As the president schleps his deficit plan, I can present the fact sheet being passed around to sell it, with some annotations.
Here’s some preliminary reading – the February 2009 speech Obama gave to start selling the stimulus. It should demonstrate that the deficit talk isn’t new, but the specifics are.
Back to the fact sheet:
The plan produces approximately $4.4 trillion in deficit reduction net the cost of the American Jobs Act.
o $1.2 trillion from the discretionary cuts enacted in the Budget Control Act.
o $580 billion in cuts and reforms to a wide range of mandatory programs;
o $1.1 trillion from the drawdown of troops in Afghanistan and transition from a military to a civilian-led mission in Iraq
o $1.5 trillion from tax reform
o $430 billion in additional interest savings
The drawdown savings simply aren’t taken seriously by Republicans; the tax reform talk, not new, is one extra nudge toward something that the key Republicans on the supercommittee want, but no one thinks can happen until – maybe, if we’re optimistic – 2012.
To spur economic growth and job creation, the plan includes one-time investment and relief in the American Jobs Act. That adds to the deficit in 2012 but is fully paid for over 10 years, and deficit reduction phases in starting in 2013, as the economy grows stronger.
Deficit reduction is achieved in a balanced approach, with a spending cut to revenue ratio for the entire plan (including discretionary cuts) of 2 to 1.
Two to one! Remember, the hypothetical deal that every Republican candidate said was unacceptable was 10 to 1 cuts to revenue.
The Joint Committee plan significantly reduces deficits and puts the country on a fiscally sustainable path by 2017. The deficit is projected to fall to 2.3 percent of GDP in 2021. By comparison, if we did nothing, the deficit would be 5.5 percent of GDP in 2021.
Reaches “primary balance”– where our current spending is no longer adding to our debt – in 2017. At that point, current spending is no longer adding to our debt, debt is falling as a share of the economy, and deficits are at a sustainable level.
The President’s plan would reduce the national debt as a share of economy. Stable or falling debt as a share of the economy is a key metric of fiscal sustainability. If we did nothing, the national debt would rise to 90.7 percent of GDP in 2021. By contrast, under the President’s plan, the national debt would fall to 73.0 percent of GDP in 2021 – or an improvement of almost 18 percentage points.
“If we do nothing” is code for “let Bush tax cuts expire.”
The plan includes $320 billion in health savings that build on the Affordable Care Act to strengthen Medicare and Medicaid by reducing wasteful spending and erroneous payments, and supporting reforms that boost the quality of care. It accomplishes this in a way that does not shift significant risks onto the individuals they serve; slash benefits; or undermine the fundamental compact they represent to our Nation’s seniors, people with disabilities, and low-income families.
The plan includes $248 billion in savings from Medicare. Within this total, 90 percent of the savings, or $224 billion, comes from reducing overpayments in Medicare. Any savings that affect beneficiaries do not begin until 2017. The plan does not propose to change the eligibility age for Medicare benefits.
In other words, the PPACA cuts to Medicare stay in place. Republicans want to repeal the whole act, and explicitly want to restore the funding taken by those cuts.
Other health and Medicaid savings amount to $72 billion. Because of the structural nature of these reforms, health savings grow to over $1 trillion in the second decade. The President will veto any bill that takes one dime from the Medicare benefits seniors rely on without asking the wealthiest Americans and biggest corporations to pay their fair share.
That’s the preview of the campaign rhetoric.
The plan includes $250 billion in savings from other mandatory programs.
Included within these savings are:
$33 billion in savings from agriculture subsidies, payments, and programs
$42.5 billion in reforms to Federal employee benefit programs, including programs for civilian employees and military personnel.
$4.1 billion from the disposal of unused government assets.
$92.2 billion from restructuring government operations and reducing government liabilities.
$77.6 billion from improving Federal program management and reducing waste and abuse.
This is probably the least immediately controversial/doomed part of the plan. It’s also the part with the most possibility for long-range fights. What are those reforms to employee benefit programs? And for military personnel? You want to devise something hard to cut politically, you start right there.
The President calls on the Committee to undertake comprehensive tax reform, and lays out five principles for it to follow: 1) lower tax rates; 2) cut wasteful loopholes and tax breaks; 3) reduce the deficit by $1.5 trillion; 4) boost job creation and growth; and 5) comport with the “Buffett Rule” that people making more than $1 million a year should not pay a smaller share of their income in taxes than middle-class families pay.
Tax reform should draw on the specific proposals the President has put forward, together with elimination of additional inefficient tax breaks. If the Joint Committee is unable to undertake comprehensive tax reform, the President believes the discrete measures he has proposed should be enacted on a standalone basis. Their enactment as a standalone package still would significantly improve the country’s fiscal standing, represent an important step toward more fundamentally transforming our tax code, and serve as a strong foundation for economic growth and job creation.
To advance this debate, the President is offering a detailed set of specific tax loophole closers and measures to broaden the tax base that, together with the expiration of the high-income tax cuts, would be more than sufficient to hit the $1.5 trillion target. These include:
Allowing the 2001 and 2003 tax cuts for upper income earners to expire ($866 billion)
Limiting deductions and exclusions for those making more than $250,000 a year ($410 billion)
Closing loopholes and eliminating special interest tax breaks (approximately $300 billion)
The $866 billion in savings is only part what’s required by current law. Upper income earners, if we’re going by campaign talk, are people making more than $250,000. Under current law, the Bush tax cuts evaporate for everyone, not just them. The pre-speech leak of the “Buffett Rule” might be a good way to frame this, and re-fight the 2001 tax cut argument, which Democrats have always won when it came to taxes on the rich. The exception, as Mitch McConnell never tires of saying, is when Democrats validated the “no tax hikes for anyone in a recession” line by passing the extensions at the end of 2010.
UPDATE: Or, just read the plan.