A look at the 'Gang of Six' deficit reduction plan

Natalie Gonnella
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Amid the 'Cut, Cap, Balance' vote and President Obama's veto promise, several senators today circulated a copy of the “Gang of Six" deficit reduction strategy during a short meeting in the Senate.

With the debt limit deadline quickly creeping closer, here's a look at the key points within the plan:

A BIPARTISAN PLAN TO REDUCE OUR NATION’S DEFICITS

EXECUTIVE SUMMARY

This bipartisan, comprehensive, and balanced plan consistent with the recommendations of the Bowles-Simpson fiscal commission that will:

• Slash our nation’s deficits by $3.7 trillion/$3.6 trillion over ten years under CBO’s March 2011 baseline, or $4.65 trillion/$4.5 trillion under the original fiscal commission baseline (which used the President’s 2011 budget request as the starting point for discretionary spending).
• Stabilize our publicly-held debt by 2014.
• Reduce our publicly-held debt to roughly 70% of our economy by 2021.
• Impose unprecedented budget enforcement.

A COMPREHENSIVE AND BALANCED PROPOSAL

The plan uses a two-step legislative process: (1) an initial bill that makes immediate cuts; and (2) a process for a second bill to enact comprehensive reform and put our nation on a stable fiscal path. The plan would:

Immediately implement aggressive deficit reduction down payment

• Cut deficits by $500 billion.

Dramatically cut discretionary spending

• Cut nonsecurity and security discretionary spending over 10 years.
• Maintain investments that encourage economic growth, strengthen the safety net for those who truly need it, and preserve a strong national defense.

Carefully strengthen the solvency of our most important entitlement programs

• Spend health care dollars more efficiently in order to strengthen Medicare and Medicaid, while maintaining the basic structure of these critical programs.
• Fully pays for SGR (the “doc fix”) over 10 years.

Fundamentally reform our tax code

• Reduce marginal income tax rates and abolish the $1.7 trillion Alternative Minimum Tax.
• Encourage greater economic growth.
• Enhance the competitiveness of American businesses and workers against global competition.
• Reform spending through the tax code to eliminate investment distortions and tax gaming.
• Change the debate about taxes in America from rate levels and carve outs to competitiveness, fairness and growth.
• If CBO scored this plan, it would find net tax relief of approximately $1.5 trillion.

Strictly tighten the government’s budget processes

• Impose spending caps and security/nonsecurity firewalls.
• Sequester accounts at the end of the year to recoup any excessive spending by Congress.
• Restrict the use of emergency designations that circumvent the spending caps.
• Prevent Congress from exceeding the caps by requiring a stand-alone resolution subject to a 67-vote threshold, in order to isolate that vote to increase the deficit from any other policy items.

Reform Social Security for future generations

• Ensure 75-year solvency of Social Security and provide for a decennial review of the program to ensure it remains solvent.
• Reform Social Security on a separate track, isolated from deficit reduction – any savings from the program must go towards solvency.

Comments

[Matthew Reynolds]

That plan sounds pretty good to me.The USA could rescue its economic situation by getting the House & Senate to pass this sound set of proposals.Having tax cuts and reductions in spending & borrowing will boost confidence and energise the economy.By moving money away from Obama's bloated Big Government towards the wealth creators you could provide incentives for productive investment thereby boosting revenues and creating jobs.