Yesterday, Taxpayers for Common Sense sent a letter to President Obama, House Speaker John Boehner (R-OH), and Senate Majority Leader Harry Reid (D-NV), presenting a plan to rappel the fiscal cliff, as they put it. They present three steps they hope the leaders follow in making a deal:
- Have a two-step process that avoids the fiscal cliff temporarily and sets up processes for the next Congress to take up longer-term reforms of both taxes and spending.
- Ensure spending bills are not rolled into a cliff deal, the deal does not rely on gimmicks, and the short-term deal doesn't undermine the longer-term reforms in any way.
- Pay for the short-term extension with a down payment of revenue and spending savings.
They then go in depth into what they would like to see in the down payment. On the revenue side, they suggest either capping deductions at $50,000, reducing or eliminating certain tax breaks, increasing tax rates on high earners, or some combination in order to raise $90 billion over two years, roughly the size of the upper-income tax cuts. They urge the next Congress to take up both individual and corporate tax reform using a zero-based approach to tax expenditures, as was used in the Simpson-Bowles Zero Plan.
On entitlements, TCS suggests indexing initial Social Security benefits to price inflation rather than wage inflation, a substantial long-term policy that may actually eliminate the 75-year Social Security shortfall. They also suggest switching to the chained CPI and introducing minimum out-of-pocket requirements for TRICARE for Life. Based on CBO estimates, these policies would likely save around $400 billion over ten years.
Other policies TCS endorses include limiting highway spending to dedicated revenue, keeping half of the sequester cuts for both defense and non-defense spending in 2013 (but allowing appropriators to apportion the cuts), increasing the debt limit while setting targets for savings on both sides of the budget, and keeping the sequester in place beyond 2013 until a deal is made as an enforcement mechanism.
TCS's recommendations come on the heels of recommendations made earlier this week by the Heritage Foundation, the Center for American Progress, and the Bipartisan Policy Center. Lawmakers should pay attention to all of these recommendations as they seek to negotiate the right process and policies for an agreement.