October 2011

Democrats Target Oil and Other Fossil Fuel Subsidies

Yesterday, a group of 14 Senate Democrats sent a letter to the Super Committee, urging them to eliminate oil subsidies for the top five oil companies. The basis for this recommendation is the "Closing Big Oil Tax Loopholes Act," which failed to pass the Senate back in May. According to the letter, that bill would save $21 billion over ten years.

This letter is similar, albeit smaller in scope, to one that 38 House Democrats sent last Friday. That letter called for eliminating all fossil fuel subsidies, including "last in, first out" (LIFO) accounting, a method of accounting for inventory that President Obama has targeted for elimination. In total, adopting these recommendations would save more than the Senate proposal: $122 billion.

These two letters bring the total number of recommendations to the Super Committee to 31. As the Senate letter shows, submissions from Members of Congress are still coming in, even after the October 14 Congressional committee deadline has passed. We'll be sure to keep updating our table.

Committee/Organization/Individual Date Ten-Year Savings
Center for American Progress (CRFB Overview) 9/6 $1.5 trillion

Senate Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia (Minority) (CRFB Overview)

9/15 $1.4 trillion

U.S. PIRG/National Taxpayers Union (CRFB Overview)

9/15 $1 trillion
Third Way (CRFB Overview) 9/15 $1.7 trillion
Taxpayers for Common Sense (CRFB Overview) 9/16 $1.7 trillion

President Obama (CRFB Overview)

9/19 $1.9 trillion
Sens. McCain, Carper, Coats, and Udall 9/20 N/A
Sen. Coburn  9/21 $300 billion
Rep. Coffman (CRFB Overview) 9/23 $103 billion
Center for Science in the Public Interest (CRFB Overview)    9/27 $200 billion

Sens. Coburn and Lieberman (CRFB Overview)

9/28 >$500 billion
99 Medical Assocations (CRFB Overview) 10/3 $62 billion

78 House Democrats (Medicare) (CRFB Overview)

10/5 $156 billion
65 House Democrats (Nuclear Arsenal) (CRFB Overview) 10/11 $200 billion
House Judiciary Committee (Majority) (CRFB Overview) 10/12 $57 billion
House Democratic Caucus (CRFB Overview) 10/13 N/A
EPI/The Century Foundation (CRFB Overview) 10/13 $4.7 trillion
Senate Small Business Committee (Minority) (CRFB Overview) 10/13 N/A
Senate Armed Services Committee (Majority) (CRFB Overview) 10/14 <$2 billion
Senate Armed Services Committee (Minority) (CRFB Overview) 10/14 N/A
Senate Budget Committee (Bipartisan) (CRFB Overview) 10/14 N/A
Senate Commerce, Science, and Transportation (Bipartisan) (CRFB Overview) 10/14 $7 billion
Senate Finance Committee (Minority) (CRFB Overview) 10/14 N/A
House Financial Services Committee (Majority) (CRFB Overview) 10/14 N/A
House Homeland Security Committee (Majority) (CRFB Overview) 10/14 $8 billion
Senate Homeland Security Committee (Bipartisan) (CRFB Overview) 10/14 N/A
House Science Committee (Majority) (CRFB Overview) 10/14 N/A
Senate Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia (Majority) (CRFB Overview) 10/14 N/A
Congressional Progressive Caucus (CRFB Overview) 10/14 $3.9 trillion
38 House Democrats (Fossil Fuel Subsidies) (CRFB Overview) 10/14 $122 billion
14 Senate Democrats (Oil Subsidies) (CRFB Overview) 10/18 $21 billion

 

Growing Support for Go Big

For the past several weeks, we have been urging the Super Committee to Go Big on deficit-reduction and exceed its savings mandate of $1.5 trillion. The support behind Go Big has continued to grow, coming from individuals, groups, and organizations from across the political spectrum.

Continuing that momentum, former Senators Byron Dorgan (D-ND) and Judd Gregg (R-NH) published an op-ed in CNN Money yesterday on the need for long-term deficit reduction through a Go Big approach, writing (emphasis added):

If the super committee only reaches the stated goal of reducing by debt by $1.2 trillion to $1.5 trillion over ten years (or if it fails to reach any agreement), it will have done a great disservice to the American people. It is far short of what is needed to address this debt crisis, and we will continue to lurch toward fiscal chaos, recession and chronic unemployment. That is a future we can avoid if we have the courage to act now.

This is a rare opportunity. We say to the super committee: This is one of those rare moments where you have the opportunity to change the course of history.

For the sake of our country's economic future, you need to think big and bold.

This theme was echoed today by Rep. Frank Wolf (R-VA), speaking on MSNBC’s Morning Joe, where he said (in reference to the Super Committee reaching its mandate): "I am hopeful. There was a group of us that signed a letter the other day asking them to "Go Big"-- to go the $4 trillion level. Some people feel that if you only do the $1.2 or $1.5 [trillion], Moody's could very well downgrade us."

With the Super Committee’s recommendations due in just over a month, it is encouraging that momentum behind the Go Big movement has continued to grow. For more information on the growing support for Go Big and what it entails, visit our Go Big resource page.

Presidential Candidate Ron Paul Releases Budget Proposal

Yesterday, presidential candidate and Congressman Ron Paul (R-TX) released his budget blueprint for what would be his first term in office, which he claims would balance the budget by 2015 as a result of a small $13 billion surplus in that year.

Rep. Paul's plan relies exclusively on spending cuts, eliminates all public debt held by the Federal Reserve (thus reducing debt held by the public by $1.6 trillion), and includes substantial tax decreases and tax cut extensions. His plan would be a bold shift for the federal budget.

Some of the major proposals are:

  • $1 trillion in spending cuts in 2013 through the elimination of five departments (Energy, HUD, Commerce, Interior, and Education)
  • Freezing spending, block-granting, and moving to the discretionary side of the budget for Medicaid, SCHIP, SNAP, family support programs, and child nutrition programs
  • Full Extension of 2001/2003/2010 income tax cuts
  • Repeal PPACA, including tax increases
  • Eliminate estate, gift, capital gains, and dividends taxes
  • Reduce corporate tax rate to 15%

His estimates of the plan rely on dynamic scoring when determining the costs of the policy proposals, GDP, spending and revenue levels and, thus, deficits and debt. In 2013 alone, Rep. Paul claims that he will cut spending by $902 billion and reduce revenue by $527 billion when compared to CBO's August baseline. He estimates that his plan would reduce debt held by the public to 52 percent of GDP in 2016, compared to 67 percent under CBO's current law baseline and about 76 percent under CFRB's Realistic Baseline.

While dynamic scoring would be ideal in a perfect world, in which experts fully understood the macroeconomic effects of policy changes on output, interest rates, and other variables, and where the difficulty of separating/disaggregating the impact of government policies on the economy from other factors affecting the economy didn't exist, the economics profession has not been able to fully solidify this process because of the sheer number of assumptions required. Thus, while Congressman Paul claims his plan would put debt on a downward path this decade, it's possible that conventional budget scoring could show that his plan would not reduce deficits and debt as much as he claims. As we see it, budget proposals should be scored based on existing methods and as accurately as possible, and any additional savings from dynamic effects should be a bonus. It’s possible that more will need to be done to put debt on a stable and falling path, but we congratulate Congressman Paul for putting out specific recommendations.

Click here to read Congressman Paul's latest budget proposal.

Last Minute Recommendations to the Super Committee

Update: The House and Senate Agricultural Committees sent a bicameral, bipartisan letter to the Super Committee on Friday, promising a $23 billion savings package by November 1. Once this package is specified, we will include it in the tracker. 

Last Friday was the last day for committees to submit recommendations to the Super Committee, so it's no surprise that a flood of letters came in just then. A number of committees (and the Congressional Progressive Caucus) offered up ideas spanning a wide range of areas. We will briefly go through all of them.

This list excludes the Majority side of the House Intelligence Committee--who also submitted a letter to the Super Committee on Friday--since they didn't include any specific recommendations.

Also, in addition to these Congressional submissions, the Economic Policy Institute and The Century Foundation compiled a list of revenue options that would raise $4.7 trillion. You can see these options here.

The sum total of these submissions bring our Super Committee tracker up to 29. Although the deadline for Congressional committees has passed, there is still the opportunity for other groups or individuals to make their ideas known.

Committee/Organization/Individual Date Ten-Year Savings
Center for American Progress (CRFB Overview) 9/6 $1.5 trillion

Senate Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia (Minority) (CRFB Overview)

9/15 $1.4 trillion

U.S. PIRG/National Taxpayers Union (CRFB Overview)

9/15 $1 trillion
Third Way (CRFB Overview) 9/15 $1.7 trillion
Taxpayers for Common Sense (CRFB Overview) 9/16 $1.7 trillion

President Obama (CRFB Overview)

9/19 $1.9 trillion
Sens. McCain, Carper, Coats, and Udall 9/20 N/A
Sen. Coburn  9/21 $300 billion
Rep. Coffman (CRFB Overview) 9/23 $103 billion
Center for Science in the Public Interest (CRFB Overview)    9/27 $200 billion

Sens. Coburn and Lieberman (CRFB Overview)

9/28 >$500 billion
99 Medical Associations (CRFB Overview) 10/3 $62 billion

78 House Democrats (Medicare) (CRFB Overview)

10/5 $156 billion
65 House Democrats (Nuclear Arsenal) (CRFB Overview) 10/11 $200 billion
House Judiciary Committee (Majority) (CRFB Overview) 10/12 $57 billion
House Democratic Caucus (CRFB Overview) 10/13 N/A
EPI/The Century Foundation (CRFB Overview) 10/13 $4.7 trillion
Senate Small Business Committee (Minority) (CRFB Overview) 10/13 N/A
Senate Armed Services Committee (Majority) (CRFB Overview) 10/14 <$2 billion
Senate Armed Services Committee (Minority) (CRFB Overview) 10/14 N/A
Senate Budget Committee (Bipartisan) (CRFB Overview) 10/14 N/A
Senate Commerce, Science, and Transportation (Bipartisan) (CRFB Overview) 10/14 $7 billion
Senate Finance Committee (Minority) (CRFB Overview) 10/14 N/A
House Financial Services Committee (Majority) (CRFB Overview) 10/14 N/A
House Homeland Security Committee (Majority) (CRFB Overview) 10/14 $8 billion
Senate Homeland Security Committee (Bipartisan) (CRFB Overview) 10/14 N/A
House Science Committee (Majority) (CRFB Overview) 10/14 N/A
Senate Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia (Majority) (CRFB Overview) 10/14 N/A
Congressional Progressive Caucus (CRFB Overview) 10/14 $3.9 trillion

 

‘Line’ Items: Fall Colors Edition

Leaves of Change – The colors of fall draw many sightseers to view nature’s beauty. Yet, it is important to recognize that behind the changing leaves are nature’s preparations for surviving the harshness of the approaching winter. From a budget standpoint, this winter could be harsher than usual, with fights over the budget and the Super Committee. What colors will Washington show this fall? Hopefully there will be less red and yellow. The House is out this week while the Senate tries to make progress on appropriations.

CLASS Dismissed – On Friday the Obama Administration quietly announced that it was leaving behind the Community Living Assistance Services and Supports (CLASS) Act. The program was a part of last year’s health care reform bill, designed to facilitate long-term care. CRFB sharply criticized the program’s financing because it would have collected revenues for five years before any benefits were distributed. This timing gimmick helped boost the budget score for the health care bill over the ten year window, but it set up a fiscal train wreck because the program lacked sustainable funding for the longer term. The law required that the program be financially solvent over the course of a 75-year period, and the Department of Health and Human Services struggled to find a way to administer the program in an actuarially sound manner. Obviously it concluded that was not possible.

Primary Colors – Economic and fiscal issues were front and center last week in the presidential campaign as a debate that focused on the economy forced candidates to discuss these issues. The “9-9-9" plan from contender Herman Cain drew a great deal of attention. Many experts have criticized the plan for not raising sufficient revenue and for likely raising effective taxes on the poor. CRFB concluded that a lot more details will be needed to come to a definitive conclusion. But the fact that everyone is talking about the plan underscores the public hunger for a fiscal strategy. Meanwhile, the newspaper Politico held a contest to determine who could generate the most support for a third party candidacy. Two CRFB board members, Erskine Bowles, the White House Fiscal Commission co-chair, and David Walker, former comptroller general of the U.S., were among the ten nominees. Walker finished second behind winner Hilary Clinton, showing that voters are looking for someone to tackle our fiscal challenges.

Budget Reform Gets a Green Light – The Senate Budget Committee sent proposals to the Super Committee on Friday to improve the budget process. Recommended were a switch to biennial budgeting, changes to the Senate “vote-a-rama” process to make it more functional, and stronger incentives to produce a timely budget resolution. The Senate Budget Committee held a hearing earlier in the week on the topic where two witnesses, Phil Joyce of the University of Maryland, and Paul Posner of George Mason University, cited the work of the Peterson-Pew Commission on Budget Reform, a project of CRFB, on ways to strengthen the Budget Committee.

Moving Appropriations – Speaking of the broken budget process, congressional leaders have decided that the best approach to approving spending bills for the fiscal year that started at the beginning of the month is to rake up the 12 bills into a few “minibus” packages. The first minibus will come to the Senate floor this week, consisting of the Agriculture, Commerce-Justice-Science, and Transportation and Urban Development spending bills.

Super Committee Gets Ideas – Friday was the deadline for congressional committees to submit recommendations to the Super Committee and the ideas came like leaves falling from a tree. However, besides the budget reform proposal from the Senate Budget Committee mentioned above, there were few bipartisan proposals. CRFB is tracking submissions to the Super Committee here.

Key Upcoming Dates (all times ET)

October 18

  • Senate Finance Committee hearing on tax reform and charitable giving at 10 am.
  • GOP presidential debate in Nevada.

November 18

  • Continuing resolution (CR) currently funding federal government operations expires.

November 23

  • The Super Committee is required to vote on a report and legislative language recommending deficit reduction policies by this date.

December 2

  • The Super Committee report and legislative language must be transmitted to the President and Congressional leaders by this date.

December 9

  • Any Congressional committee that gets a referral of the Super Committee bill must report the bill out with any recommendation, but no amendments, by this date.

December 23

  • Congress must vote on the bill recommended by the Super Committee by this date. No amendments are allowed.

CLASS Act Fades Away

The CLASS Act, the new long-term care program enacted as part of the Affordable Care Act, has been dropped, as the Obama Administration has struggled to implement the program in an actuarially sound manner. Secretary of Health and Human Services Kathleen Sebelius said that, "I do not see a viable path forward for CLASS implementation at this time." The CLASS program would provide long-term care benefits to beneficiaries who paid monthly premiums for at least five years.

It was no secret that the CLASS Act was in trouble. Right from the outset, it seemed that the way the program was structured in ACA would not be viable, since the program was supposed to be self-sufficient. For one, CLASS seemed very susceptible to adverse selection, because it was voluntary and had a relatively short vesting period (five years). The result would be that people would wait until they were sick to enroll. Also, CLASS had been getting lower-than-expected enrollment, which would have forced HHS to increase premiums or reduce benefits, which would further drive away relatively healthy people from the program. In short, without changes, CLASS seemed likely to need general revenue in the future to keep it going.

As we argued back during the health care reform debate, using the revenues from the CLASS Act to fund other elements of the reform package was an egregious gimmick and threatened to leave the program in a dangerously unfunded state. At least that's not a worry anymore.

HHS had spent much of this year trying to adjust the program to make it more actuarially sound, but it had seemed to have given up last month when no appropriations were made for the program in the first CR for FY 2012 and the staff was being transferred from the program's office. Now, the move is official.

Because of its seemingly unsound nature, CLASS had been targeted for significant reform or repeal by some fiscal plans, such as the Fiscal Commission and the Gang of Six. However, because of the vesting period, repeal would actually cost billions of dollars over the next ten years as beneficiaries paid the premiums but only were able to get a few years of benefits at most. In its most recent estimate of ACA back in February, CBO estimated that repealing CLASS would cost $86 billion from 2012-2021. Since the ACA was estimated to save $210 billion over the same period, the "repeal" of CLASS will wipe out some, but not all, of the net savings from the health care reform law (at least as of the most recent estimate).

Hopefully, lawmakers will work to make up for the near-term "savings" that CLASS would have produced with further health reforms. We need many more reforms to our health care programs if we are to control rising health care costs and rising debt.

 

House Democratic Caucus Submits Recommendations

With only a day left for Committees to send recommendations to the Super Committee, the House Democrats decided to take an omnibus approach. Letters from ranking members of all 16 committees were sent in one package, with an overall letter from Minority Leader Nancy Pelosi (D-CA). These letters are more a laundry list of recommendations than a coherent fiscal plan, so providing a topline savings number would be difficult. Nonetheless, here are some of the highlights:

  • Job creation: Not surprisingly, the number one common theme in these letters was job creation and the number one plan was the American Jobs Act. Investment in surface transportation, broadband, and other infrastrcture projects showed up a couple times as well. Expanded help for homeowners in a variety of ways also made an appearance.
  • Medicare prescription drugs: This area follows up on a letter that a group of House Democrats sent earlier to the Super Committee. House Energy and Commerce Committee ranking member Henry Waxman (D-CA) mentioned providing increased rebates to low-income seniors in Part D, one of the bigger ticket savings items in the letters. Also, Elijah Cummings (D-MD) of the Oversight Committee supported allowing Medicare to negotiate lower drug prices and to combine the purchasing power of all Federal Employee Health Benefit (FEHB) plans to negotiate prices as well.
  • Revenue odds-and-ends: Besides the implicit support for allowing the 2001/2003 upper-income tax cuts to expire, the letters included a number of smaller loophole-closers and revenue-raisers. Oil and gas tax preferences were targeted, and there were proposals to slap a fee on banks, legalize and tax internet gambling, and increase the guarantee fees that Fannie Mae and Freddie Mac charge. Comprehensive tax reform was mentioned a few times (as well as in the overall letter), but no proposals were made on that front.

For the purpose of simplicity, we will count these letters as one submission, making it the 15th in our Super Committee tracker. We will continue to update the table as remaining committees rush to meet their deadline. 

Committee/Organization/Individual Date Ten-Year Savings
Center for American Progress (CRFB Overview) 9/6 $1.5 trillion

Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia (Minority) (CRFB Overview)

9/15 $1.4 trillion

U.S. PIRG/National Taxpayers Union (CRFB Overview)

9/15 $1 trillion
Third Way (CRFB Overview) 9/15 $1.7 trillion
Taxpayers for Common Sense (CRFB Overview) 9/16 $1.7 trillion

President Obama (CRFB Overview)

9/19 $1.9 trillion
Sens. McCain, Carper, Coats, and Udall 9/20 N/A
Sen. Coburn  9/21 $300 billion
Rep. Coffman (CRFB Overview) 9/23 $103 billion
Center for Science in the Public Interest (CRFB Overview)    9/27 $200 billion

Sens. Coburn and Lieberman (CRFB Overview)

9/28 >$500 billion
99 Medical Assocations (CRFB Overview) 10/3 $62 billion

78 House Democrats (Medicare) (CRFB Overview)

10/5 $156 billion
65 House Democrats (Nuclear Arsenal) (CRFB Overview) 10/11 $200 billion
House Democratic Caucus (CRFB Overview) 10/13 N/A

 

Spotlight on the States: New Jersey

With federal budget news in a bit of a holding pattern until next month, we return to our Spotlight on the States blog series with a discussion of New Jersey’s FY 2012 budget battle.

Back in February, Republican governor Chris Christie proposed a $29.4 billion budget proposal aimed at reducing the growing $10.5 billion state budget deficit. The governor’s plan represented a 2.6 percent reduction in appropriations from the previous fiscal year’s budget, relying entirely on spending cuts rather than revenue increases (in fact, he cut taxes by $200 million in his budget). The battle over the budget loomed as the Democrat-controlled legislature was determined to increase spending in a number of areas, offset by an increase in revenues from a proposed millionaires' surtax.

Two months after Gov. Christie’s budget proposal was released, Moody’s Investors Service downgraded New Jersey’s credit rating from Aa2 to Aa3, the fourth highest rating. New Jersey was then the third lowest rated state, just ahead of California and Illinois. Moody’s cited “the state's weakened financial position” as the reason for the downgrade, along with rising pension and health-care costs. The state’s unfunded pension liability was reported to be about $54 billion at the time, which together with debt payments and health benefits made up 13 percent of the 2010 budget and could rise to 30 percent within 8 years.

On June 28th, after months of negotiations, the New Jersey legislature passed a pension reform bill aiming to ensure the solvency of public pensions and health care plans over the long-run by increasing employee contributions to both and raising the retirement age for pensions. This bill came after the state government had skipped a $3 billion payment to the state pension fund in FY 2011. The reform would save $267 million in FY 2012 alone, with $224 million from the Police and Fire Retirement System and $43 million from the Public Employee Retirement System. Over the next 30 years, these savings would total around $130 billion and would increase the state's pension funding ratio (ratio of assets to liabilities) from 62 percent to 88 percent.

At that point, the state government had to hurry to pass a budget before the start of the fiscal year. The New Jersey legislature passed a last-minute $30.6 billion budget on June 29th, just two days before FY 2012. The plan was $1.1 billion more than Gov. Christie’s original budget proposal, and included the contentious millionaire surtax that the Governor swore he would veto. Since there had been no negotiations on the budget between the legislature and Gov. Christie, he simply amended the proposed budget with a number of line-item vetoes and adjustments to appropriations, amounting to $900 million in cuts – including the elimination of the millionaire’s surtax. The final restructured budget totaled $29.7 billion in spending.

The plan’s deficit-reduction comes almost entirely from the spending side of the budget – an approach similar to those taken by Ohio and Wisconsin. In a press conference last week, Gov. Christie highlighted the current savings of the pension program already for FY 2012 and pointed to the positive outlook of the New Jersey deficit as a result of the new budget and reform measures enacted earlier this year.

CRFB President Maya MacGuineas and Board Member Douglas Holtz-Eakin Testify on Medicare Reform

On Wednesday, CRFB President Maya MacGuineas and CRFB board member Douglas Holtz-Eakin testified in front of the Senate Special Committee on Aging on Medicare reform. The hearing focused on the future of the vital program and ways it can be reformed to strengthen its finances going forward. The hearing examined a variety of possible reforms and what their effect would be, both fiscally and from a programmatic standpoint. 

 

MacGuineas testified that there are a wide variety of potential reforms for Medicare, in fact many of which overlap. She identified three general types of reforms:

  • Savers - things that lower Medicare spending directly, such as raising the Medicare eligibility age
  • Benders - things that lower the growth rate curve to health care spending, such as cost-sharing requirements
  • Structural Reforms - things that would change the basic structure of Medicare, such as putting Medicare on a budget

MacGuineas then went into that fact that no matter how large a package of health reforms are passed, it is likely that more changes will be necessary later. She also noted that just because something does not score well in the 10-year budget window, that does not mean it is not worthwhile as things that save money past the 10-year window are critical. Finally, she urged that we need to look at way to end the open-ended nature of health-care spending and put health care spending on a budget as we do other parts of the federal spending.

Holtz-Eakin also testified that Medicare needs to reformed in the face of our fiscal challenges. Like MacGuineas, he offered a number of policy prescriptions and specific ideas. As an immediate reform Holtz-Eakin said that the Sustainable Growth Rate (SGR) needs to be fixed. He also went into the pros and cons of other Medicare reforms, such as various tort reform options, MediGAP reform, and premium support, among others. 

Overall, our long-term fiscal problems are caused by entitlement growth, driven largely by spiraling health-care costs. Thus, Medicare reform is crucial to fixing our fiscal problems, something that we hope the Super Committee and Congress as a whole will address. 

Herman Cain's 9-9-9 Plan

Republican presidential candidate Herman Cain's economic plan received a lot of attention at Tuesday night's debate. Regardless of what one thinks about the plan itself, the fact that it generated so much discussion is a positive development. With so many voters justifiably concerned about the economy and yearning for their leaders to adopt sound policies that will spur growth in the short and long-run, the focus on Cain's plan underscores the dearth of concrete ideas from policymakers and the public's desire for action. The debate in this campaign season over fiscal policies that will ensure a brighter economic future is truly welcome and essential. CRFB hopes to see more plans from candidates, particularly from those who would criticize the ideas of their opponents without offering their own proposals. Jon Huntsman also has a tax plan that we briefly examined here.

That said, and as others have noted, the plan lacks the full detail that would enable a thorough analysis of its ultimate impact on taxpayers and the federal budget. A few experts have made an attempt to describe the impact of the plan (see Bruce Bartlett’s column and former Joint Committee on Taxation Staff Director Ed Kleinbard’s attempt at a fuller analysis of the plan).

In the first phase of a three phase proposal, the so-called 9-9-9 plan would make a number of fairly big changes to the current tax code. The 9-9-9 part of the plan refers to new rates on corporate and personal income, and a new national sales tax:

9% Business Flat Tax: Taxes gross income minus all investments, purchases from other businesses and dividends to shareholders. Creates empowerment zones that will offer deductions for payrolls of people employed in the zone.

9% Individual Flat Tax: Taxes gross income minus charitable deductions. People who live or work in empowerment zones will receive additional deductions.

9% National Sales Tax: This would be in addition to state and local sales taxes.

The 9-9-9 plan would also:

  • Eliminate the payroll tax.
  • Eliminate the capital gains tax.
  • End the so called “death tax” (the estate tax).
  • And eliminate the double taxation of dividends.

In the second phase of the plan, Cain proposes implementing a “Fair Tax”, which is assumed to resemble this proposal from Americans for Fair Taxation. It appears that the Fair Tax is intended to replace the individual and business taxation pieces of the 9-9-9 plan and to supersede the national sales tax.  Again, the devil is in the details and many of those are missing.

The 9-9-9 plan has faced quite a bit of criticism, with even some conservatives conceding that one obvious consequence would be to significantly lower taxes on the wealthy, while imposing a new tax on those who currently do not make enough to pay income tax (although everyone who works currently pays payroll taxes, which would be eliminated under the plan). Additionally, those who have attempted to estimate the impacts of 9-9-9 don’t believe it would be revenue neutral compared to current law levels, as Cain contends.

We look forward to learning more details of the 9-9-9 plan so that we can better assess it's impact on the budget.  Yet we commend Mr. Cain for offering some specifics of his economic plan and contributing to a desperately needed discussion on economic and fiscal policy.

13th and 14th Plans Added to Super Committee Tracker

Two more recent recommendations have been added to our Super Committee submissions tracker, dealing with defense and health care.

The first comes from a group of 65 House Democrats, who recommend reducing the U.S.'s nuclear weapons budget by $200 billion over ten years. It is not exactly clear how they would reduce spending in this area, but they point out that since the START treaty signed in December would reduce the nuclear arsenal, the nuclear budget should be reduced as well. Also, they mention some arsenal reductions, so it is likely that they would go further in reducing the U.S.'s stock of nuclear weapons. This option is about twice as aggressive as the Sustainable Defense Task Force's cuts to the nuclear arsenal, but it is unclear whether this policy would be a way to help stay within the discretionary caps put in place by the Budget Control Act (BCA) or to be enacted on top of BCA savings.

The second comes from a group of 99 medical organizations (headlined by the American Medical Association) who call for significant medical malpractice reforms. In particular, they call for a limit on noneconomic damages of $250,000 and other liability protections that would make the burden of proof of liability higher. They claim that this form of tort reform would save $62 billion over ten years, making it more aggressive than the reform contained in the Fiscal Commission and similar to the Domenici-Rivlin proposal.

The addition of these two recommendations brings the total in our Super Committee tracker to 14.

Committee/Organization/Individual Date Ten-Year Savings
Center for American Progress (CRFB Overview) 9/6 $1.5 trillion

Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia (Minority) (CRFB Overview)

9/15 $1.4 trillion

U.S. PIRG/National Taxpayers Union (CRFB Overview)

9/15 $1 trillion
Third Way (CRFB Overview) 9/15 $1.7 trillion
Taxpayers for Common Sense (CRFB Overview) 9/16 $1.7 trillion

President Obama (CRFB Overview)

9/19 $1.9 trillion
Sens. McCain, Carper, Coats, and Udall 9/20 N/A
Sen. Coburn  9/21 $300 billion
Rep. Coffman (CRFB Overview) 9/23 $103 billion
Center for Science in the Public Interest (CRFB Overview)    9/27 $200 billion

Sens. Coburn and Lieberman (CRFB Overview)

9/28 >$500 billion
99 Medical Assocations (CRFB Overview) 10/3 $62 billion

78 House Democrats (Medicare) (CRFB Overview)

10/5 $156 billion
65 House Democrats (Nuclear Arsenal) (CRFB Overview)  10/11 $200 billion

 

Senate Committee on Aging Holding Hearing on Medicare Reform

CRFB President Maya MacGuineas and former CBO director and current CRFB board member Douglas Holtz-Eakin will be testifying in front the Senate Special Committee on Aging at a hearing entitled "A Time for Solutions: Finding Consensus in the Medicare Reform Debate." 

This hearing will focus on the various different ways in which Medicare and other federal health programs can be changed, why this is necessary (our fiscal crisis, with health-care being the main driver, of course) and what consensus exists. CRFB has been showing consensus in Medicare, and others in its table of overlapping policies.

The hearing is being webcast on the Senate Aging Committee's website and will start at 2 PM.

Click here to read Maya MacGuineas' written testimony.

Click here to read Doug Holtz-Eakin's testimony.