Deficit Reduction Proposals--Recommendations from Two Panels

The presidential panel is called the National Commission on Fiscal Responsibility and Reform, and led by former Republican Sen. Alan Simpson and Democrat Erskine Bowles. The panel released the preliminary report in early November. A second report was issued on November 17, 2010 by the Bipartisan Policy Center, a think tank that includes former leaders from both political parties. This second commission is led by former Sen. Pete Domenici and Alice Rivlin, a former Clinton administration budget director. A comparative analysis shows:

2012-20 Deficit Reduction

* BPC: $5.9 trillion; NCFRR: $3.8 trillion

(I) Spending Cuts

* BPC: $2.7 trillion
-- Freeze discretionary spending at 2011 levels until 2015 (non-defense) or 2016 (defense), and then tie increases to economic growth (non-defense: $1 trillion; defense: $1.1 trillion)
-- A tax on sweetened drinks, an increase in Medicare Part B premiums, smaller payments to drug companies and other health care savings ($0.8 trillion)
-- Slap higher incomes with payroll tax, smaller cost-of-living increases for Social Security ($0.1 trillion)

* NCFRR: $2.2 trillion

-- Freeze discretionary spending at 2010 level in 2012, then cut 1% each year until 2015, when it will be tied to inflation ($1.5 trillion)
-- Pay doctors and providers less, limit Medicare cost increases
-- Strengthen the Social Security by increasing retirement age to 69 from 67 by 2075, subjecting higher incomes with payroll taxes and giving smaller cost-of-living increases

(II) New Revenue and Offsets

* BPC: $0.4 trillion

-- 6.5% national deficit reduction sales tax ($3 trillion)
-- One-year holiday from Social Security payroll taxes (-$0.6 trillion)
-- Income taxed at rates of either 15% or 27% (-$1.3 trillion)
-- Corporate tax rate drops to 27% from 35% (-$0.8 trillion)

* NCFRR: $0.2 trillion

-- Additional 15-cents-a-gallon federal gasoline tax by 2015
-- A change in how inflation is measured for all federal programs, including how taxes are assessed

(III) Other Tax Changes

* BPC: $1.9 trillion

-- Replace deductions for mortgage interest and charitable giving with 15% tax credits; reduce or eliminate most other tax credits ($3.5 trillion)

-- Replace earned income tax credit for low-income families; eliminate standard deduction (-$1.9 trillion)

* NCFRR: $0.8 trillion

-- Limit or eliminate the mortgage interest deduction, the child tax credit and earned income tax credit

(IV) Interest Savings

* BPC: $0.9 trillion; NCFRR: $0.7 trillion


Sources: The New York Times; The Dallas Morning News (November 21, 2010)