The Comeback America Initiative's Plan
Today, the Comeback America Initiative (CAI), a non-partisan organization that promotes discussion around fiscal solutions, released their "Restoring Fiscal Sanity" Report, a plan to bring debt down to sustainable levels. At the launch event today, CRFB board member and former U.S. Comptroller General David Walker presented the report’s two fiscal frameworks which provide policymakers with specific reforms to avoid a debt crisis and encourage job growth.
The first approach and preferred approach, the Preemptive Framework, outlines a proactive plan to address our fiscal challenges before a debt crisis occurs, making gradual changes now to avoid a fiscal crisis or much larger deficit reduction later on. The Preemptive Framework would bring the debt down to 63 percent of GDP by 2021.
The second Framework, the Reactive Framework, specifies what could be done in the event that lawmakers fail to act on time to curb future debt or to a sufficient extent. In this Framework, which is intended to act as an illustration of what lawmakers might have to do in such an event, CAI calls for deeper spending cuts and tax increases under a much faster timeframe. Under the Reactive Framework, debt would fall to about 51 percent of GDP by 2021, given that lawmakers would have to act much more dramatically to restore markets’ faith in the credit worthiness of the U.S.
Here are some of the specific recommendations under the Preemptive Framework:
- Switch all inflation-indexed programs to a chained CPI
- Impose a budget cap on all major spending categories except Social Security and interest on federal debt
- Make Social Security solvent with reforms that include indexing yearly COLAs to the chained CPI, increasing the normal and early retirement ages by two years, and reducing benefits for high-earners
- Save $1 trillion in defense by reducing DoD overhead by at least 25 percent and requiring the department to implement the acquisition and contracting reforms recommended by the GAO
- Make a $500 billion investment in infrastructure and energy
- Phase out the Affordable Care Act by 2020 and replace it with universal preventative and catastrophic coverage, increase cost-sharing in Medicare, and negotiate drug prices in all health programs
- Reform the tax code to reduce the maximum individual and corporate rates to no more than 25 percent and reduce many tax expenditures, while allowing the 2001/2003/2010 tax cuts to expire
- Institute a 5 percent consumption tax if needed
In addition to presenting the highlights of the two plans at the launch event, Mr. Walker also spoke about the recent proliferation of pledges to special interest groups. He believes that politicians from both ends of the political spectrum should rescind and reject all pledges and be willing to compromise. As Walker said, "Never say never."
We commend CAI for proposing their two-pronged plan and furthering discussion about what needs to be done to avoid a debt crisis. Hopefully, the plan can inject additional ideas into the current debate so that we can avoid experiencing a fiscal crisis and having to enact some of the larger, more immediate spending and tax changes illustrated in the Reactive Framework.
As CRFB has noted many times before, it is also best to make changes gradually, well in advance, and on our own terms. The CAI plan shows just how that is truly the case.