UPDATE: CBO mistakenly overestimated the deficit-reducing effect of the Medicare Commission in their score. As a result, they now estimate deficit reduction of between 0.25 and 0.5 percent of GDP, as opposed to 0.5 percent in the second decade.

ALSO: Click here for charts and interactive graphs comparing the House and Senate bills.

Today, Senator Reid released his Manager's Amendment of the Patient Protection and Affordable Care, which will likely be passed by the Senate before Christmas. The CBO also released its corrected score of the bill which showed that it would reduce $132 billion over the next decade ($60 billion excluding the CLASS Act). More importantly, the CBO estimates the bill could reduce the deficit in the second ten years by somewhere in the broad range of 0.25 percent and 0.5 percent of GDP. This is somewhat more significant than the previous most recent bills from both the House and Senate, and is largely the result of new rules enhancing the power of the Independent Medicare Advisory Board (The "Medicare Commission").

We will provide more information soon, but for now here is our newest chart comparing the new bill to previous versions:

Numbers in billions, with positive numbers representing a reduction in the deficit
Sources: Congressional Budget Office, Joint Committee on Taxation, and Authors' Calculations
*Assumes $10 billion in home health cuts are the result of market-based payment updates
+The CLASS Act makes available government-sponsored long-term care insurance. Because this insurance would have a "vesting period," the provision appears to raise considerable amounts of revenue over the next decade. However, these revenues must ultimately be used to cover the program's costs, and therefore do not belong in the bill as an offset.

Yesterday, on the heels of President Obama signing a $1.1 trillion "minibus" CRFB released a paper on the importance of controlling discretionary spending growth. The paper showed that, while fiscal conservatives tend to worry about mandatory spending, discretionary spending has actually been growing faster over the last decade. It also devotes a small box to discussing President Obama's proposed spending cuts -- which this blog will discuss in more detail. As we explain:

In his 2010 budget request, President Obama proposed terminating or cutting about 75 discretionary spending programs to achieve $11.5 billion in savings. Proposals ranged from as large as $3 billion for the F-22 Fighter Aircraft – which most experts deem no longer necessary - to as small as $1 million for the Christopher Columbus Fellowship Foundation – which the Administration found spent 80% of its funds on overhead.

We first discussed and analyzed these proposed cuts in our Analysis of the President's FY 2010 Budget back in May. There, we pointed out that administrations have historically faced opposition in Congress in trying to enact cuts and eliminations. As we wrote:

Despite proposing more cuts than the Obama Administration, President Bush saw limited success in eliminating or cutting government programs. For its FY2006 Budget, coming off a large electoral victory with a unified Congress and few spending pledges, the Bush Administration succeeded in achieving around 40% of its proposed cuts and saving roughly $6.5 billion. In the next two years, Congress enacted less than 15% of the Administration’s proposed cuts, for savings of less than $2 billion a year.   

We haven't yet reviewed all of President's requested cuts (we plan to in the next month or so), but we did try to look at the President's top ten proposed cuts to see if they were included in the appropriations bills he has signed. We excluded defense spending because it has not been passed yet. We also excluded two proposed "corps of engineers" cuts, since they came out of difficult-to-trace earmark spending.

Of the top ten programs remaining, we found that only two were enacted as requested. Another three were partially enacted. Yet five of the proposed cuts were ignored altogether -- including four which received funding increases.

Out of the $1.78 billion in proposed savings from these ten items, in fact, Congress only enacted $560 million -- less than one third. And that doesn't even include the $200 million in increased spending for areas the President recommended cutting. That would put the net cut at closer to $360 million.

Here is a chart of the spending cuts (numbers in millions). We intend to expand it to include all the President's proposed cuts the coming months:

If Congress cannot even enact these small cuts, we worry about its ability to control discretionary spending on the whole. We thus urge Congress to enact some type of enforcement mechanism, such as caps, to keep Congress from bowing to the temptation to overspend. As we explain:

Just holding discretionary spending growth to inflation – with strong enforceable spending caps – would be a positive step. In the 1990s, it was these types of caps, along with pay-as-you-go rules, strong economic growth, slower-than-usual health care cost growth, and a commitment to deficit reduction that led to budget surpluses...caps would prevent the situation from further deteriorating, something which would almost certainly occur under the current process...controlling discretionary spending alone cannot be enough to avert the coming debt crisis...But discretionary controls can make a far bigger difference than most policymakers realize, and more importantly, they can send a signal that we are serious about getting our burgeoning debt under control.

The chance that some type of bipartisan commission will be created to address the nation’s long-term fiscal challenges increased significantly this week as the idea has gained support and key leaders appear to be responding to mounting pressure to adopt the proposal.

CNN reported on Tuesday that President Obama is seriously contemplating an executive order to establish a commission, with White House advisors debating on how broad a mandate the panel should have. House Speaker Nancy Pelosi, who previously had been cold to such the idea, was quoted by Politico today as saying that “we’ll come to terms on a commission” early next year.

A group of key centrists in the Senate have demanded a vote on legislation to create a commission that will make recommendations to reduce the mounting federal debt in order to gain their support for a long-term debt limit increase.

At a hearing convened by the Senate Committee on Homeland Security and Governmental Affairs today former Federal Reserve chairman Alan Greenspan offered his approval of a bipartisan commission, saying it is “an excellent idea.” At the hearing, Senate Budget Committee chairman Kent Conrad (D-ND) stated that the proposal he introduced last week with Sen. Judd Gregg (R-NH) now has 34 sponsors. Conrad testified that a commission is needed because the “regular order will not take on burgeoning debt.”

There are still several issues that must be resolved among competing proposals for a budget panel. One is whether it should be formed though legislation or presidential directive. A directive would be easier to execute, but the commission would not have the full force of law and could not mandate that Congress vote up or down on its recommendations, like the Conrad/Gregg bill proposes. Other issues include how broad a mandate the entity should have and the make-up of the panel – whether it should be composed entirely of Members of Congress or include others.

CRFB supports a bipartisan special process for tackling the debt in the hope that it will focus much-needed attention on fiscal responsibility and establishing a shared fiscal goal. According to a recent statement from CRFB president Maya MacGuineas. “It is less important to us the specifics of any commission or task force than the reflection that Congress and the White House are finally willing to turn their attention to this pressing problem.”

The House has been extremely busy today, not only passing a $154 billion jobs bill but also passing a temporary continuing resolution, the defense appropriations bill, and a minor increase to the debt ceiling. 

On the debt ceiling, the House voted to increase the limit by a tiny margin -- $290 billion -- in order to give the government the ability to finance operations for roughly another six weeks. The Senate is expected to approve this measure before adjourning for the year.  This mini-increase in the debt ceiling will likely be welcomed by moderates in the Senate, who are hoping to use the next large increase in their favor to push for the need to create some sort of a fiscal commission. Why six weeks? This ostensibly gives President Obama the chance, in his State of the Union address next month, to lay out any plans for tackling runaway deficits and high debt. Many Democrats had originally hoped to pass a $2 trillion increase to the ceiling, which would be enough to hold off on another vote on this issue until after the 2010 midterm elections.

See CRFB's latest primer on the debt ceiling.

The Defense appropriations bill the House sent to the Senate was a whopping $636.6 billion. That bill would also extend unemployment benefits and other non-military programs through the end of February. A summary of the bill can be seen here. As for the continuing resolution, the House adopted a short term CR to fund the agencies that have not yet had current year spending bills enacted. The current CR expires December 18, and the new one lasts until December 23 of this year.

Tim Penny, co-chair of the Peterson-Pew Commission on Budget Reform, was interviewed today for an hour on his home state public radio station. Saying that we're about to go over the cliff regarding the federal budget and its debt burden, Penny laid out the Commission's argument for beginning immediately to implement a plan for getting the nation's debt under control. Penny took a number of questions from callers, and didn't pull any punches in describing the necessity for action, and the extent of tough political choices that must be made. At the current rate of borrowing, the federal government will soon exceed debt levels not seen since World War II. As a portion of the country's economy, Federal debt held by the public will soon exceed 100%.

Today Maya MacGuineas also honed in on that alarming 100 percent projection for 2022, which is based on reasonable assumptions about what policymakers are likely to do on tax and spending policies. In other words, she wrote in the NY Daily News, we’ll owe loans that are equal to the entire value of all the economic activity generated in the United States in a given year….” Bottom line: “If we don’t wrestle this beast today, it will devour us tomorrow.”