Former Republican Sen. Alan Simpson and former White House Chief of Staff Erskine Bowles are out today with a new plan to cut deficits by $2.4 trillion over the next decade.
As the co-chairmen of President Barack Obama's deficit-reduction commission, Simpson and Bowles proposed a bipartisan plan of tax increases and spending cuts that failed to catch on with the administration and Congressional leaders.
Following the failure of their initial proposals, the pair detailed the new deficit-reduction strategy — called A Bipartisan Path Forward to Securing America's Future — as across-the-board sequestration cuts loom next week.
An initial goal of their new plan is to avoid sharp austerity by averting the sequester. At the same time, they seek to bring the national debt below 70 percent of GDP by the beginning of the 2020s.
The package reduces the number of tax expenditures but lowers the marginal rate for individuals and corporations.
Bowles and Simpson also say they want to slow down the rising cost of health care, "replace dumb cuts with smart reforms," focus on the long-term and "make America better off tomorrow than it is today."
Here are the available details of how the plan claims to save $2.4 trillion over the next 10 years, based on the report:
- Cut Medicare and Medicaid funding by roughly $600 billion. Accomplish this by:
- Reducing Medicare provider payments
- Increasing premiums for high earners
- Adjusting benefits to reflect an aging population, possibly by delaying or reducing them
- Reducing drug costs
- Cutting waste
- Improving incentives for providers and beneficiaries
- Gain roughly $600 billion through tax reform:
- Eliminate or scale back most tax expenditures
- A portion of these tax expenditure savings would go toward $600 billion in deficit reduction
- The remainder would go toward cutting the effective corporate and individual tax rate.
- Gain roughly $1.2 trillion from:
- Lowering caps on discretionary spending
- Cutting farm subsidies
- Changing civilian and military health and retirement programs
- Adding fees
- Cutting spending on higher education
- Adopting chained CPI as the new index for cost of living increases, slowing the inflation adjustment for Social Security and other programs.
The next step of the program will address infrastructure investment caps, cut the federal health commitment to close to GDP growth and enact Social Security reform.
From the report, here are their four steps to deficit reduction (the U.S. has already carried out the first two steps):
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