
  46 Substitute F-16 and F/A-18Es for half of the Air Force and Navy’s planned buys of F-35 fighter aircraft.
  47 Cancel the Marine Corps version of the F-35
  48 Cancel the Navy’s Future Maritime Prepositioning Force
  49 Cancel the new Joint Light Tactical Vehicle (JLTV), the Ground Combat Vehicle, and the Joint Tactical Radio
  50 Reduce planned levels for "Other Procurement.”
$8.50 51 Reduce military personnel stationed at overseas bases in Europe and Asia by one-third
$6.00 52 Modernize Tricare, DOD health
$5.40 53 Replace military personnel performing commercial activities with civilians
$7.00 54 Reduce spending on Research, Development, Test & Evaluation by 10 percent
$2.00 55 Reduce spending on base support.
$1.40 56 Reduce spending on facilities maintenance
$0.80 57 Consolidate the Department of Defense’s retail activities
$1.10 58 Integrate children of military personnel into local schools in the United States
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