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Stabilize the US Debt

Your goal is to achieve 60% of GDP by 2018

Current Choices

Possible Choices

your adjusted Debt

sixty percent

Zero Percent

$

Dollars in Billions that you need to cut to get under 60% of the GDP by 2018

The Debt will reach 60% of GDP in XXXX.

Under the current scenario, the debt will not reach 60% of GDP by 2030.

Stabilize the Debt: An Online Exercise in Hard Choices NEXT

It’s no secret that America’s finances are a mess. So, what can be done about it? The problem has been mounting for a long time and it cannot be fixed overnight, but we need to start addressing it now.

The debt of the United States is rising to unprecedented – and unsustainable – levels. According to the Peterson-Pew Commission on Budget Reform, under reasonable assumptions, the public debt of the U.S. is projected to grow to 85% of GDP by 2018, 100% by 2022, and 200% in 2038. No country can support debt at these levels without huge costs to its standard of living at a minimum and most likely a severe crisis.

Drastic action now would threaten the already fragile economic recovery. But failing to convince markets and creditors that the U.S. is serious about reducing its debt in the longer term would cause interest rates to rise dramatically and likely trigger a fiscal crisis.

We need to establish a fiscal goal and commit as a nation to achieving it. The Peterson-Pew Commission recommends a goal of stabilizing the debt at 60% of GDP by 2018 in the report, Red Ink Rising. We must set an ambitious, yet attainable, goal that Americans can support. See more about the reasoning behind this goal on the FAQ page.

This simulation was designed to illustrate the tough budget choices that will have to be made and to promote a public dialogue on how we can set a sustainable fiscal course. How do your choices stack up? Good luck.

YOUR CHALLENGE:
Stabilize the U.S. Debt at 60% of GDP by 2018.
To begin the simulation, click the “Next” button above. There are 8 categories where your choices will affect the debt. Negative numbers next to a choice indicate how much the debt will be reduced, positive numbers add to the debt. Use the “Next” and “Back” buttons to navigate to each section; do not use your browser’s navigation arrows. Click the “Done” button when finished making all the choices you want. The bar graph on the right will chart how your choices affect the debt-to-GDP ratio relative to the 60% goal. Visit the FAQ page for more on how the game works.

For more information on any choice simply click the icon to the left of that choice.
MORE INFORMATION:
NEXT
Choose Budget Path NEXT BACK

The federal budget is more than numbers; it’s about setting national priorities. Before moving to discrete budget choices, you must choose a starting point by making decisions on the broader policy issues below that cannot be avoided. The starting path you choose will greatly impact the budget, and our society. All numbers represent cumulative changes in debt and include interest. Numbers in red add to the debt and blue numbers decrease it.
CLICK ANY OPTION TO SEE MORE INFORMATION
- Iraq and Afghanistan
  Reduce Troops to 60,000 by 2015-$350B
- Reduce Troops to 30,000 by 2013-$740B
- Maintain Current Funding Levels$0
- 2001/2003 Tax Cuts
  Renew All the Tax Cuts$3,280B
- Renew the Tax Cuts on Income Below $250k/200k$2,590B
- Reduce Lower Rate Cuts by Half and Let Upper-Income Cuts Expire$2,060B
- Allow All the Tax Cuts, Except for AMT Patches, to Expire$480B
- Discretionary Spending Growth
  Grow Regular Discretionary Spending with GDP$1,290B
- Adopt the Discretionary Spending Growth Rates in the President's Budget$680B
- Grow Regular Discretionary Spending with Inflation$0
Iraq and Afghanistan:

There are three broad policy choices that you must make before proceeding to the larger set of options. These determine your starting budget path. This option establishes what you would choose to do about troop levels for the conflicts in Iraq and Afghanistan. Only one of these options may be chosen.

Reduce Troops to 60,000 by 2015

Under this option, the number of U.S. troops in Iraq and Afghanistan would fall gradually over the next five years. Troop levels in these two countries were about 235,000 in 2010. Troop levels would decrease to 195,000 in 2012, 80,000 in 2014, and 60,000 in 2015 and beyond on this path.

Reduce Troops to 30,000 by 2013

Under this option, the number of U.S. troops in Iraq and Afghanistan would fall sharply over the next three years. Troop levels in these two countries were about 235,000 in 2010. Troop levels would decrease to 150,000 in 2011, 65,000 in 2012, and 30,000 in 2013 and beyond on this path.

Maintain Current Funding Levels

Under this option, the wars in Iraq and Afghanistan will continue to be funded at 2010 levels -- $130 billion plus inflation adjustments – for the next two decades.

2001/2003 Tax Cuts:

There are three broad policy choices that you must make before proceeding to the larger set of options. These determine your starting budget path. This option establishes what you would choose to do about the tax cuts enacted in 2001 and in 2003, which are set to expire at the end of 2010. Only one of these options may be chosen.

Renew All the Tax Cuts

This option would renew the 2001 and 2003 tax changes, scheduled to expire after 2010. These changes include lower tax rates across the board, reduced capital gains and dividends rates; fewer marriage penalties; and doubling of the child tax credit; and other changes. This option would also permanently index the AMT to prevent it from reaching middle-earners.

Renew the Tax Cuts On Income Below $250k/200k

This option would allow the 2001/2003 tax provisions to expire for the highest income taxpayers – those with incomes over $250,000 (joint filers) and $200,000 (individuals), but would renew those affecting all other taxpayers. The two highest individual income tax rates would rise from 33 percent to 36 percent and 35 percent to 39.6 percent in 2010. This option would also re-instate limitations on itemized deductions and personal exemptions and impose a 20 percent tax rate on capital gains and dividends for these taxpayers. This option would also permanently index the AMT to prevent it from reaching middle-earners.

Reduce Lower Rate Cuts by Half and Let Upper-income Cuts Expire

This option would allow the 2001/2003 tax provisions to expire for the highest income taxpayers – those with incomes over $250,000 (joint filers) and $200,000 (individuals). For all other taxpayers, their tax rate would be reset at midway between current rates and the rate that would have resulted if the 2001/2003 provisions were allowed to fully expire. For example, the lowest tax rate is now 10 percent, and would become 15 percent at expiration. Under this option the lowest rate would be reset at 12.5 percent. This option would also permanently index the AMT to prevent it from reaching middle-earners.

Allow All the Tax Cuts, Except for AMT Patches, to Expire

Under this option, all of the tax cuts passed in 2001 and 2003 would be allowed to expire at the end of 2010, but the government would continue to “patch” the Alternative Minimum Tax (AMT) to prevent it from hitting middle-class families. The expiring provisions would include lower income tax rates, an expanded child tax credit, a new 10 percent tax bracket, lower capital gains rates, and marriage penalty relief.

Discretionary Spending Growth

There are three broad policy choices that you must make before proceeding to the larger set of options. These determine your starting budget path. This option establishes what assumption you would make about the future growth of discretionary spending. Only one of these options may be chosen.

Grow Regular Discretionary Spending with GDP

Discretionary spending is controlled by annual appropriation acts; policymakers decide each year how much money to provide for given activities, such as spending on defense and education. This option would allow base discretionary programs to grow as a constant share of the economy – as it has done in the past. From this starting point, you can decide whether to increase or decrease specific pieces of the discretionary budget.

Adopt the Discretionary Spending Growth Rates In the President's Budget

Discretionary spending is controlled by annual appropriation acts; policymakers decide each year how much money to provide for given activities, such as spending on defense and education. Under the President’s budget, non-security spending would be frozen for three years, while security spending would continue to grow at 2 to 3 percent to per year. From this starting point, you can decide whether to increase or decrease specific pieces of the discretionary budget.

Grow Regular Discretionary Spending with Inflation

Discretionary spending is controlled by annual appropriation acts; policymakers decide each year how much money to provide for given activities, such as spending on defense and education. Discretionary spending has historically grown faster than inflation. This option would limit base discretionary growth to inflation. As a result, discretionary spending would decline as a share of the economy. From this starting point, you can decide whether to increase or decrease specific pieces of the discretionary budget.
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Defense, Diplomacy & Security DONE NEXT BACK

The government spends a significant portion of its budget on defense, security, and foreign relations. Many of the programs in these categories are vital to keeping America safe and maintaining global leadership. A balance must be struck between national security and fiscal responsibility. All numbers represent cumulative changes in debt and include interest. Numbers in red add to the debt and blue numbers decrease it.
CLICK ANY OPTION TO SEE MORE INFORMATION
- Enact Administration's Proposed Weapon System Cuts-$30B
- Foreign Aid
  Cut Foreign Economic Aid in Half-$110B
- Increase Foreign Economic Aid by 50%$110B
- Veterans' Benefits
  Reduce Veteran's Income Security Benefits-$50B
- Expand Veteran's Income Security Benefits$30B
- Cancel Missile Defense System-$50B
- Reduce Spending on Ship Building-$50B
- Increase Homeland Security Spending$50B
- Troop Levels
  Increase Number of Troops by 46,000$70B
- Reverse "Grow the Army" Initiative-$90B
Enact Administration's Proposed Weapon System Cuts

This option would implement all the defense cuts recommended in the President’s FY2011 budget: the C–17 Transport Aircraft Production, Joint Strike Fighter Alternate Engine, Navy’s Next Generation Cruiser, EP-X Manned Airborne Intelligence, Surveillance, and Reconnaissance Aircraft, Net Enabled Command Capability, and Third Generation Infrared Surveillance Program programs would all be cancelled.

Foreign Aid

Here you may make a choice between two options about whether you think more or less should be spent on U.S. aid to other countries. You may also choose not to make either choice.

Cut Foreign Economic Aid in Half

Critics of foreign aid believe we already spend too much of our own resources trying to help other countries, and that these funds have not delivered the economic benefits promised. Currently, we spend about $28 billion a year on foreign economic aid. This option would gradually cut that amount in half.

Increase Foreign Economic Aid by 50 Percent

Proponents of foreign aid argue that the United States should spend more than it currently does to help countries around the world build successful economies and avoid future military conflicts. We currently spend less than one percent of our GDP on foreign aid, which is consistently among the lowest spending among OECD countries. This option would increase foreign economic aid by 50 percent, or by about $14 billion in the first year

Veterans' Benefits'

Veterans of the military receive a variety of benefits not available to other members of the population. These include pensions, medical, housing, and education benefits, to name just a few. Here you may make a choice between two options about whether you think more or less should be spent on the total annual amount spent on Veterans’ benefits related to income security – that is, compensation, pensions, and life insurance programs. You may also choose not make either choice.

Reduce Veteran's Income Security Benefits

Some veterans are currently eligible for medical benefits, though their disabilities are not related to military service. Additionally, these veterans’ incomes are above a means-tested threshold. Choosing this option would close enrollment for certain veterans and un-enroll others. It would additionally reduce veterans’ disability compensation to account for Social Security disability insurance payments they also receive.

Expand Veteran's Income Security Benefits

Since January 2003, the Veteran’s Administration has accepted no new enrollments of veterans who have no service-connected disability and whose incomes are above certain geographically adjusted thresholds. This option would re-open enrollments for this group. The VA estimates that there are 10 million veterans who are currently not enrolled for benefits, but who would be eligible under this option.

Cancel Missile Defense System

Critics have questioned the rationale behind missile defense, arguing that they needlessly provoke other countries, and that such programs have been plagued by cost overruns and technological problems. Others disagree, arguing that with other countries increasing their long-range missile capabilities, such a defense system is an absolute necessity. This option would end funding to develop a missile defense system.

Reduce Spending on Ship Building

During the years of the Reagan Administration’s military buildup, the Navy paid about $1.2 billion (in 2009 dollars) for each new ship. Now, the Congressional Budget Office estimates that the average ship costs $2.7 billion. In recent years, the average ship cost has increased due to improved capabilities, material costs growing faster than inflation, and greater overhead costs with fewer ship purchases. This option would force the cost of ship-building to increase only with the rate of inflation.

Increase Homeland Security Spending

This option would increase funding for the Department of Homeland Security funding by 10%. Proponents argue that this is necessary in order to secure our borders and combat terrorism. Critics worry it would leave the country vulnerable in certain areas, and that spending on things such as the border fence between the U.S. and Mexico or the Coast Guard’s Deepwater program have been ineffective and are an inefficient use of resources.

Troop Levels

Here you may make a choice between two options about whether you think total Army troop levels should be larger. One option implements a phased in increase in levels, and the second option would halt an increase in troop levels that is already underway. You may also choose not make either choice. This option is related to, but not the same as the choice made about troop levels in Iraq and Afghanistan.

Increase Number of Troops by 46,000

Many experts have argued that on-going troop deployment worldwide has left the military stretched thin. To address this strain and prepare us for any new potential conflicts, this option would increase the total number of new Army troops over the next five years by 46,000 troops, in addition to continuing the Grow the Army” initiative described next.

Reverse "Grow the Army" Initiative

In 2007, the Army announced “Grow the Army,” initiative that would add 65,000 active personnel (increasing from 482,400 to 547,400) and 9,200 reservists (increasing from 555,000 to 564,200) by 2011. This option would reverse the initiative and have the service return to 482,400 active and 555,000 reserve soldiers.
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Domestic Social & Economic Spending DONE NEXT BACK

The recession has reminded us of the importance of an adequate safety net, but has also significantly worsened our debt situation. Decisions must be made as to the best way to keep the economy strong. It may also be time to rethink the appropriate role of government in providing for education, welfare, and other social spending. All numbers represent cumulative changes in debt and include interest. Numbers in red add to the debt and blue numbers decrease it.
CLICK ANY OPTION TO SEE MORE INFORMATION
- Cancel Unobligated ARRA Funds *UPDATED*-$190B
- Enact New Jobs Bill *UPDATED*$100B
- Highway Funding *NEW*
  Decrease Highway Funding by 25%-$200B
- Increase highway Funding by 25%$200B
- Freeze Average Unemployment Benefits at 2009 Levels-$50B
- Cut Temporary Assistance to Needy Families (TANF) Program-$50B
- Cut Federal Funding of K-12 Education by 25%-$60B
- Eliminate the New Markets Tax Credit -$40B
- Cut School Breakfast Programs-$30B
- Double Funding on Adoption and Foster Care$70B
- Increase Funding for the Education of Disadvantaged and Disabled Children$290B
Cancel Unobligated ARRA Funds

The American Recovery and Reinvestment Act (ARRA) was enacted in February 2009 in order to stimulate the economy through a combination of tax cuts, direct government investment, aid to states, and relief for lower income individuals. A significant portion of the approved funds, however, have not yet been made available or been committed to specific projects. This option would cancel all currently unobligated stimulus spending and direct all the savings to deficit reduction.

Enact New Jobs Bill

With the unemployment rate still hovering around 10 percent, many people are clamoring for another stimulus to accelerate the recovery believed to be under way. This option would provide an additional stimulus package of $75 billion next year.

Highway Funding

Here you may make a choice between two options about whether you think surface transportation funding should be cut back or increased. You may also choose not make either choice.

Decrease Highway Funding by 25%

The federal government makes grants to states for highway and many other surface transportation projects. Many of these highway grants are funded by the Highway Trust Fund, which collects revenues mostly from the federal gas tax. This option would decrease federal surface transportation funding by 25%.

Increase Highway Funding by 25%

The federal government makes grants to states for highway and many other surface transportation projects. Many of these highway grants are funded by the Highway Trust Fund, which collects revenues mostly from the federal gas tax. This option would increase federal surface transportation funding by 25%.

Freeze Average Unemployment Benefits at 2009 Levels

Average benefits are currently at about $300/month. In the wake of the recent recession, unemployment benefits have played a much bigger role in income security than in years past. Although this benefit would not impact the number of weeks individuals could collect benefits, it would freeze average benefit levels.

Cut Temporary Assistance to Needy Families (TANF) Program

The TANF program currently costs about $17 billion a year. Typically referred to as “welfare,” and formerly called Aid to Families with Dependent Children (AFDC), TANF provides support for needy families, and is distributed to states in the form of a block grant. It is intended as temporary support, with the goal being for families to become economically self-sufficient. This option would gradually cut funding for TANF in half.

Cut Federal Funding of K-12 Education by 25%

Federal spending on K-12 education will be about $38 billion in 2010. This option would gradually reduce this piece of the budget, cutting the federal share 25 percent by 2015. States would thus become more responsible for funding K-12 education.

Eliminate the New Markets Tax Credit

The New Markets Tax Credit (NMTC) allows taxpayers to receive a 39 percent credit against their income tax for any qualified equity investments made in “Community Development Entities.” The intent of the credit is to spur development in low-income communities. This option would eliminate the credit.

Cut School Breakfast Programs

The federal government provides money to states so that they can operate nonprofit breakfast programs in schools and residential childcare. Choosing this option would reduce that funding for breakfast programs. School lunch programs would remain as they are.

Double Funding on Adoption and Foster Care

The federal government current funds states to help them place children with families, with additional money going to states placing special needs children. Funds are split roughly evenly between the foster and adoption programs. This option would double annual funding for these two programs, increasing funding by nearly $10 billion a year.

Increase Funding for the Education of Disadvantaged and Disabled Children

The federal government provides grants to states for educating students with disabilities. In FY 2009 those grants provided about $1,370 per child (excluding additional stimulus funds). This option would increase that average to $4,200. This option would also increase grants to help disadvantaged children who are underachieving academically. In FY 2009 those grants were $14.3 billion (excluding stimulus funds), but this option would increase that amount to $25 billion.
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Social Security DONE NEXT BACK

Social Security is the single largest government program, and it’s on an unsustainable path. The combination of increasing life expectancy and the retirement of the “baby boom” population threatens to push its costs well above its dedicated revenue sources. The longer we wait to address this shortfall, the worse it will get. All numbers represent cumulative changes in debt and include interest. Numbers in red add to the debt and blue numbers decrease it.
CLICK ANY OPTION TO SEE MORE INFORMATION
- Raise the Normal Retirement Age to 68-$110B
- Slow Initial Benefit Growth
  Gradually Reduce Scheduled Benefits (by 30% in 2080)-$100B
- Progressively Reduce Benefits, Protecting Low Earners-$80B
- Progressively Reduce Benefits, Protecting Low and Medium Earners-$60B
- Use An Alternate Measure of Inflation for COLA-$100B
- Reduce Spousal Benefits from 50% to 33%-$20B
- Increase Years Used to Calculate Benefits -$40B
- Include all New State and Local Workers-$80B
- Institute a Minimum Benefit$130B
Raise the Normal Retirement Age to 68

Currently, the retirement age is 66, and it is scheduled to gradually increase to 67 starting in 2017. This option would begin to increase the retirement age to 67 immediately and would additionally increase it by two months per year until it reaches 68, instead of stopping at 67. Increasing the age even further would provide savings in later years.

Slow Initial Benefit Growth

Here you may choose one of three options for slowing the growth of benefit payments, compared to estimated growth. The first option would implement phased in benefit reductions for all beneficiaries. The other two options are considered “progressive”, meaning they include protections against reduced benefits for those at certain income levels. You may also choose not make any choice.

Gradually Reduce Scheduled Benefits (by 30% in 2080)

Currently, initial Social Security benefits are determined in a way that allows them to grow with economy-wide wage growth. This option would instead “price index” all benefits. Since prices generally grow more slowly than wages, this option will gradually slow the growth of Social Security benefits, leading them to be about 30 percent lower than currently projected by 2080.

Progressively Reduce Benefits, Protecting Low Earners

Currently, initial Social Security benefits are determined in a way that allows them to grow with economy-wide wage growth. This option would institute what is known as progressive price indexing. Workers below the 30th percentile would have their benefits adjusted for wage inflation as they are currently, top earners would have their benefits adjusted only with prices, and benefits for those in between would be determined through a hybrid formula.

Progressively Reduce Benefits, Protecting Low and Medium Earners

Currently, initial Social Security benefits are determined in a way that allows them to grow with economy-wide wage growth. This option would institute what is known as progressive price indexing. Workers below the 60th percentile would have their benefits adjusted for wage inflation as they are currently, top earners would have their benefits adjusted only with prices, and benefits for those in between would be determined through a hybrid formula.

Use An Alternate Measure of Inflation for COLAs

Every year, Social Security recipients receive a “Cost of Living Adjustment (COLA) so benefits keep pace with inflation. Many believe that the indexing formula, the consumer price index (CPI), overstates inflation. This option would compute the COLA using something called the “chained CPI,” which is believed to offer a more accurate measure of inflation. This new computation is estimated to result in an annual COLA that is 0.3 percent less, on average.

Reduce Spousal Benefits from 50% to 33%

Under current law, retirees receive the higher of benefits calculated from their own earnings, or 50 percent of their spouse’s benefits. This can create inequities whereby a dual-earner family would receive lower benefits than single-earner family making the same income. This option would aim to correct that inequity by reducing spousal benefits from 50 percent of the primary earner’s to 33 percent.

Increase Years Used to Calculate Benefits

Currently, Social Security benefits are calculated based upon a retiree’s 35 highest years of earnings. This option would increase the number of years to 40 by 2018. For workers with less than 40 years of earnings, “zero earnings years” will count in their average.

Include All New State and Local Workers

Under current law, some state and local government employees are not required to pay into the Social Security. This option would require all state and local workers to contribute to the Social Security program. This would only apply to employees hired in 2010 and beyond, not to current state and local government workers.

Institute a Minimum Benefit

This option would change benefit calculations such that a worker with 30 years of earnings at the minimum wage level would receive a minimum retirement benefit of 120 percent of the Federal poverty level. This provision would take full effect for all newly eligible workers in 2026, and would be phased in for new eligible workers in 2017 through 2025.
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Health Care DONE NEXT BACK
Despite the passage of health care reform, Medicare and Medicaid will continue to grow at an unsustainable pace. These two programs, more than any other area of the budget, threaten to break the bank. Meanwhile, private health care costs also continue to grow, and 23 million people are projected to remain uninsured after the reform bill is fully implemented. All numbers represent cumulative changes in debt and include interest. Numbers in red add to the debt and blue numbers decrease it.
CLICK ANY OPTION TO SEE MORE INFORMATION
- Modify Health Care Reform Law
  Expand Coverage to an Additional 5 Million People$130B
- Reduce Insurance Subsidies by 20%-$160B
- Repeal Entire Legislation$160B
- Repeal Legislation, but Keep Medicare/Medicaid Cuts-$260B
- Increase Cost-Sharing for Medicare-$100B
- Raise Medicare Premiums to 35% of Costs-$140B
- Institute a Public Option *NEW*-$40B
- Enact Medical Malpractice Reform-$50B
- Increase the Medicare Retirement Age to 67-$80B
- Replace Traditional Medicare with Insurance Vouchers-$120B
- Modify Federal Medicaid Funding to States
  
  Reduce Funding Removing Floor on Matches-$130B
- Increase Average Matches from 57% to 60%$140B
Modify Health Care Reform Law

This option allows you to make modifications to the recently passed health care legislation. Some options expand coverage – costing money, and some restrict coverage – saving money, compared to estimates of effects of the existing law. You may make only one out of four possible choices. You may also choose not to make any modifications to the legislation.

Expand Coverage to an Additional 5 Million People

Under the recently passed health care bill, coverage will be expanded to an additional 32 million at a cost of $940 billion over ten years. This option would increase the number of additional people covered by 5 million to 37 million.

Reduce Insurance Subsidies by 20%

The recently passed health care bill provides subsidies for individuals to purchase health insurance. People with income of more than 133 percent of the Federal Poverty Level but less than 400 percent are eligible for the insurance subsidies. This option would cut the amount of the subsidies by 20 percent.

Repeal Entire Legislation

This option would repeal the recently-passed health care reform legislation in its entirety. Not only would this option repeal the costly coverage provisions, but it would also get rid of the spending cuts and tax increases in the legislation. As a result, this repeal would have the effect of increasing projected debt levels.

Repeal Legislation, but Keep Medicare/Medicaid Cuts

This option would repeal the coverage provisions and tax increases in the recently-passed health care reform legislation. However, the spending cuts in the bill would be preserved. Instead of being used to finance the expansion of insurance coverage, these savings would be used to help reduce the debt.

Increase Cost-Sharing for Medicare

Currently, the Medicare program’s cost sharing formula depends greatly on the type of service performed, whether it is in a hospital, outpatient care, or other services. This option would make the cost sharing uniform for all services provided by Medicare Parts A and B, making the deductible and coinsurance rate uniform, and providing an annual cap on cost-sharing liability. Additionally, this option would restrict the ability of Medigap policies to cover cost sharing.

Raise Medicare Premiums to 35% of Costs

Under current law, the Medicare Part B premium is set so that it will cover 25 percent of the program’s cost for most seniors, resulting in premiums of about $100 a month. This option would gradually increase all premiums so that they cover 35 percent of the program’s costs by 2014.

Institute a Public Option

This option would create a public health care option through the health insurance exchanges to be established in the year 2014. The Congressional Budget Office estimates that it would reduce deficits by roughly $68 billion through 2020.

Enact Medical Malpractice Reform

This option would cap awards of noneconomic damages at $250,000, awards of punitive damages at $500,000, and a statute of limitations of one year for claims brought by adults, and at three years for those brought on behalf of children. These limitations would reduce the cost of medical malpractice insurance, and the practice of “defensive medicine.” The result would be lower costs for Medicare, Medicaid, and private insurance.

Increase the Medicare Retirement Age to 67

Currently, the age at which people qualify for benefits is 65, the same age it has been since the program was enacted in 1965. This option would increase the retirement age by two months every year from 2014 until 2025, when it would reach 67. The argument for this increase is that life expectancy has increased since 1965, so the retirement age should reflect that; in fact, Social Security’s retirement age is already scheduled to increase to 67.

Modify Federal Medicaid Funding to States

This option allows you to make only one of two choices about changing Medicaid funding. One option increases federal funding to states, and the other restricts it. You may also choose not to modify current Medicaid funding levels.

Reduce Funding Removing Floor on Matches

Under current law, the Federal government pays a large portion of Medicaid costs, averaging about 57 percent. The exact federal contribution is a complex formula, but cannot drop below 50 percent. This option would gradually remove that floor, requiring some states to take on additional costs, or else reform their programs to avoid them.

Increase Average Matches from 57% to 60%

Under current law, the Federal government pays 57 percent of Medicaid costs, on average. Because many state governments are facing serious fiscal problems, this option would increase federal Medicaid funding – by 3 percentage points on average.

Replace Traditional Medicare with Insurance Vouchers

This option would replace the current Medicare program with a voucher program. Those eligible for the program would receive a voucher valued, for example, at the average per person cost of Medicare in their region of the country. To save money, these vouchers would grow at a slower rate than Medicare.
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Other Spending DONE NEXT BACK

NASA missions, farm subsidies, earmarks – what should be done with these and other programs? Should we reduce farm subsidies? Should we increase R & D spending? These choices won’t be easy, every cut will hurt someone, and every increase will worsen the debt. All numbers represent cumulative changes in debt and include interest. Numbers in red add to the debt and blue numbers decrease it.
CLICK ANY OPTION TO SEE MORE INFORMATION
- Eliminate Certain Outdated Programs-$40B
- Two Year Freeze of Federal Civilian Pay *NEW*-$50B
- Introduce Minimum Out-of-Pocket Expenses and Federal Cost Sharing for TRICARE for Life *NEW*-$40B
- Reform Federal Retiree Benefits *NEW*-$30B
- Cancel NASA Missions to the Moon and Mars-$40B
- Reduce Farm Subsidies-$80B
- Expand Spending on Federal Research & Development$100B
- Cut All Earmarks and Use Half of Savings for Deficit Reduction-$80B
- Increase Mass Transit Funding$60B
Eliminate Certain Outdated Programs

This option would implement all of the non-defense and non-NASA terminations recommended in the “Terminations, Reductions, and Savings” section of the President’s FY2011 budget. A list of these recommended terminations is available here.

Two Year Freeze of Federal Civilian Pay

Some argue that the public sector has been unjustly immune from the layoffs and pay increases that have recently become widespread in the private sector, resulting in both wages and wage growth for federal civilian employees outpacing those for private sector workers. This option would halt pay increases for nonmilitary federal employees for two years.

Introduce Minimum Out-of-Pocket Expenses and Federal Cost Sharing for TRICARE for Life

TRICARE for Life (TFL) currently acts as a supplement to Medicare for military retirees, covering nearly all costs not covered by Medicare and requiring few out-of-pocket expenses. This option would introduce minimum levels of fees for beneficiaries, while also increasing cost sharing for military retirees who are not yet eligible for Medicare by raising enrollment fees, copayments and deductibles under TRICARE.

Reform Federal Retiree Benefits

Currently, pensions for federal civilian retirees are calculated based on the average of an employee's highest three consecutive years. This option would increase this formula to include five years and make several other changes to how federal retiree benefits are calculated, including basing COLAs for federal civilian and military retirees on an alternative measure of inflation (the chained CPI-U), increasing federal employee's contributions to pension plans, and reducing benefits under the Federal Employees Compensation Act.

Cancel NASA Missions to the Moon and Mars

Instead of replacing the space shuttle and furthering our exploration of outer space under the Constellation program, this option would bring an end to plans for further visits to the moon and to Mars. Critics of the space program say current efforts to return to the moon and eventually Mars are way over budget. Supporters say the space program provides valuable jobs, and that the country benefits in hard to measure ways be continuing space exploration.

Reduce Farm Subsidies

This option would prohibit new enrollments in the Conservation Stewardship Program, prohibit reenrollments in the Conservation Reserve Program, reduce crop insurance subsidies paid to crop insurance providers, and eliminate crop subsidies for farmers. A separate agriculture-oriented option allows the choice to eliminate federal subsidies for biofuels.

Expand Spending on Federal Research & Development

In 2009 the federal government spent an estimated $147 billion on research and development (R&D) across all agencies (not R&D including spending under the American Recovery and Reinvestment Act). For example, the Agriculture Department conducts R&D on various ways to create biofuels, the Defense Department explores new types of weapons systems, and the Energy Department spends R&D money on nuclear and fossil fuel technologies. This option would broadly increase R&D spending by $10 billion each year.

Cut All Earmarks and Use Half of Savings for Deficit Reduction

The term earmark is commonly associated with what people generally believe is wasteful federal spending that gets directed towards lawmakers’ pet projects and home states or districts outside of the normal legislative and budget process. This year, the government spent about $15 billion in earmarked money. This option eliminates all earmarks and dedicates half of the savings to deficit reduction. Since it is likely that at least some earmarks fund useful and productive programs, the programs would have to be financed through the appropriations process.

Increase Mass Transit Funding

Increasing federal funding for new bus and rail projects would cost about $51 billion over ten years. Mass transit is argued to be the most cost-efficient way to reduce congestion, but most of the benefits flow to people who live and work in cities. Included would also be an additional $500 million per year for Amtrak subsidies.

DONE NEXT BACK
Revenues DONE NEXT BACK
Taxes are the price we pay for the government we want. Yet we currently raise far less in taxes than we spend each year. Without sufficiently large spending cuts, stabilizing the debt will require raising existing taxes, implementing new taxes, or both. All numbers represent cumulative changes in debt and include interest.
CLICK ANY OPTION TO SEE MORE INFORMATION
- Increase User Fees Across the Board-$40B
- Sell Certain Government Assets-$70B
- Impose Financial Crisis Responsibility Fee-$80B
- Reform International Tax System-$120B
- Enact Carbon Tax or Cap-and-Trade-$330B
- Increase Gas Tax by 10 Cents per Gallon-$80B
- Enact 5% VAT With Partial Rebate-$630B
- Gradually Increase Dependent Exemption by $3,500$190B
- Impose Surtax on Income Above $1 Million-$190B
- Gradually Increase Payroll Tax by One Percentage Point-$130B
- Raise Social Security Payroll Tax Cap
  Raise Cap to Cover 90% of Earnings-$420B
- Institute Two Percent Surtax on Earnings Above Cap-$190B
- Reduce Corporate Tax Rate from 35% to 30%$390B
- Index Tax Code to Alternate Measure of Inflation-$80B
- Improve Tax Collection (Reduce Tax Gap)-$20B
Increase User Fees Across the Board

The federal government charges user fees for many things to help defray the costs of things like increased security at airports, or for access to national parks. This option would simply increase all federal user fees, and would be phased in to eventually collect $5 billion more each year than is currently the case.

Sell Certain Government Assets

The government currently owns over $2.7 trillion in assets. Under this option, the government would sell a small portion of these, including portions of the Tennessee Valley Authority, the Southeastern Power Administration, excess operating inventory and materials, and about a third of the oil in the strategic petroleum reserve.

Impose Financial Crisis Responsibility Fee

This option would require the largest financial firms (over $50 billion in assets) to pay a fee to compensate taxpayers for the use of the Troubled Asset Relief Program (TARP). The amount of the fee would be based on the firm’s size and its debt.

Reform International Tax System

This option would implement a number of proposals to reform how foreign income and income earned-abroad by U.S. citizens and companies is taxed, among other things. It would also attempt to capture taxes owed by those who hold money in off-shore tax haven countries.

Enact Carbon Tax or Cap-and-Trade

There are generally two types of energy taxes in today’s discourse – a direct tax based on carbon or a “cap and trade” regime. A carbon tax would impose a fee based on the estimated amount of emissions released into the air. A cap and trade solution sets a maximum on the amount of carbon allowed to be emitted, and then allow companies to buy and sell these pollution permits on an open market. If the government auctions – rather than freely distributes – initial permits, this regime would simulate a tax. The Congressional Budget Office estimates that either version could raise over $100 billion a year.

Increase Gas Tax by 10 Cents per Gallon

The current Federal gas tax is 18.4 cents per gallon, and the revenues from the tax are put into the Highway Trust Fund. This option would increase the Federal gas tax by 10 cents to 28.4 cents per gallon. Proponents of the increase argue that it will reduce consumption of gas and consequently reduce carbon emissions. Opponents say federal gas taxes are already too high and would disproportionately impact working-class Americans and certain industries.

Enact 5% VAT With Partial Rebate

This option would create a five percent national sales tax, or VAT, on all goods and services. This particular estimate of VAT revenues assumes that education spending, rent, housing, and religious and charitable services would be excluded. It would be phased in slowly beginning in 2012, and part of it would be rebated back to taxpayers or else used to cut other taxes.

Gradually Increase Dependent Exemption by $3,500

Currently a taxpayer is allowed an automatic tax exemption for him or herself, as well as additional exemption for a spouse and each additional dependent. The exemption is currently a bit above $3,500 for each dependent, and is indexed to inflation. This option would gradually increase the per-dependent exemption to $7,000.

Impose Surtax on Income Above $1 Million

This option would impose a five percent surtax on income above $1 million. Currently, all income earned above $1 million is taxed at a marginal rate of 35 percent. If the 2001/2003 tax cuts expire, this rate will increase to 39.6 percent. The surtax would make the top rate 40 percent now, and 44.6 percent with the expiration of the 2001/2003 tax cuts.

Gradually Increase Payroll Tax by One Percentage Point

This option would gradually increase the Social Security payroll tax from its current rate of 12.4 percent (split equally between employers and employees) to 13.4 percent.

Raise Social Security Payroll Tax Cap

This option allows you to make only one of two choices about changing the cap on the amount of income subject to payroll taxes that fund Social Security. Both options would increase cap levels, increasing Social Security revenues. You may also choose not to modify current cap levels.

Raise Cap to Cover 90% of Earnings

In 2009, earnings up to $106,800 were subject to the Social Security payroll tax and that amount increases annually by the average wage growth. Originally, in 1937, about 92 percent of all earnings were subject to the tax and by 2007 it was only about 80 percent. This option would raise the percentage to 90 percent, about $200,000 in today’s terms.

Institute Two Percent Surtax on Earnings Above Cap

In 2009, earnings above $106,800 were exempt from the Social Security payroll tax. The exemption amount is indexed annually for average wage growth. Although this option would not increase that cap, it would impose a two percent surtax on earnings above this cap.

Reduce Corporate Tax Rate from 35% to 30%

Many experts have complained that corporate tax rates are too high in the United States, as compared with other countries. This option would reduce the top rate to 30 percent, from 35 percent under current law.

Index Tax Code to Alternate Measure of Inflation

This option would use the chained measure of inflation instead of the standard measure to adjust various portions of the tax code for inflation. CBO estimates that the chained measure is likely to grow 0.3 percentage points more slowly than the standard measure over the next decade, so applying the chained measure would increase the amount of income subject to taxation and result in higher tax revenues over time. Proponents of this option argue that using the current measure overstates inflation.

Improve Tax Collection (Reduce Tax Gap)

It is popular to propose closing the “tax gap” as a way to bring in more revenue. The tax gap is an estimate of how much in federal taxes due goes uncollected in any given year. Some estimates put the amount as high as $350 to $400 billion per year. This option would implement a number of proposals in the President’s FY2011 budget to begin to collect more of these taxes.
DONE NEXT BACK
Tax Expenditures DONE BACK

The tax code is filled with hundreds of deductions, credits, exclusions, exemptions, and other forms of “spending through the tax code.” Although some of these tax expenditures serve important social and economic needs, many are costly, distorting, and regressive. Reducing tax expenditures may be a preferable alternative to increasing marginal tax rates. All numbers represent cumulative changes in debt and include interest.
CLICK ANY OPTION TO SEE MORE INFORMATION
- Tax Fringe Benefits as Regular Income *NEW*-$70B
- Limit Mortgage Interest and Other Itemized Deductions for High Earners-$250B
- Curtail State and Local Tax Deduction-$470B
- Eliminate Life Insurance Tax Benefits-$220B
- Eliminate Subsidies for Biofuels-$110B
- Make Research & Development Tax Credit Permanent$80B
- Extend $400/person Making Work Pay Credit$400B
- Tax Credits for Children and Families
  
  Cut the Earned Income Tax Credit (EITC)-$70B
- Expand the EITC and Child Tax Credit$90B
- Extend "American Opportunity" College Tax Credit$60B
- Tax Treatment of Employer Sponsored Health Insurance
  
  Begin Excise Tax on High-Cost Plans in 2013 Instead of 2018-$110B
- Repeal Excise Tax on High-Cost Plans$10B
- Replace Employer Health Care Exclusion with a Flat Credit (In Place of Excise Tax)-$340B
Tax Fringe Benefits as Regular Income

Currently, certain "fringe benefits" can be provided to employees on a tax-free basis. These include discounts, free services, meals, and holiday gifts, to name a few. This option would tax these benefits as if they were wage income.

Limit Mortgage Interest and Other Itemized Deductions for High Earners

Among other complaints, opponents of tax expenditures complain they go largely to high earners, since they pay higher marginal rates and therefore gain more from reducing their taxable income. Under this option, there would be a cap on the amount upper-income taxpayers (individuals making over $200,000 and families making over $250,000) could receive from these tax credits. The total value of these credits could not exceed 28 percent of these taxpayer’s incomes. Supporters of reducing the mortgage interest deduction claim that it also distorts the housing market.

Curtail State and Local Tax Deduction

Currently, taxpayers may deduct their state and local income or sales tax payments from their federal income tax. This option would reduce the total amount allowed under this deduction. Some supporters of elimination or reduction of this deduction claim that the deduction mainly benefits wealthy localities that provide more services and, consequently, pay more taxes.

Eliminate Life Insurance Tax Benefits

Under current law, life insurance benefits received upon the death of an insured person are exempt from taxation. This option would make these benefits subject to the individual income tax.

Eliminate Subsidies for Biofuels

Companies that produce biofuels, almost exclusively those producing corn ethanol, receive subsidies to make sure that production costs are competitive with those of fossil fuels. A recent federal mandate to gradually increase the use of biofuels will expand the cost of this credit that has reached approximately $6 billion per year. This option would eliminate subsidies for biofuel production.

Make Research & Development Tax Credit Permanent

Currently, businesses can take a nonrefundable tax credit for 20 percent of research expenses above a certain amount. The credit is temporary though, so it has been extended numerous times since its enactment thirty years ago. This option would make the R&D tax credit permanent.

Extend $400/person Making Work Pay Credit

One of the centerpieces of President’s Obama stimulus (the American Recovery and Reinvestment Act) is the Making Work Pay (MWP) credit. The MWP credit is a refundable credit that provides up to $400 for single workers and $800 for married couples. The credit is only available in 2009 and 2010 though. This option would make the MWP credit permanent.

Tax Credits for Children and Families

This option allows you to choose between expanding and reducing tax credits that primarily benefit lower-income families. The Earned Income Tax Credit goes only to families with incomes below a certain threshold; the Child Tax Credit is available to all families with children, but begins to be reduced for families above certain income levels. You may also choose not to make either of these choices.

Cut the Earned Income Tax Credit (EITC)

The EITC was created in 1975 as a way to offset payroll taxes for low-income workers with children. It has since been expanded to include some workers who do not have children. It is currently one of the largest refundable tax credits in the tax code, and one of the largest income support programs as well. This option would reduce the EITC.

Expand the EITC and Child Tax Credit

This option would make permanent certain temporary expansions of these two tax credits. For EITC it makes permanent marriage penalty relief by raising the phase-out levels of the credit for married couples, and increased benefit levels for families with three or more children made in recent stimulus measures. For CTC it makes the $3,000 refundability threshold permanent and eliminates indexing, which allows the program to benefit more people and increase over time.

Extend "American Opportunity" College Tax Credit

The American Opportunity Tax Credit (AOTC) was created in the American Recovery and Reinvestment Act (ARRA) as a way to help students pay for college. It provides a $4,000 refundable credit to students in exchange for 100 hours of community service at a non-profit organization. The credit was only made available for 2009 and 2010. This option would make the AOTC permanent.

Tax Treatment of Employer Sponsored Health Insurance

This option allows you to choose one from among three options affecting the tax treatment of these benefits, which gives a tax credit to employers for providing employees with health benefits. These options relate to the recently passed health care bill – two of them would raise more revenue than under the current law, and one would cost money compared to estimates of the current law. You may also choose not to make any of these changes to current law.

Begin Excise Tax on High-Cost Plans in 2013 Instead of 2018

To offset the effects of the employer health care exclusion, the recently-passed health care legislation would tax high-cost insurance plans beginning in 2018. Originally, the tax was supposed to begin in 2013. This option would move that tax back up to its original date of 2013. Supporters of the excise tax argue that it will reduce health care spending by encouraging enrollees to pick a lower cost health insurance plan than they otherwise would.

Repeal Excise Tax on High-Cost Plans

Under the new health care bill an excise tax on high-cost insurance plans would begin in 2018. This option would repeal that provision.

Replace Employer Health Care Exclusion with a Flat Credit (In Place of Excise Tax)

Under current law, employer-provided health insurance is not counted as taxable income for the employees who receive the benefits, although an excise tax on high cost plans is scheduled to begin in 2018. In place of an excise tax this option would repeal the employer provided health insurance exclusion altogether and replace it with a flat refundable tax credit. The tax credit would grow with economic (GDP) growth.
DONE BACK
Your Results: Stabilize the Debt BACK

You failed to reduce the debt to a sustainable level. Without further changes, a fiscal crisis is likely to occur.

You reduced the debt to 60 percent of GDP, but not until . Hopefully, you will have done enough to avert a fiscal crisis.

You reduced the debt to % of GDP in 2018. The debt grows to % of the GDP by 2030. Further changes will be required.

You reduced the debt to % of GDP in 2018, and kept it at a sustainable level through 2030.
Where did my savings come from
Budget Path

Defense

Domestic

Social Security

Healthcare

Other Spending

Revenues

Tax Expenditures

-1,50001,500

Savings in Billions
Revenue

Spending

-3,00003,000

Savings in Billions (excluding choices made in Budget Path)
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All Possible Choices: Stabilize the Debt CLOSE

Choose your Path
Iraq and Afghanistan
Reduce Troops to 60,000 by 2015
-$350B
Reduce Troops to 30,000 by 2013
-$740B
Maintain Current Funding Levels
$0
2001/2003 Tax Cuts
Renew All the Tax Cuts
$3,280B
Renew the Tax Cuts on Income Below $250k/200k
$2,590B
Reduce Lower Rate Cuts by Half and Let Upper-Income Cuts Expire
$2,060B
Allow All the Tax Cuts, Except for AMT Patches, to Expire
$480B
Discretionary Spending Growth
Grow Regular Discretionary Spending with GDP
$1,290B
Adopt the Discretionary Spending Growth Rates in the President's Budget
$680B
Grow Regular Discretionary Spending with Inflation
$0
Defense, Diplomacy & Security
Enact Administration's Proposed Weapon System Cuts
-$30B
Foreign Aid
Cut Foreign Economic Aid in Half
-$110B
Increase Foreign Economic Aid by 50%
$110B
Veterans' Benefits
Reduce Veteran's Income Security Benefits
-$50B
Expand Veteran's Income Security Benefits
$30B
Cancel Missile Defense System
-$50B
Reduce Spending on Ship Building
$50B
Troop Levels
Increase Number of troops by 46,000
$70B
Reverse "Grow the Army" Initiative
-$90B
Domestic Social & Economic Spending
Cancel Unobligated ARRA Funds
-$190B
Enact New Jobs Bill
$100B
Highway Funding
Decrease Highway Funding by 25%
-$200B
Increase Highway Funding by 25%
$200B
Freeze Average Unemployment Benefits at 2009 Levels
-$50B
Cut Temporary Assistance to Needy Families (TANF) Program
-$50B
Cut Federal Funding of K-12 Education by 25%
-$60B
Eliminate the New Markets Tax Credit
-$40B
Cut School Breakfast Programs
-$30B
Double Funding on Adoption and Foster Care
$70B
Increase Funding for the Education of Disadvantaged and Disabled Children
$290B
Social Security
Raise the Normal Retirement Age to 68
-$110B
Slow Initial Benefit Growth
Gradually Reduce Scheduled Benefits (by 30% in 2080)
-$100B
Progressively Reduce Benefits, Protecting Low Earners
-$80B
Progressively Reduce Benefits, Protecting Low and Medium Earners
-$60B
Use An Alternate Measure of Inflation for COLAs
-$100B
Reduce Spousal Benefits from 50% to 33%
-$20B
Increase Years Used to Calculate Benefits
-$40B
Include all New State and Local Workers
-$80B
Institute a Minimum Benefit
$130B

Health Care
Modify Health Care Reform Law
Expand Coverage to an Additional 5 Million People
$130B
Reduce Insurance Subsidies by 20%
-$160B
Repeal Entire Legislation
$160B
Repeal Legislation, but Keep Medicare/Medicaid Cuts
-$260B
Increase Cost-Sharing for Medicare
-$100B
Raise Medicare Premiums to 35% of Costs
-$140B
Institute a Public Option
-$40B
Enact Medical Malpractice Reform
-$50B
Increase the Medicare Retirement Age to 67
-$80B
Replace Traditional Medicare with Insurance Vouchers
-$120B
Modify Federal Medicaid Funding to States
Reduce Funding Removing Floor on Matches
-$130B
Increase Average Matches from 57% to 60%
$140B
Other Spending
Eliminate Certain Outdated Programs
-$40B
Two Year Freeze of Federal Civilian Pay
-$50B
Introduce Minimum Out-of-Pocket Expenses and Federal Cost Sharing for TRICARE for Life
-$40B
Reform Federal Retiree Benefits
-$30B
Cancel NASA Missions to the Moon and Mars
-$40B
Reduce Farm Subsidies
-$80B
Expand Spending on Federal Research & Development
$100
Cut All Earmarks and Use Half of Savings for Deficit Reduction
-$80B
Increase Mass Transit Funding
$60B
Revenues
Increase User Fees Across the Board
-$40B
Sell Certain Government Assets
-$70B
Impose Financial Crisis Responsibility Fee
-$80B
Reform International Tax System
-$120B
Enact Carbon Tax or Cap-and-Trade
-$330B
Increase Gas Tax by 10 Cents per Gallon
-$80B
Enact Five percent VAT With Partial Rebate
-$630B
Gradually Increase Dependent Exemption by $3,500
$190B
Impose Surtax on Income above $1 million
-$190B
Gradually Increase Payroll Tax by One Percentage Point
-$130B
Raise Social Security Payroll Tax Cap
Raise Cap to Cover 90% of Earnings
-$420B
Institute Two Percent Surtax on Earnings Above Cap
-$190B
Reduce Corporate Tax Rate from 35% to 30%
$390B
Index Tax Code to Alternate Measure of Inflation
-$80B
Improve Tax Collection (Reduce Tax Gap)
-$20B
Tax Expenditures
Tax Fringe Benefits as Regular Income
-$70B
Limit Mortgage Interest and Other Itemized Deductions for High Earners
-$250B
Curtail State and Local Tax Deduction
-$470B
Eliminate Life Insurance Tax Benefits
-$220B
Eliminate Subsidies for Biofuels
-$110B
Make Research & Development Tax Credit Permanent
$80B
Extend $400/person Making Work Pay Credit
$400B
Cut the Earned Income Tax Credit (EITC)
-$70B
Expand the EITC and Child Tax Credit
$90B
Extend "American Opportunity" College Tax Credit
$60B
Tax Treatment of Employer Sponsored Health Insurance
Begin Excise Tax on High-Cost Plans in 2013 Instead of 2018
-$110B
Repeal Excise Tax on High-Cost Plans
$10B
Replace Employer Health Care Exclusion with a Flat Credit (In Place of Excise Tax)
-$340B

Current Choices: Stabilize the Debt CLOSE

Choose your Path
Iraq and Afghanistan
- Reduce Troops to 60,000 by 2015
  -$350B
- Reduce Troops to 30,000 by 2013
  -$740B
- Maintain Current Funding Levels
  $0
2001/2003 Tax Cuts
- Renew All the Tax Cuts
  $3,280B
- Renew the Tax Cuts on Income Below $250k/200k
  $2,590B
- Reduce Lower Rate Cuts by Half and Let Upper-Income Cuts Expire
  $2,060B
- Allow All the Tax Cuts, Except for AMT Patches, to Expire
  $480B
Discretionary Spending Growth
- Grow Regular Discretionary Spending with GDP
  $1,290B
- Adopt the Discretionary Spending Growth Rates in the President's Budget
  $680B
- Grow Regular Discretionary Spending with Inflation
  $0
Defense, Diplomacy & Security
Enact Administration's Proposed Weapon System Cuts
-$30B
Foreign Aid
- Cut Foreign Economic Aid in Half
  -$110B
- Increase Foreign Economic Aid by 50%
  $110B
Veterans' Benefits
- Reduce Veteran's Income Security Benefits
  -$50B
- Expand Veteran's Income Security Benefits
  $30B
Cancel Missile Defense System
-$50B
Reduce Spending on Ship Building
-$50B
Increase Homeland Security Spending
$50B
Troop Levels
- Increase Number of troops by 46,000
  $70B
- Reverse "Grow the Army" Initiative
  -$90B
Domestic Social & Economic Spending
Cancel Unobligated ARRA Funds
-$190B
Enact New Jobs Bill
$100B
Highway Funding
- Decrease Highway Funding by 25%
  -$200B
- Increase Highway Funding by 25%
  $200B
Freeze Average Unemployment Benefits at 2009 Levels
-$50B
Cut Temporary Assistance to Needy Families (TANF) Program
-$50B
Cut Federal Funding of K-12 Education by 25%
-$60B
Eliminate the New Markets Tax Credit
-$40B
Cut School Breakfast Programs
-$30B
Double Funding on Adoption and Foster Care
$70B
Increase Funding for the Education of Disadvantaged and Disabled Children
$290B
Social Security
Raise the Normal Retirement Age to 68
-$110B
Slow Initial Benefit Growth
- Gradually Reduce Scheduled Benefits (by 30% in 2080)
  -$100B
- Progressively Reduce Benefits, Protecting Low Earners
  -$80B
- Progressively Reduce Benefits, Protecting Low and Medium Earners
  -$60B
Use An Alternate Measure of Inflation for COLAs
-$100B
Reduce Spousal Benefits from 50% to 33%
-$20B
Increase Years Used to Calculate Benefits
-$40B
Include all New State and Local Workers
-$80B
Institute a Minimum Benefit
$130B

Health Care
Modify Health Care Reform Law
- Expand Coverage to an Additional 5 Million People
  $130B
- Reduce Insurance Subsidies by 20%
  -$160B
- Repeal Entire Legislation
  $160B
- Repeal Legislation, but Keep Medicare/Medicaid Cuts
  -$260B
Increase Cost-Sharing for Medicare
-$100B
Raise Medicare Premiums to 35% of Costs
-$140B
Institute a Public Option
-$40B
Enact Medical Malpractice Reform
-$50B
Increase the Medicare Retirement Age to 67
-$80B
Replace Traditional Medicare with Insurance Vouchers
-$120B
Modify Federal Medicaid Funding to States
- Reduce Funding Removing Floor on Matches
  -$130B
- Increase Average Matches from 57% to 60%
  $140B
Other Spending
Eliminate Certain Outdated Programs
-$40B
Two Year Freeze of Federal Civilian Pay
-$50B
Introduce Minimum Out-of-Pocket Expenses and Federal Cost Sharing for TRICARE for Life
-$40B
Reform Federal Retiree Benefits
-$30B
Cancel NASA Missions to the Moon and Mars
-$40B
Reduce Farm Subsidies
-$80B
Expand Spending on Federal Research & Development
$100
Cut All Earmarks and Use Half of Savings for Deficit Reduction
-$80B
Increase Mass Transit Funding
$60B
Revenues
Increase User Fees Across the Board
-$40B
Sell Certain Government Assets
-$70B
Impose Financial Crisis Responsibility Fee
-$80B
Reform International Tax System
-$120B
Enact Carbon Tax or Cap-and-Trade
-$330B
Increase Gas Tax by 10 Cents per Gallon
-$80B
Enact Five Percent VAT With Partial Rebate
-$630B
Gradually Increase Dependent Exemption by $3,500
$190B
Impose Surtax on Income above $1 million
-$190B
Gradually Increase Payroll Tax by One Percentage Point
-$130B
Raise Social Security Payroll Tax Cap
- Raise Cap to Cover 90% of Earnings
  -$420B
- Institute Two Percent Surtax on Earnings Above Cap
  -$190B
Reduce Corporate Tax Rate from 35% to 30%
$390B
Index Tax Code to Alternate Measure of Inflation
-$80B
Improve Tax Collection (Reduce Tax Gap)
-$20B
Tax Expenditures
Tax Fringe Benefits as Regular Income
-$70B
Limit Mortgage Interest and Other Itemized Deductions for High Earners
-$250B
Curtail State and Local Tax Deduction
-$470B
Eliminate Life Insurance Tax Benefits
-$220B
Eliminate Subsidies for Biofuels
-$110B
Make Research & Development Tax Credit Permanent
$80B
Extend $400/person Making Work Pay Credit
$400B
Tax Credits for Children and Families
- Cut the Earned Income Tax Credit (EITC)
  -$70B
- Expand the EITC and Child Tax Credit
  $90B
Extend "American Opportunity" College Tax Credit
$60B
Tax Treatment of Employer Sponsored Health Insurance
- Begin Excise Tax on High-Cost Plans in 2013 Instead of 2018
  -$110B
- Repeal Excise Tax on High-Cost Plans
  $10B
- Replace Employer Health Care Exclusion with a Flat Credit (In Place of Excise Tax)
  -$340B

FAQ: Frequently Asked Questions CLOSE

Q: Where do the data for the options come from?
The large majority of data originate from official Congressional Budget Office or Office of Management and Budget estimates – primarily CBO’s Budget Options publication, and the President’s budget, published by OMB; to a lesser degree, some data come from the Joint Committee on Taxation. Data also come from CBO estimates of legislative proposals not included in Budget Options. Finally, in a small number of cases, data are from non-governmental sources that have proven credible. For example, our savings for cutting earmarks is a conservative number based on estimates made by Taxpayers for Common Sense and Citizens Against Government Waste.

Q: How does debt affect the federal budget?
As with personal credit cards or mortgages, the government cannot borrow for free and must pay interest. Who does the government pay interest to? Interest payments, now at 6 percent of the budget, will grow to 15 percent by 2018, squeezing out other budgetary priorities. Every dollar spent on interest is a dollar that might be spent on research, education, or tax cuts.

Government borrowing also affects the cost of individual borrowing. Our creditors have traditionally seen the United States and its debt as a secure investment. But as concerns about our fiscal stability grow, investors may not want to buy more U.S. debt. The U.S. Treasury will then have to raise interest rates on U.S. bonds to attract the funds we need, further increasing the interest burden on the budget.

Q: What’s the different between the debt and the deficit?
The deficit is the difference between revenue and spending in a given fiscal year. The debt is the amount owed to creditors who have financed the government’s borrowing, and represents the accumulation over time of that borrowing, plus interest.

Q: We have heard about government debt and deficits for years. Why is now different?
In fiscal year 2009, the United States had the highest one-year deficit as a share of the economy since the years shortly after World War II. While the debt usually goes up in times of war and economic downturns, it typically shrinks back down once the national crisis is over. But this time, we face the prospect of ever-growing government debt. Under reasonable assumptions about what Congress and the President are likely to do, the public debt will grow steadily as a share of the economy, reaching 85 percent by 2018, 100 percent by 2022, and 200 percent in 2038. (The average since World War II is below 50 percent).

Q: Why a debt to GDP ratio?
Debt as a percentage of GDP, rather than a specific dollar amount goal, measures the economic capacity of a nation to afford its national debt. If the economy saw tremendous growth, a set dollar goal would be easily met by the increased government revenue that would result from economic growth and would represent a smaller drain on the economy. In contrast, debt as a percentage of GDP accounts for economic growth and decline and measures our ability to maintain a debt-to-income ratio at some specific level, or within some range.

Q: Won’t cutting the debt now hurt the economy?
We recognize the impact that cutting our debt too quickly could hurt the economic recovery. Our plan recommends waiting to implement the policy changes until 2012. Making aggressive changes any earlier could harm the economy, particularly when unemployment is expected to remain high and the economy is expected to remain below its potential.

But if we wait too long, we will leave the country reliant on excessively high borrowing for too long. So far, the United States has been able to borrow at a lower rate and without too much trouble. But if the markets or our creditors get nervous about our debt, that could change abruptly—and are more likely to do so if no debt plan is put in place.

Q: Do you track the budget choices I make?
The choices you make are not automatically tracked by us. Only by filling in the demographic information and clicking the "Submit" button on the final Results page do you provide the Committee for a Respsonsible Federal Budget with your budget choices. The user is not required to submit this information, but we hope you will as it will provide us with important data in determining preferences and trends among the public. CRFB will provide analysis of aggregated data that will be useful to policymakers and others in determining what types of budget policies the public may or may not support. CRFB will not provide individual information to anyone. Those who complete the simulation through the special Dallas Morning News link and choose to submit their data will also have their choices analyzed by Dallas Morning News staff and may be contacted by a DMN reporter.

Q: Who is responsible for this simulator?
The Stabilize the Debt budget simulator is presented by the Committee for a Responsible Federal Budget, a nonpartisan, nonprofit organization dedicated to educating the public on federal budget and fiscal issues and promoting fiscal responsibility in Washington. CRFB is a partner in the Peterson-Pew Commission on Budget Reform. We are grateful to Ripple Communications and TrestleMedia for their work in developing the simulator.

Q: What is the purpose of the simulator?
To stimulate an informed debate on the fiscal direction of the country and what can be done to improve it. We all have our thoughts on how to reduce the debt. How do your choices stack up?

METHODOLOGY: About the Simulator CLOSE

The Stabilize the Debt simulator was designed to illustrate how budget choices affect debt held by the public in the medium and long term. The numbers in this simulation measure the cumulative change in debt from 2010-2018. The simulator also calculates whether the debt will remain stable through 2030.

To construct our list of options, we reviewed proposals and suggestions from a number of groups in and outside of government. Many of our cost and savings estimates are based on the Congressional Budget Office's (CBO) "Budget Options" reports, and other CBO documents. For Social Security options, we relied on short- and long-term projections from the Office of the Chief Actuary of the Social Security Administration. Other estimates came from the Office of Management and Budget, the Joint Committee on Taxation, several outside groups, and our own calculations.

Generally speaking, we assumed that most policies would phase in over time, and have little or no effect before 2012. Since most non-Social Security options are only formally estimated over a ten year period, we used our own calculations to extrapolate their effects in the second decade. In most cases, this meant assuming past growth rates would continue. When there were specific reasons to believe these trends would not continue, our extrapolations differed.

To convert from deficit impact to cumulative debt impact, we calculated the interest effects of each policy change, and then calculated cumulative deficit and interest costs. Although our calculations were done in consultation with experts, any budget estimates are inherently uncertain -- depending not only on the exact nature of the policy, but also on the economic situation and on behavior responses to policy which may be difficult to predict. Beyond the ten year budget window, this uncertainty increases.

This simulation does not employ dynamic scoring in calculating its figures. Many of the options, individually or together, may significantly impact economic growth, such as tax cuts or investments in infrastructure and research and development. However, given the uncertainty in magnitude of these effects, we adopt the standard scoring convention which assumes that policy changes will not lead to changes in macroeconomic variables. As there is no standard for applying dynamic scoring, we follow common budgeting procedure as practiced by organizations like CBO.

LEARN: About the Federal Budget CLOSE

This budget simulation does not attempt to encompass all aspects of the federal budget process, which is long and complicated. What this simulation does is allow users to make decisions about what their budget priorities would be among the available choices, given the constraint of attempting to achieve a 60% debt-to-GDP ratio. This brief summary gives users a general idea of the federal budget process.∗

Federal agencies begin preparing formal budget proposals for the next fiscal year almost a year before actual submission. Those proposals are submitted to the President via the Office of Management and Budget. Then, in February, after much back and forth between federal agencies and OMB, the President submits a comprehensive budget to Congress. The budget consists of estimates of spending, revenues, borrowing, and debt; policy and legislative recommendations; detailed estimates of the financial operations of federal agencies and programs; data on the actual and projected performance of the economy; and other information supporting the President’s recommendations.

The Congressional Budget Act of 1974 (CBA) established procedures for Congress to adopt its own budget framework, or budget resolution, to guide subsequent spending and tax bills. The framework is effectively a joint rule of Congress, and hence does not have the force of law and is not binding on the executive branch. The President’s budget generally does influence the Congressional budget, but the extent of that influence depends on the political climate and fiscal condition of the country at the time.

Typically, during March, the House and Senate Budget Committees mark up and report to their respective bodies a budget plan in the form of a concurrent resolution on the budget. This budget resolution is drafted using the President’s budget request, information from the Budget Committees’ own hearings, views and estimates reports from other committees, and CBO reports. The budget resolution is required to provide (for the upcoming fiscal year and for each of at least the next 4 years) the total level of new budget authority, outlays, revenues, the deficit or surplus, the public debt, and spending by broad functional category. The budget resolution also may include special directions, called reconciliation instructions, to authorizing committees to report legislation to make changes in direct spending programs designed to achieve a specified amount of savings (or spending increase). Similarly, it can include directions to the tax-writing committees to make the changes in tax law necessary to meet revenue targets.

The CBA calls for adoption of a budget resolution by April 15th of each year. In practice this rarely happens, and in some years no formal budget resolution is actually adopted

Under CBA rules, Congress can theoretically block consideration of legislation that exceeds the spending and revenue level established in the budget resolution.

The budget resolution is enforceable only through congressional rules that Congress can choose to waive. For a budget rule to be enforced, a member must raise a point of order against any legislation that violates the rule. However, Congress, can and frequently does waive these points of order.

Nearly all sources of revenue for federal spending are financed through taxes. Some fees and other sources of revenue are also collected. The remaining shortfall between a year’s revenues collected and spending initiated is financed through borrowing. At times, though rarely, more revenues are collected than there is spending, resulting in a surplus. But in recent years, in part do to actions taken to help stabilize the economy, the gap between revenues and spending has been growing compared to historical norms, and annual deficits and accumulated debt have been summarily growing as well.

In fiscal year 2009, the United States had the highest one-year deficit as a share of the economy since the years shortly after World War II. While the debt usually goes up in times of war and economic downturns, it typically shrinks back down once the national crisis is over. But this time, we face the prospect of ever-growing government debt. Under reasonable assumptions about what Congress and the President are likely to do, the public debt will grow steadily as a share of the economy, reaching 85 percent by 2018, 100 percent by 2022, and 200 percent in 2038. (The average since World War II is below 50 percent).

There are two types of spending: discretionary spending, which is controlled through the annual appropriations process, and direct or mandatory spending, which is outside of the appropriations process. Changes to direct spending programs require a special legislative process, and are often highly controversial. In general, direct spending programs are basically on automatic pilot and grow without check or review.

This simulation does not make distinctions between discretionary and mandatory spending, and the actual processes required to make changes in certain areas, such as Social Security or Medicare. Legislative, changes to these mandatory spending programs involve a complicated process. But the simulation is simply designed to allow users to choose among the various options, and attempt to reach the 60 percent debt-to-GDP goal. Simulation data and options will be updated periodically to reflect new budget estimates issued from CBO and OMB and to remove options that have been enacted into law.

∗ The Government Accountability Office and Congressional Research Service provide very extensive accounts of the full federal budget process. A recent version of the frequently updated CRS report, “Introduction to the Federal Budget Process” may be found here http://budget.house.gov/crs-reports/98-721.pdf. The GAO description of the process is in Appendix 1 of its “A Glossary of Terms Used in the Federal Budget Process”, and may be found here http://www.gao.gov/new.items/d05734sp.pdf.

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