Winter is Coming – HBO’s “Game of Thrones” has a legion of devoted fans. The show deftly combines mystical elements with real-world political intrigue. Of course, the gratuitous sex and violence may also play a role in its popularity. The fictional capital of King’s Landing could be mistaken for Washington, DC except for the (slightly) better sanitation in our capital. King’s Landing is filled with plotting and backstabbing and is currently under siege. DC has more than its share of schemes and, in a way, is also under siege due to the increasing unpopularity of its inhabitants and their inability to address the problems plaguing the nation. The days may be getting longer and the temperatures higher in DC, but there still is a growing sense that, as the Starks constantly warn, “Winter is coming.” This winter could be particularly harsh as the “fiscal cliff” that Federal Reserve chairman Ben Bernanke warns of could wreak havoc on the already fragile economy a the end of the year. The expiration of the 2001/2003/2010 tax cuts, the payroll tax holiday, the Alternative Minimum Tax (AMT) patch and several tax extenders (referred to by some as "Taxmageddon”) along with the across-the-board cuts imposed by the sequester under the Budget Control Act (BCA), will all occur at once, along with the debt ceiling also being reached. The challenge for lawmakers in a post-election lame duck session of Congress will be to replace fiscal cliff with a comprehensive plan that achieves a significant level of deficit reduction, but in a smart, phased-in manner. Learn more about the fiscal cliff here.

You Either Win or You Die – As they set the stage for the election and its aftermath, both parties appear to be following the Cersei Lannister view of politics, “When you play the game of thrones, you win or you die; there is no middle ground.” As Politico reports, Republicans want to soften the defense cuts under the sequester by further cutting social programs while Democrats plan to hold firm. Meanwhile, no progress is being made on entitlement and revenues, which will have to be a significant part of any comprehensive plan to significantly reduce the deficit. Last week the House passed legislation replacing the defense cuts for 2013 under the BCA sequester with $238 billion of cuts over ten years to programs such as Medicaid, food stamps, and the health care reform law. We’re all about being ambitious, but our idea of a "Go Big" approach depends on middle ground. Each side must put everything on the table to reach a comprehensive plan that puts the country on a sustainable fiscal course.

House Passes First Fiscal Year 2013 Spending Bill – The appropriations process is as dysfunctional as the Lannister family. Temporary stopgap measures have now become the norm when it comes to funding the government and this year appears headed in the same direction. Last week the House passed the first spending bill for the fiscal year that begins October 1. The Commerce, Justice, and Science appropriations bill provides $51.1 billion in funding for these agencies. Because this amount is less than the spending level agreed to under the BCA, the President has threatened to veto the bill if it somehow manages to pass the Senate. The White House also objects to policy riders contained in the bill. This week the House Appropriations Committee will mark up the FY 2013 spending bills for Homeland Security, Military Construction/Veterans Affairs, Defense and State/Foreign Operations. The security bills have spending levels above those agreed to in the BCA. All this means we can again expect the fiscal year to begin without most, if any, spending bills in place.

Going on Offense on Defense – Military action is significant to the plot of Game of Thrones. Likewise, defense spending is significant to the federal budget, and a source of great friction. The House this week will consider the National Defense Authorization Act for FY 2013, which rolls back some of the cuts proposed by the Pentagon to comply with the BCA. This comes as the public expresses support for some defense cuts.

Senate Budget Votes Expected – The annual federal budget blueprint has become akin to the Zombie-like White Walkers – not really among the living but nearly impossible to completely kill. While all hope has been lost for the House and Senate agreeing on a FY 2013 budget resolution, the Senate is still expected to vote on several versions this week in what will be no more than political theater. Senators will exercise their right to bring up budget proposals to the Senate floor since no budget has been approved. The Senate is expected to consider the resolution approved by the House, a version of President Obama’s budget proposal, and proposals from Sens. Pat Toomey (R-PA), Rand Paul (R-KY) and Mike Lee (R-UT). None is expected to muster enough votes to pass. Budget process reform is needed to help improve federal budgeting.

Broad Agreement on Debt Fix – The people of Westeros may not be able to agree on who their king is, but Americans appear to be in general agreement that a comprehensive approach will be required to address the national debt. According to a recent poll from the Peter G. Peterson Foundation, 87 percent of respondents say that a solution to the long-term debt solution will require tax increases and spending cuts. That corresponds with the results of our federal budget simulator, where 94 percent of those who voluntarily submitted their results used a combination of spending cuts and revenue increases.

Want to Know Where the Presidential Candidates Stand? – While not as catchy as "King in the North," cries for the presidential candidates to “Debate the Debt” are growing. Visit the website to learn more and sign the petition calling on the candidates to devote one of the three debates scheduled this fall exclusively to the debt and their specific plans to address it.

Key Upcoming Dates (all times ET)

May 15

• 2012 Fiscal Summit in Washington, DC, starting at 8:30 am. Speakers include former President Bill Clinton, House Speaker John Boehner, Treasury Secretary Tim Geithner, Sen. Rob Portman, Rep. Paul Ryan, Rep. Chris Van Hollen, former Sen. Alan Simpson and The Travelers Cos. Chairman and CEO Jay Fishman
• Senate Finance Committee hearing on what tax reform could mean for tribes and territories at 10 am.
• Senate Appropriations subcommittee mark-up of FY 2013 appropriations bill for Military Construction/Veterans Affairs at 11 am.
• Senate Appropriations subcommittee mark-up of FY 2013 appropriations for Homeland Security at 3:30 pm.
• Presidential contests in Nebraska and Oregon
• Dept. of Labor's Bureau of Labor Statistics releases April 2012 Consumer Price Index (CPI) data

May 16

• House Appropriations Committee mark-up of FY 2013 appropriations bills for Homeland Security and Military Construction/Veterans Affairs at 10 am.

May 17

• House Appropriations Committee mark-up of FY 2013 appropriations bills for Defense and State/Foreign Operations at 10 am.

May 22

• Presidential contests in Arkansas and Kentucky

May 29

• Presidential primary in Texas

May 31

• US Dept. of Commerce's Bureau of Economic Analysis releases its second estimate of 2012 first quarter GDP growth.

June 1

• Dept. of Labor's Bureau of Labor Statistics releases May 2012 employment data.

June 5

• Presidential contests in California, Montana, New Jersey, New Mexico, and South Dakota

June 14

• Dept. of Labor's Bureau of Labor Statistics releases May 2012 Consumer Price Index (CPI) data.

June 26

• Presidential primary in Utah

June 28

• US Dept. of Commerce's Bureau of Economic Analysis releases its third estimate of 2012 first quarter GDP growth.

Former Sen. Judd Gregg (R-NH) weighs in on the impact of "taxmaggedon" in The Hill today. While the tax increases would likely lead to more revenue, he said, the sudden rise of the payroll tax, expiration of the 2001/2003 tax cuts, and other tax increases could have a devastating impact on a still weak economy. Gregg explains:

The likely consequences are obvious. Such a massive increase in taxes will lead to a significant slowdown in the economy as investment and disposable income both drop dramatically.

People and businesses will have to retrench in order to deal with these higher taxes. This will result in less economic activity and potentially less revenue for the federal government. The opportunity to partly address deficit problems through economic growth will be lessened, and this will ensure that our deficits and debt situation will continue to grow and become even more of a drag on our prosperity and national culture.

Gregg makes a strong case regarding the negative short- and long-term economic consequences of the tax increases in current law. Importantly, though, extending current tax policy in its entirety would add $5 trillion to the debt relative to that scenario, which would contribute to a slowing of long-term growth or possibly even a fiscal crisis. As with the rest of the fiscal cliff, policymaker should be looking to replace the immediate expiration of all the tax cuts with a gradual plan which brings the debt under control. Indeed, comprehensive tax reform could reduce the deficit while lowering marginal tax rates by going after tax expenditures. 

The expiration of the tax cuts is just one part of the fiscal cliff, which also includes the $1.2 trillion sequester, the expiration of the doc fix, and the expiration of extended unemployment benefits. Taken together, we estimate the fiscal cliff would slow economic growth by about two percentage points over the next two years (the impact split roughly evenly between the tax increases and spending cuts). On the other hand, the debt accrued from continuing these policies will lower GDP by about one percent within ten years and much more beyond that. Any actions must therefore balance these dualing concerns by enacting a gradual and smart plan to stabilize the debt.

At Wonkblog, Suzy Khimm points to a study done by the Stimson Center that polled Americans about how large the defense budget should be. The study asked 665 participants about how much money they would assign to various parts of the defense budget after giving them context and arguments for and against cutting spending. Overall, the participants cut defense by an average of $104 billion (18 percent reduction) from 2012 to 2013 when they went area-by-area through the budget and by $127 billion (23 percent) when they picked an overall defense spending number. Khimm notes that these cuts are larger than even what the sequester calls for (which is a ten percent cut).

Our budget simulator may not be as exhaustive as the options presented in this study, but it does give us a good idea of where our users would be willing to trim costs. Granted, the baseline for defense spending has changed since those results were compiled, as the Budget Control Act has reduced defense through spending caps. Still, the results are informative about areas our users were willing to cut. In terms of defense, a majority of users picked five options from the defense portion of the simulator as well as the option to draw down troops in Afghanistan to 30,000 by 2013. The five options were:

• Cut weapons systems
• Cut foreign aid in half
• Cancel missile defense system
• Reduce ship buildings
• Decrease troop levels and reverse the Grow the Army initiative

These five options represent $330 billion in savings from 2011-2018. Adding in the war drawdown ups that number to close $1.4 trillion; however, the drawdown savings are likely to occur anyways as troops are already scheduled to be drawn down in Afghanistan in a similar manner.

These results are not scientific, but they are informative about what at least the users of our simulator supported cutting. See the full results of the simulator here and play our new simulator with updated defense options here.

Update: The House has passed the reconciliation and replacement bills by a 218-199 vote.

We have already talked about the House reconciliation bills that would replace the sequester that is set to hit on January 2 of next year. Now House Budget Committee ranking member Chris Van Hollen (D-MD) has offered his alternative to the replacement. The alternative leans more heavily on tax increases and limiting tax expenditures, rather than the spending cuts approach that the reconciliation bill contains.

The Van Hollen bill includes the elimination of direct payments for agriculture as its main spending cut. For revenue increases, it eliminates the domestic production activities deduction for oil and gas companies, prohibits their use of last-in, first-out (LIFO) inventory accounting, and modifies the way the foreign tax credit is calculated for oil and gas companies that are "dual capacity taxpayers" (ones that receive a specific economic benefit from another country). In addition, the proposal imposes the Buffett Rule and increase retirement contributions for Members of Congress.

CBO has scored the Van Hollen proposal as reducing deficits by $30 billion from 2013-2022, with $112 billion of savings being netted against the $82 billion cost of repealing the sequester for a year. However, CBO notes that once final appropriations are made for FY 2013, thus raising the amount of discretionary spending that gets cut, the cost of repealing the sequester will rise by about $25 billion.

The CBO score for the reconciliation bills and sequester replacement show deficit reduction of $238 billion over the same period, with $310 billion of savings being netted against $72 billion for repealing the sequester (it has a lower cost than the $84 billion in Van Hollen's bill because the House majority chooses to keep the sequester for mandatory spending). Once final appropriations are made, their cost of repealing will also rise by about $25 billion.

^{*Estimates assume enactment on October 1.
***Less than $500 million.
Note: Numbers may not add up due to rounding.}

It is good that both sides are putting forward alternatives to the sequester to put in place smarter and more gradual reforms. It is very important that all lawmakers start working toward a solution now so that there is time to reach an agreement.

However, one somewhat disturbing theme in the two bills is that both only cancel the sequester for 2013. This would simply continue the temporary extension mentality that has dominated fiscal policy for a long time. If the intent is to get rid of the sequester, it is better to come up with a plan to replace the many elements of the fiscal cliff permanently with a smart, gradual, and comprehensive debt reduction plan to control future debt.

Impasses and showdowns have become the norm over the past few years, and it is turning out to be no different with student loans. For background, in 2007, Congress passed a law that gradually reduced subsidized Stafford student loan rates to their current 3.4 percent interest rate. Since the provision was only temporary, that rate will rise to 6.8 percent on July 1. Both chambers have been working on bills to extend the 3.4 percent rate, and the difference--of course--is one of offsets. The House bill, which passed the chamber a few weeks ago, offsets the extension by eliminating the Prevention and Public Health Fund from the Affordable Care Act. The Senate bill, which fell short of the requisite 60 votes with a 52-45 vote, offsets the extension by closing a loophole that allows S corporation owners to avoid the Medicare payroll tax on their income.

However, our colleague Jason Delisle at the New America Foundation's Federal Education Budget Project points out a way to temporarily lower rates while also reducing the deficit, from CBO's Budget Options (Mandatory Spending Option 11): linking student loan rates to long-term Treasury rates.

The CBO has provided a cost estimate for a proposal that would link the interest rate on all newly-issued federal student loans—Subsidized and Unsubsidized Stafford, Graduate and Parent PLUS—to long-term U.S. Treasury borrowing rates.  (The CBO isn’t endorsing the proposal, just showing lawmakers how it would ‘score’.) Interest rates would still be fixed for the life of the loan, but the rate would change each year based on market rates for Treasury notes. The proposal sets the rate for newly issued loans based on the interest rate on 10-year Treasury notes at the time the loan is issued, and adds a premium of 3 percentage points to it.

That formula would make the rate on loans issued this fall fixed at 4.9 percent, a big drop from the current 6.8 percent rates. What’s more, that rate would be available to all undergraduate and graduate borrowers, unlike the proposal pending in Congress to provide lower rates for only some undergraduates. Of course, next year the rate could be higher or lower depending on what happens to interest rates in the market. The CBO assumes it will be higher. That’s where the deficit reduction (i.e. cost savings) come in.

If and when the interest rates on 10-year U.S. Treasury notes rise, the fixed interest rate on newly-issued student loans will also increase. Once rates on those securities rise above 3.8 percent – the rates are currently 1.9 percent – the interest rate on newly issued student loans will exceed 6.8 percent, the current fixed interest rate. Because CBO assumed that interest rates will rise in the future, it assumed that borrowers will pay higher rates in the future than under current law, reducing spending and the deficit. According to the estimate, this new rate structure would reduce the deficit by $52 billion over ten years.

Delisle notes that Treasury rates are lower than when CBO originally estimated the policy in March 2011, so the savings would likely be lower. Still, the idea remains the same. As borrowing rates stay low, so will the Stafford rates relative to where they are scheduled to be; when they rise, so will the loan rates. Also, this system would provide more certainty than either the temporary system that both bills would keep in place or a variable rate structure for student loans, where rates would be reset each year. Delisle's proposal certainly is an interesting idea worth considering to break the impasse over student loan rates.

A Galaxy Far, Far Away – Friday was Stars Wars Day, the annual observance of the popular movie series that plays on the date, as in May the Fourth (be with you). The franchise seems as strong as ever, having survived Jar Jar Binks and returning to the big screen again; this time in 3-D glory. The classic battle between good and evil portrayed in the films is timeless and offers many lessons for us today. Not only do the films illustrate how political dysfunction can destroy a great republic, they also portray how even the most entrenched and powerful forces can be overcome against all odds. With the national debt currently on course to reach unprecedented levels, getting back to a sustainable path may seem to be as far away as Tatooine, but if Ewoks can take out Storm Troopers, then putting in place a comprehensive fiscal plan is doable.

May the Forced Cuts Be with You…or Not – The House and Senate are both back from recess this week. The House has immediately resumed its work to alter the spending cuts that will automatically kick in at the beginning of 2013 due to the failure of the Super Committee to forge a deal. House Republicans are pushing a “reconciliation” package that will replace $78 billion of the cuts set for 2013 with $260 billion in savings over ten years. The House legislation would replace scheduled cuts in defense programs with reductions in other areas, such as food stamps, Medicaid, and the health care reform law. The House Budget Committee marked up the package on Monday and a floor vote is set for Thursday. As usual, the party lines drawn over the bill will resemble those between Jedi and Sith. Democrats on the Budget Committee expressed their opposition to the replacements in a paper and the Senate is not expected to act on the measure if it does pass the House.

Fiscal Death Star Awaits – The House reconciliation bill will serve as a marker for House Republicans in negotiations expected in a lame duck session of Congress after the elections, when lawmakers will have to grapple with the sequester, the expiration of tax cuts, and a great many other matters occurring at the same time. How Washington handles what Federal Reserve chair Ben Bernanke describes as the “fiscal cliff” will significantly affect the economy and the debt trajectory. The cliff needs to be exchanged for a smart, comprehensive plan to reduce the debt. See more on the fiscal cliff here, here and here.

Appropriations Turns Away from Dark Side…Slightly – While lawmakers still must contend with a plethora of issues at the end of the year, such as the fiscal cliff described above and the likely need for another debt ceiling increase, one thing legislators may not have to fret over is a government shutdown. While House Republicans still support a topline spending level below the $1.047 cap specified for fiscal year 2013 in the Budget Control Act and adopted by the Senate, the House reconciliation bill includes language effectively agreeing to that level through the end of the calendar year, meaning that lawmakers should be able to agree to a stopgap continuing resolution that funds the federal government into January of 2013. However, hoping that this signifies some sort of thaw in the partisan budget fights is akin to expecting spring to arrive on the ice planet of Hoth. Spending fights are still expected next year and the budget process is still in desperate need of reform.

No More E-Vader-ing the Debt – The general election campaign for the White House is formally underway. Much of the Republican Party is rallying behind former Massachusetts Governor Mitt Romney and President Obama kicked off his campaign with rallies in Ohio and Virginia over the weekend. Recent polling indicates an extremely tight race between the two. How can voters differentiate between the two candidates and get an idea of how they would govern? Make the candidates debate the debt! A debt debate would showcase the candidates’ differing approaches to the federal budget and national priorities. Most polls show deficits/debt to be the second most important issue to voters behind the economy/jobs, yet it has been the Phantom Menace, with little substantive discussion. Devoting one of the three scheduled presidential debates for this fall exclusively to the topic and requiring the candidates to present detailed plans at the debate would advance the constructive discussion that this country needs on the debt challenge and how to address it. Just like Luke Skywalker had to confront Darth Vader, candidates seeking to lead us must address the national debt head on. To learn more and sign a petition calling on the candidates to debate the debt, visit http://debatethedebt.org/.

Be a Budget Jedi – Addressing the debt in a smart way that takes into account economic concerns requires the wisdom of Yoda. Think you got what it takes? Then try your hand at the newest version of our federal budget simulator. We recently updated the numbers and added several new options based on ideas currently being floated. We also released the results based on the choices users have made. These results show that when Americans get a better understanding of the depth of the problem, they are willing to make hard decisions to reduce the debt. The “median plan” based on the options that received majority support among those users who voluntarily submitted their results shows the way for a grand compromise. Among the surprising findings is that several Social Security reform options to strengthen the vital program’s finances received majority support, along with allowing at least some of the 2001/2003 tax cuts to expire.

Key Upcoming Dates (all times ET)

May 8

• Presidential contests in Indiana, North Carolina, and West Virginia
• House votes on FY 2013 spending bill for Commerce, Justice, Science and related programs
• House Appropriations subcommittees mark-up FY 2013 spending bills for Defense and Military Construction & Veteran's Affairs
• Conference committee on the surface transportation reauthorization bill meets at 3 pm.

May 9

• House Appropriations subcommittees mark up FY 2013 Homeland Security and State Dept. and foreign affairs spending bills.

May 10

• House floor vote on the Sequester Replacement Act.

May 15

• Presidential contests in Nebraska and Oregon
• Dept. of Labor's Bureau of Labor Statistics releases April 2012 Consumer Price Index (CPI) data.

May 22

• Presidential contests in Arkansas and Kentucky

May 29

• Presidential primary in Texas

May 31

• US Dept. of Commerce's Bureau of Economic Analysis releases its second estimate of 2012 first quarter GDP growth.

June 1

• Dept. of Labor's Bureau of Labor Statistics releases May 2012 employment data.

June 5

• Presidential contests in California, Montana, New Jersey, New Mexico, and South Dakota

June 14

• Dept. of Labor's Bureau of Labor Statistics releases May 2012 Consumer Price Index (CPI) data.

June 26

• Presidential primary in Utah

June 28

• US Dept. of Commerce's Bureau of Economic Analysis releases its third estimate of 2012 first quarter GDP growth.

The non-partisan Congressional Budget Office (CBO) doesn't make recommendations for, or against, any fiscal plan, but that doesn't mean they can't help others do so. To that end, CBO director Doug Elmendorf recently suggested six criteria with which to evaluate the many plans out there. Of course, these criteria are not necessarily co-equal, but each are important. They are:

• Magnitude of Changes: Simply put, this criterion is about hitting a certain debt target, usually as defined by the debt-to-GDP ratio. Elmendorf states that "policymakers will need to make judgments about how much federal debt is acceptable" and choose a baseline to work off of. Moving from the clearly unsustainable "Alternative Fiscal Scenario"--in which current tax and spending policies are maintained--to current law would require $8 trillion of savings, but lawmakers could target a more modest goal of stabilizing debt to GDP or a more aggressive goal of getting debt back to its approximate average in recent decades of 40 percent of GDP. Whatever the goal, they will need to have enough deficit reduction to get there.
• Specificity: We have long extolled the virtues of being as specific as possible with budget plans, and the CBO director agrees, at least for the purposes of being able to evaluate the plan. Beyond that, he reiterates the announcement effect idea that "credible policy changes that would substantially reduce deficits later in the coming decade and beyond could boost the economic expansion in the next few years by holding down interest rates and increasing people's confidence in the nation's long-term economic prospects." Being specific is one of the key aspects to policy changes being credible in the eyes of the public.
• Amount and Composition of Federal Spending: Assuming that revenue will have to be kept roughly in line with spending (or at least close), a fiscal plan must make a decision about how large government is and what its priorities are as reflected in spending. Elmendorf notes that Social Security and health care programs are automatically set to rise in the coming decades due to demographic shifts and health care cost increases, but policymakers must decide how much of that increase they will tolerate when weighed against spending on the rest of the budget, or whether they will simply allow spending to rise as a percent of GDP. (We would add that politicians should also be concerned about the composition of the tax code -- how much it spends on tax expenditures, and to what end.)
• Short-Term Economic Impact: Considering the current economic environment, Elmendorf notes that policymakers must be careful with the timing of deficit reduction policies. He notes that these policies would be a drag on the economy in the short term through their effects on aggregate demand, but also that waiting too long to implement deficit reduction would result in higher debt. Still, in another nod to the announcement effect, he says, "despite those trade-offs, however, I am not aware of any benefit to delaying decisions about future changes in tax and spending policies. Indeed, as I noted above, credible policy changes that put the debt on a sustainable long-term path could boost the economy in the near term." Well said, Doug.
• Longer-Term Economic Impact: Policymakers should also consider the effects on the economy over the longer-term. Unlike with the short term, this criterion is more about the composition of policies rather than the timing. Reducing deficits, all else equal, will increase national savings and investment and thus grow the size of the nation's capital stock. But the composition of policy changes could boost or dampen the effect on long-term growth. For example, rate-reducing tax reform or an increase in the retirement age could encourage more work and investment, while raising tax rates or cutting infrastructure spending could partially mute the positive economic effects of deficit reduction.
• Distributional Effects: The policy composition of a fiscal plan determines who bears the burden of tax and spending changes. Elmendorf points out that this entails not only looking at the direct effects of policy changes, but also the indirect effects via the economy and its consequences for different people. Distributional analysis is most often associated with effects on people with different incomes, but could also be done by occupation, family/marriage status, or other distinctions that are relevant for policymakers.

Director Elmendorf's six criteria serve as a very useful checklist in evaluating the many fiscal plans that are floating around in the current debate. Check out our interactive comparison grid and apply the criteria yourself.

At an event at the University of Rochester's Simon School yesterday, JPMorgan Chase CEO Jamie Dimon made a direct call for the Simpson-Bowles recommendations. Dimon stated that the debt challenges facing the United States are "the opposite of Europe" because we see the crisis coming and know how to solve it. He pointed to Simpson-Bowles is the answer, but that right now our elected official don't have the political courage to make it happen.

Dimon is just one of a few prominent people to recently endorse the plan. Former Federal Reserve chairman Alan Greenspan called it an "ideal vehicle" for deficit reduction because it would start the country on the right path of taking large chucks out of deficits and debt, even if it didn't turn out to be the full solution, while offering an opportunity for compromise. He also said that President Obama should have embraced the plan immediately. General Electric CEO Jeffrey Immelt has also made high supportive statement about the Simpson-Bowles plan in recent weeks and months, citing how we need to take a hard look at every part of the budget and need to start thinking about where there's bipartisan support.

As the topic of tax reform will be heating up this year, five analysts from the Brookings Institution's Hamilton Project have released a paper called "A Dozen Economic Facts About Tax Reform." It is certainly a useful primer on how the tax system has changed over time and the promise and difficulties involved in changing it.

Those dozen facts are:

1. America collects lower revenue than other industrialized countries.
2. Tax expenditures represent a large share of total government spending.
3. The tax code subsidizes some activities and penalizes others.
4. The tax system has become less progressive over time.
5. Virtually all American families, even low-income families, pay taxes.
6. There is a limit to what tax reform can accomplish.
7. Individuals and the economy will feel every approach to tax reform.
8. The benefits from tax expenditures are not equally shared.
9. Cutting individual income tax rates would modestly increase the earnings of the typical American family while substantially increasing the federal budget deficit.
10. Deficit-financed tax cuts do not spur economic growth in the long run.
11. Corporate tax reform can improve U.S. competitiveness in several different ways—but not necessarily all at once.
12. Addressing the deficit will require policy solutions equal to the size of the problem.

First, the paper provides context by showing how the size of our revenue compares to other countries and how the system has changed over time. It also talks about the size of tax expenditures in the context of the federal budget (spoiler alert: they're huge). Interestingly, they quantify what the top marginal tax rate could be if different reform options were taken with different revenue targets. For example, converting the mortgage interest deduction to a 15 percent credit, eliminating the state and local tax deduction, and capping the value of the health care exclusion would allow the top to be lowered from 39.6 percent to 38 percent while increasing revenue by $100 billion in 2015.

The paper is accompanied by an event this morning with multiple all-star panels, including former Treasury secretary Lawrence Summers, former CBO and OMB director (and CRFB board member) Alice Rivlin, and former Council of Economic Advisers chair Martin Feldstein. You can watch the event on C-SPAN here and read the paper here.