Politics

Comparing Deficit-Reduction Plans

Over the last several weeks, leaders in Washington have proposed various plans to address the nation’s growing deficit as a condition of raising the debt ceiling by Aug. 2. Below is a running comparison of some of the major proposals or ideas that have been released. Related Article »

July 27Scorecard of the House and Senate Plans

The Congressional Budget Office issued estimates of competing plans by the House and Senate to resolve the looming debt crisis. On July 27, House Republican leaders reworked their plan to get additional savings.  Related Article »

Original House plan

Revised House plan

Senate plan

Savings in discretionary spending,
not war-related

$695 billion

$740 billion

$751 billion

Savings in discretionary spending,
war-related

 

 

$1.0 trillion

The Senate plan includes more than $1 trillion in savings from winding down the wars in Iraq and Afghanistan. The House plan does not count such savings.

Savings in mandatory spending

$20 billion

$20 billion

$41 billion

Interest savings from lower deficits

$135 billion

$155 billion

$375 billion

Total savings

$850 billion

$915 billion

$2.2 trillion

House Republican leaders went back to the drawing board after the budget office found that their original plan fell short of promised savings. They amended their plan to include $65 billion in additional savings. After excluding war-related savings, the Senate plan saves roughly $900 billion. Including such savings would allow the debt ceiling to be raised past the 2012 election.

Debt limit increase

$2.5 trillion

$2.5 trillion

$2.7 trillion

Under the House plan, procedures would be established for staggered increases through actions by both President Obama and Congress.

July 25Boehner vs. Reid

The speaker of the House, John A. Boehner, and the Senate majority leader, Harry Reid, on July 25 offered dueling plans to raise the federal debt limit. Both plans are smaller than the $4 trillion deficit-reduction package President Obama had advocated earlier. What’s known about the plans:  Related Article »

Mr. Boehner’s Proposal

Calls for a total $3 trillion in spending cuts, while raising the debt ceiling by $2.6 trillion in two phases, with the second one before the 2012 election. The plan does not include tax increases, which are opposed by most Republicans.

First phase

• Cut discretionary spending by $1.2 trillion over 10 years, while raising the debt limit by $1 trillion immediately.

• Impose limits on future spending and set up a framework to automatically cut spending if those caps are breached.

• Require the House and Senate to vote on a balanced budget amendment by year’s end. The idea had already passed in the House as part of broader legislation but was rejected by the Senate.

Second phase

• Create a bipartisan committee to find another $1.8 trillion in savings next year. The committee’s proposal would not be subjected to amendment or Senate filibuster.

• Only after the committee’s plan is enacted, President Obama would be authorized to request a second debt limit increase of $1.6 trillion.

Mr. Reid’s Plan

Has President Obama’s endorsement. Would reduce the deficit by $2.7 trillion and raise the debt ceiling until after the 2012 election. The plan, which includes savings that Republican leaders have supported, also does not include tax increases.

The savings

• $1.2 trillion in discretionary spending cuts over 10 years.

• Mandatory spending cuts of $100 billion, including $30 billion from Fannie Mae/Freddie Mac reforms and $10 billion to $15 billion in agricultural reforms. Cuts will not include Medicare, Medicaid or Social Security.

• $1 trillion in savings from winding down combat operations in Iraq and Afghanistan, a point likely to encounter resistance from Republicans who brand such savings as gimmicks.

• $400 billion in interest savings.

• Create a bipartisan Congressional committee to find additional savings by the end of 2011.

July 22How Close Was a Grand Deal?

What President Obama and the Republican House speaker, John A. Boehner, had on the table when their debt-limit talks collapsed July 22.  Related Article »


10-year totals

Obama offer
on July 18

Boehner offer
on July 20

Difference
between offers

Discretionary spending cuts

$1.2 trillion

$1.2 trillion

Total discretionary spending in 2012

$1.045 trillion

$1.040 trillion

$5 billion

Cuts to Medicare

$250 billion

$250 billion

Both offers would have slowly raised the Medicare eligibility age to 67 from 65, raised premiums for
higher-income beneficiaries and reduced payments to hospitals and drug makers.

Cuts to other health programs, including Medicaid

$110 billion

$150 billion

$40 billion

Savings from other domestic entitlement programs

$200 billion

$200 billion to
$214 billion

Up to $14 billion

Including farm subsidies and federal retirement benefits.

Social Security

Change formula for cost-of-living adjustments

Obama would raise cap on taxable wages.

Total federal tax revenue

At least $36.648 trillion

At most $36.232 trillion

Around $400 billion

Both offers would have reduced or eliminated tax breaks to allow for lower individual and corporate
income tax rates as well as deficit reduction. They would both repeal the alternative minimum tax.

What would happen if tax code
is not overhauled

Bush tax cuts extended only for the middle class; additional $425 billion in cuts to Medicare and Medicaid.

The Boehner offer would repeal parts of the Obama health care law and protect deductions for high-income taxpayers.

July 21Two Plans From the Senate and One From the House

On July 21, officials said that President Obama and Speaker John A. Boehner were closing in on a budget package calling for as much as $3 trillion in savings over the next 10 years. Meanwhile, several other ideas, two from the Senate and one from the House, had also been discussed.  Related Article »

McConnell-Reid Outline

‘Gang of 6’ Plan

‘Cut, Cap and Balance’ Bill

An outline proposed by the two Senate leaders, Mitch McConnell, Republican of Kentucky, and Harry Reid, Democrat of Nevada. Details had not been made public.

A bipartisan proposal released by the so-called Gang of Six senators pushing for both deep spending cuts and new revenue. The plan has renewed hopes for a deal.

A bill passed by the House of Representatives calling for deep spending cuts, a federal spending cap and a balanced budget amendment.

Spending cuts

$1.5 trillion
$2.5 trillion
$5.5 trillion

Most of the cuts would be in discretionary spending, with a few small mandatory spending cuts achieved through minor adjustments of large entitlement programs, including Medicare and Medicaid. The plan would allow President Obama to raise the debt ceiling in three increments.

Nearly 70 percent of the total $3.7 trillion in savings would be from both discretionary and entitlement spending cuts. Savings would come from adjusting to a more accurate measure of inflation for many government programs. Additional savings would include $202 billion from health care.

Discretionary spending in fiscal year 2012 would be reduced below fiscal year 2008 levels except for Defense, Homeland Security and Veterans Affairs. The plan provides a universal spending cap after 2012, which Democrats worry would devastate entitlement programs.

Revenue increases

$0
$1.2 trillion
$0

While the plan avoids deep spending cuts feared by Democrats, it also stops short of calling for revenue increases Democrats have been insisting on.

The remainder of savings would primarily be through overhauling the income-tax code. The plan requires the finance committee to report on tax changes within six months.

The bill, which was introduced by House Republicans and is unlikely to pass in the Senate, rules out any compromise that includes higher tax revenue.