Tom Coburn, who yesterday released a $9 trillion deficit reducing plan of his own, has unexpectedly rejoined the “Gang of Six,” that previously moribund group of senators from both parties seeking to work out a deficit deal. The Gang’s new proposal aims to reduce the deficit by $3.7 trillion over ten years, and initial indications suggest that it could actually pass the Senate. Here’s Politico:
Conrad said there was a “remarkably enthusiastic reaction” in the room of 43 senators. “There are many of us who believe deeply, how can you extend the debt limit and not deal with the debt,” Conrad said. “I see there are many groups that have that same feeling. Maybe there is a chance to get something critically important done for the country here. “I thought it was a thrilling meeting,” said Sen. Joe Lieberman (I-Conn.). “I think what happened what began to happen is that the Gang of Six began to turn into a bipartisan majority of senators. Who want to solve a national problem and not play partisan politics. It got very emotional.” “I think within 24 hours, you will see a significant number of senators publicly support this,” said Sen. Chris Coons (D-Del.). Even GOP leaders were open to it. “If you had a net tax cut, presumably it would be consistent with the pledge” [not to raise taxes], said Sen. John Thune (R-S.D.), No. 4 in leadership. “I think you’ll see a fair amount of enthusiasm the possibility that this could be integrated and a part of a debt-ceiling fix, with substantial cuts and with a pathway to real reform,” said Sen. John Cornyn (R-Texas), the Senate GOP’s campaign chief. “I think everybody is going to realize nobody is going to get 100 percent of everything they want.”
I’ve appended the Executive Summary of the plan to this post. It appears to be modeled after the recommendations of the Simpson-Bowles Commission report, which did almost nothing to address health-care entitlement reform, though it contains many appealing tax provisions (it ends the Alternative Minimum Tax and moves the U.S. to a territorial corporate tax system, like that used by the rest of the world). Here is a summary of Simpson-Bowles’ health care provisions, which I penned last December for National Review. The main components are:
- Slight modifications to the employer tax exclusion for health insurance;
- A ten-year “doc fix;”
- Repeal of Obamacare’s CLASS Act for long-term care;
- Increased Medicare cost-sharing;
- Modest Medigap restrictions (privately-sponsored Medicare supplemental insurance);
- Extending Medicaid drug rebates to seniors eligible for both Medicare and Medicaid (dual-eligibles);
- Reduction in “excess” payments to hospitals for medical education; and
- Eliminating certain Medicaid tax loopholes.
It appears as though the Senate plan can’t get put together in time to raise the debt ceiling, but I gather that the approach will be to do both in parallel. More as the story develops. UPDATE 1: The Hill is reporting that House Speaker John Boehner's (R., Oh.) spokesman says that the Gang of Six plan "shares many similarities with the framework the Speaker discussed with the president, but also appears to fall short in some important areas. The House is voting today on our 'cut, cap, and balance' plan, and we hope the Senate will take it up soon. That remains our focus." UPDATE 2: Jim Capretta, a former associate director of the Office of management and Budget under George W. Bush, skewers the Gang of Six plan. "It's a terrible, terrible plan...certainly much worse than the McConnell plan." The National Review editors agree, calling the plan "Government by Platitude." UPDATE 3: The Wall Street Journal takes a more cautiously optimistic tone, suggesting, "Maybe, just maybe, the U.S. can avoid a fiscal crack-up and a debt downgrade after all."
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A BIPARTISAN PLAN TO REDUCE OUR NATION’S DEFICITS
This bipartisan, comprehensive, and balanced plan consistent with the recommendations of the Bowles-Simpson fiscal commission that will:
- Slash our nation’s deficits by $3.7 trillion/$3.6 trillion over ten years under CBO’s March 2011 baseline, or $4.65 trillion/$4.5 trillion under the original fiscal commission baseline (which used the President’s 2011 budget request as the starting point for discretionary spending).
- Stabilize our publicly-held debt by 2014.
- Reduce our publicly-held debt to roughly 70% of our economy by 2021.
- Impose unprecedented budget enforcement.
A COMPREHENSIVE AND BALANCED PROPOSAL The plan uses a two-step legislative process: (1) an initial bill that makes immediate cuts; and (2) a process for a second bill to enact comprehensive reform and put our nation on a stable fiscal path. The plan would: Immediately implement aggressive deficit reduction down payment
- Cut deficits by $500 billion.
Dramatically cut discretionary spending
- Cut nonsecurity and security discretionary spending over 10 years.
- Maintain investments that encourage economic growth, strengthen the safety net for those who truly need it, and preserve a strong national defense.
Carefully strengthen the solvency of our most important entitlement programs
- Spend health care dollars more efficiently in order to strengthen Medicare and Medicaid, while maintaining the basic structure of these critical programs.
- Fully pays for SGR (the “doc fix”) over 10 years.
Fundamentally reform our tax code
- Reduce marginal income tax rates and abolish the $1.7 trillion Alternative Minimum Tax.
- Encourage greater economic growth.
- Enhance the competitiveness of American businesses and workers against global competition.
- Reform spending through the tax code to eliminate investment distortions and tax gaming.
- Change the debate about taxes in America from rate levels and carve outs to competitiveness, fairness and growth.
- If CBO scored this plan, it would find net tax relief of approximately $1.5 trillion.
Strictly tighten the government’s budget processes
- Impose spending caps and security/nonsecurity firewalls.
- Sequester accounts at the end of the year to recoup any excessive spending by Congress.
- Restrict the use of emergency designations that circumvent the spending caps.
- Prevent Congress from exceeding the caps by requiring a stand-alone resolution subject to a 67-vote threshold, in order to isolate that vote to increase the deficit from any other policy items.
Reform Social Security for future generations
- Ensure 75-year solvency of Social Security and provide for a decennial review of the program to ensure it remains solvent.
- Reform Social Security on a separate track, isolated from deficit reduction – any savings from the program must go towards solvency.