On Tuesday President Obama continued his push to replace the across-the-board spending cuts of the sequester with a more balanced approach. Flanked by first-responders who would be affected by sequestration, Obama railed against the “meat-cleaver approach” of the sequester and called for a mix of less drastic spending cuts and revenue increases through eliminating some tax loopholes and deductions, referred to by some economists as tax expenditures.
Meanwhile, Erskine Bowles and Alan Simpson, who co-chaired President Obama’s National Commission on Fiscal Responsibility and Reform, unveiled an ambitious framework for replacing the sequester with $2.4 trillion of deficit reduction over the next decade, which according to the Committee for a Responsible Federal Budget will put the debt as a share of the economy on a downward path over the long run. The framework is intended to promote a bipartisan compromise.
The framework proposes:
- Reduce Medicare and Medicaid spending by improving provider and beneficiary incentives throughout the health care system, reducing provider payments, reforming cost-sharing, increasing premiums for higher earners, adjusting benefits to account for population aging, reducing drug costs, and getting better value for our health care dollars
- Enact comprehensive, pro-growth tax reform that eliminates or scales back most tax expenditures, with a portion of savings from tax expenditures dedicated to deficit reduction and the additional savings used to reduce rates and simplify the tax code
- Strengthen limits on discretionary spending
- Reduce non-health mandatory spending by reforming farm subsidies, modernizing civilian and military health and retirement programs, imposing various user fees, reforming higher education spending, and making other changes
- Adopt chained CPI for indexing and achieve savings from program integrity
Fix the Debt welcomed the new framework:
Our political leaders seem alarmingly content to lurch from one near-crisis to the next and it is our hope that this new framework helps encourage policymakers to meet their fiduciary responsibilities and come up with a bipartisan plan to fix the debt. While the Campaign to Fix the Debt does not endorse specific proposals, we hope policymakers will turn their attention to coming up with a plan that meets the principles laid out by the Campaign in order to put the nation on a firmer fiscal footing.
Last week we offered our own criteria for deficit reduction.
There is some hope that the new class of lawmakers in Washington will be willing to reach across the aisle and beyond party ideology to achieve consensus. A bipartisan group of 21 Republican and 11 Democratic freshman members of the House of Representatives sent a letter to Congressional leaders with their own statement of principles for reducing the deficit. The freshmen reject piecemeal solutions and call for a long-term approach.