Washington News

The Joint Select Committee on Deficit Reduction continues to meet daily in its efforts to find a deficit solution. If seven of the 12 Supercommittee members do not agree on a solution that meets the $1.2 trillion or greater standard, then automatic spending reductions take effect. Over 10 years, there could be $600 billion in Defense Department reductions and $600 billion in reductions in payments to Medicare providers.

Speaker of the House John Boehner (R-OH) stated on October 27 that he does not expect the Joint Select Committee to recommend major tax reform. He stated, "I've never believed the Supercommittee could rewrite the tax code. I think that's the appropriate role of the committee process in the House and Senate and I would expect it would stay that way."

While Supercommittee members have not commented publicly, it has been widely reported in Washington that both the Democratic members and Republican members have submitted plans.

The Democratic proposal would reduce the deficit by $3 trillion over 10 years. This plan includes approximately $1.3 trillion in revenue and $1.7 trillion in spending cuts. The spending cuts reportedly include a $500 billion reduction in Medicaid. Republican members have publicly indicated opposition to the tax increases in that plan.

The Republican plan includes $2 trillion in spending reductions. Approximately $685 billion of this total is through healthcare savings. House Ways and Means ranking minority member Sander Levin (D-MI) indicated that supercommittee Democrats would not accept the Republican proposal.

Editor's Note: The deadline for an agreement is rapidly approaching. While the bill must be published by November 23, 2011, it has to be scored by the Congressional Budget Office in order to be certain that it meets the $1.2 trillion target number. CBO Director Douglas Elmendorf stated that he would need two weeks to do the economic scoring of the bill. Therefore, his hope is that the Supercommittee bill will be available the first week of November.

CRFB Proposes "Going Big"

Maya MacGuineas, President of the bipartisan Committee for a Responsible Federal Budget (CRFB), recently published recommendations for the Supercommittee. MacGuineas suggests that the Supercommittee should "go big" and seek to develop a $4 trillion solution.

CRFB states that the solution will involve both "shared sacrifice" and "economic gains." The shared sacrifice will necessarily involve a combination of reductions in discretionary government spending, entitlements and other government programs, while also requiring some measure of increased revenue.

CRFB suggested that a $4 trillion deficit solution is necessary to stabilize the debt. Under the current policies, the public debt is expected to reach 79% of the economy by 2021. With a $4 trillion solution, the public debt would be 67% of the economy in that year, and potentially could stabilize and be reduced as a percentage of the economy in the future.

The CFRB solution involves a combination of specific changes to both spending and revenue.

Category	Solution	Budget Impact
Government Wide	Change CPI	$250 billion
Discretionary Spending	Specific Caps	$400 billion
Healthcare	Medicaid, Medicare, TRICARE Reform	$900 billion
Other Govt.	Agriculture, Retirement Programs, Fannie Mae, Freddie Mac	$350 billion
Social Security	Retirement Age, CPI	$300 billion
Revenues	Reduced Deductions and Rates	$1.2 trillion
Interest	Lower Debt Service	$600 billion
	Total	$4 trillion

Editor's Note: This organization and your editor take no specific position on the CFRB solution. This analysis is a reasonably clear picture of the substantial actions necessary to produce savings of this magnitude. It is offered as a service for that reason.