Restoring America’s Future

Nov 19, 2010

Bipartisan Policy Center’s Plan to Revive the Economy and Improve Our Long Term Fiscal Outlook

Statement by Michael A. Peterson, Vice Chairman of the Peter G. Peterson Foundation, on the Report by the Bipartisan Policy Center’s Debt Reduction Task Force

“The report released today by the Bipartisan Policy Center’s Debt Reduction Task Force is another blueprint that demonstrates that America can succeed in overcoming its long-term fiscal challenges. The report represents another example of how both parties can come together to develop and agree on a comprehensive solution that puts our nation on a sustainable fiscal path. “Proposals such as these, which put everything on the table, help foster a greater national dialogue about how we can get our fiscal house in order and preserve economic opportunities for future generations of Americans. We hope that this report will be one of a range of bipartisan, sensible proposals that we consider as a country. Addressing our fiscal challenges, while promoting economic recovery and preserving important programs for our nation’s most vulnerable citizens, should be the national imperative at this critical time.”

Report Analysis

By: Jon Quinn
November 19, 2010

On Wednesday, November 17, the Bipartisan Policy Center (BPC) released the report, “Restoring America’s Future,” the final product of its Debt Reduction Task Force. The Task Force is co-chaired by former Senator Pete Domenici and former director of the Office of Management and Budget (OMB) and Congressional Budget Office (CBO), Alice Rivlin. The plan is a comprehensive budget reform proposal that aims to balance the budget and stabilize the debt at 60 percent of Gross Domestic Product (GDP) by 2020. It does so by addressing all aspects of federal spending and modifying the tax code to raise additional revenue.

The BPC proposal is the first in a series of reports that will be released over the next several months that examines different ways to bring the budget back into balance and reduce the country’s mounting debt burden. The National Commission on Fiscal Responsibility and Reform (“President’s Commission”), on which Alice Rivlin also serves, is due to report on December 1st. The proposal from its co-chairs (or the “Chairmen’s Mark”) was released on November 10. Bill Galston and Maya McGuineas (of the Brookings Institution and the New America Foundation, respectively), have also put together a comprehensive plan. See the table below for a comparison of the BPC Fiscal Plan to the Chairmen’s Mark.

  Bipartisan Policy Center Co-Chairs’ Proposal
Goal Balance primary budget (excluding interest cost) by 2014, stabilize debt relative to the size of the economy by 2020 Balance primary budget by 2015, stabilize debt by 2014
Discretionary Spending Short-term freeze in new, annual funds, then funding grows each year at rate of GDP (economic) growth Cuts through 2015, then funding growth capped at price growth (inflation) from 2015-2020.  This would be a slower rate of growth than GDP growth.
Mandatory Spending
Social Security
  • Cover 90 percent of total wages
  • Use different measure of inflation
  • Reduce growth in retirement benefits for the wealthy
  • Cover all new state and local employees
 
  • Increase minimum benefit
  • Index retirement age to life expectancy
  • Establish new minimum benefit
  • Raise retirement age to 68 by 2050 and 69 by 2075; hardship exemption for those unable to work longer
Medicare
  • Increase beneficiaries’ premiums and rebates from drug companies
  • Greater bundling of payments to providers
  • Transition to premium support (per-person, or capitated) system
  • Expand authority of the new Independent Payment Advisory Committee to reduce costs
  • Offset the cost of annual increases in physician payments with Medicare savings
Medicaid
  • Expand use of managed care
  • Reform federal-state shared funding system
Convert portion of the program from open-ended entitlement to a block grant or a fixed payment to the states
Other Health Medical malpractice reform
  Phase out the exclusion of  employer health care from employees’ taxable income Cap exclusion of employer health care from employees’ taxable income
Other Mandatory
  • Reduce farm subsidies
  • Reform federal retirement plans and military health care
Revenues
Personal Income Tax Eliminate most deductions and simplify those that remain
 
  • Two rates: 15 and 27 percent
  • Percentage decrease in after-tax income is progressively distributed.
  • Three options: two options that lower rates; one option that trims deductions and credits unless Congress acts
  • Percentage decrease in after-tax income is uniform across incomes
Corporate Income Tax Eliminate most tax deductions and simplify those that remain
  Reduce rate to 27 percent Single rate (at different levels for the different options)
Other Taxes
  • One-year payroll tax holiday
  • Establish “deficit reduction”
  • consumption tax

 

  • One-year payroll tax holiday
Process Reforms
  • Impose strict caps on discretionary spending
  • Biennial budgeting
 
  • Stricter pay-as-you-go rules
  • Create a fiscal accountability commission
  • Establish global health care budget
  • Establish a “cut and invest” committee to terminate outdated programs

About the Bipartisan Policy Center:

The Bipartisan Policy Center was founded in 2007 by former Senators Howard Baker, Tom Daschle, Bob Dole, and George Mitchell. It is dedicated to developing policy solutions to critical national issues that appeal to both sides of the partisan divide. They aim to develop policy initiatives that can garner popular and political support and that will represent a centrist perspective on issues. The work of the Debt Reduction Task Force was partially supported by the Peter G. Peterson Foundation.

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