"The Moment of Truth" or the Simpson-Bowles Report by the National Commission on Fiscal Responsibility and Reform, Circa 2010
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.