National Commission on Fiscal Responsibility and Reform

The 6 Tenets of “The Plan”

1.      Discretionary Spending Cuts

  • Eliminate all Congressional earmarks
  • Reduce Congressional and White House budgets by 15% (including travel budget)
  • Freeze Congressional pay until 2014
  • Freeze federal workers’ wages through 2014
    • Also, eliminate 200,000 federal jobs by 2020 (10%)
    • Also, eliminate 250,000 federal non-defense contractor jobs by 2015
  • Hold discretionary spending in 2012 to 2011 levels; by 2013, reduce descretionary spending levels to those of 2008. After 2013, increase the spending by half the rate of inflation.
  • Both  security and non-security funding cut in equal percentages
  • Increase transportational revenues until the transportaion trust fund is fulled-funded (includes a gas tax-hike starting at $0.15)
  • Create a committee to cut $11 billion of unnecessary programs by 2015
  • Cut $1 billion of “low-priority” Army Corps of Engineers programs by 2015
  • Cut oversea’s budget by 10%, cut contributions to the U.N. by 10%, and cut foreign aid budget by 10% by 2015
  • Cut almost $1 billion in fossil fuel research funds
  • In order to spend above the caps: (1) Affirmative vote from House of Reps (2) 60-vote point of order in the Senate
  • President proposes annual limits to war spending
  • Establish a disaster fund based on the average amount spent in the past decade (rolls-over annually)
  • Create a committee to cut duplicative, unnecessary, or non-priority programs from spending

2.      Tax Reform

  • “The Zero Plan”
  • There will only be 3 personal tax brackets
    • There will only be 1 corporate rate
    • All deductions, loopholes, and credits will be eliminated
      • This includes EITC and mortgage interest deductions
    • The 3 tax rates will be 8%, 14%, and 23%
  • The 2nd Plan
    • Personal deductions would increase to $15,000
    • The 3 tax rates will be 15%, 25%, and 35%
    • Repeal or extensively limit tax deductions
      • This includes state, local, and mortgage interest deductions
  • The 3rd Plan
    • Force Congress to reform taxes by raising taxes each year that they fail to act
  • Implications of Their Suggested Changes
    • The above 3 plans allow Congress to only collect taxes on income made in the US
    • It redudes or eliminates taxes on revenues companies earn abroad and US expatriates
  • The report also suggests raising the gas tax by $0.15/gallon

3.      Healthcare Cost Reduction & Reform

  • More lower-income citizens would be put into Medicaid-managed care
  • Freeze Medicare payments through 2013, cut them in 2014, and create a better physician payment formula
  • Medicaid co-pay amount would increase
  • Reform or repeal the Community Living Assistancer Services and Supports program - it is unsustainable
  • Begin previously-planned cuts to Medicare Advantage and home health care programs
  • Use pilot programs more often
  • Create savings by reducing administrative costs, excess payments, and fraud, reforming cost sharing, medical malpractice, and Medigap coverage, and eliminating state gaming on the program
  • Create a spending cap for Medicaid/Medicare growth
  • If the health care system overspends in 5 years, Congress and the President may be forced to increase premiums or co-pays
  • If the health care system overspends in 5 years, Congress and the President may be forced to raise the Medicare eligibility age
  • Create a long-term budget for total health care spending, limit growth to GDP growth plus 1%

4.      Mandatory Spending Cuts

  • Government expenditures and revenue stop at 21% of GDP
  • Reduce argicultural subsidies
  • Eliminate federally subsidized student loans in which the government makes interest payments while the student is in school
  • Reform military and civil service health and retirement savings programs
  • Charge market rates for federal electricity-generation
  • Require the TVA to charge rates to cover its costs
  • Give Postal Service more rule over their restructuring
  • Increase user fees with inflation

5.      Social Security Reform

  • Retirement age will increase based on longevity statistics
    • In 2075, estimated retirement age will be 69
  • Raise the Contribution ceiling:
    • Currently, people only pay Social Security taxes on the first $100,000 that they make - This accounts for only about 85% of taxable wages
    • Let’s take the ceiling up to 90% by 2050
  • Ensure the minimum benefit is 25% higher than the poverty line
  • Use "chained CPI" instead of standard CPI to measure Social Security cost of living adjustments
  • Increase benefits to individuals older than 85
  • Achieve a net-reduction in benefit payments by (1) increasing benefits for low-income beneficiaries and (2) decrease benefits for higher-income people

6.      Process Reform

  • Enforce deficit reduction targets
  • Adopt triggers for extended unemployment benefits based on the unemployment threshold
  • Only allow spending cap adjustments for review of IRS enforcement, anti-fraud efforts in health and labor programs, and disability claims

Highlights of the Plan:

The Simpson-Bowles Plan will:

  • Reduce the deficit to 2.2% of GDP by 2014
  • Reduce the deficit by $4 trillion by 2020
  • Cap revenue and reduce spending to 21% of GDP
  • Reduce tax rates and cuts out loopholes in the tax code
  • Stabilize and reduce debt over time (stabilized by 2014 and reduced down to 40% by 2037)
  • Secure Social Security’s future

Read the bill here.