In her testimony before the President’s Fiscal Commission last week, CRFB President Maya MacGuineas presented the following plan as an option to stabilize the federal debt at the popularly considered maximum, 60 percent of GDP, in response to the request for specific policies to deal with the debt. Her plan (shown in the below table) is meant to achieve the 60 percent goal in a balanced manner, while protecting the most vulnerable and promoting economic growth. What follows is only one option for stabilizing the debt—but regardless of the plan we ultimately choose, it’s time to get specific in determining exactly how we are going to fix this grave problem.
Reduce domestic discretionary spending by 5%, short-term freeze, cap growth
Speed up/increase retirement age to 68 and index for longevity
Slow growth of benefits for middle and upper earners
Switch to superlative CPI
Update/reduce spousal benefits
Reduce new insurance subsidies
Increase cost sharing/premiums for Medicare
Increase retirement age for Medicare
Reform malpractice policies
Reduce Medicaid funding to the states
Introduce a voucher option
Institute a cap on federal health spending to restrict growth to GDP + population + 1% starting next decade
Eliminate agriculture subsidies
Reduce other mandatory spending
Freeze government salaries for two years, reduce workforce by 5%, reform contracting process
Tax expenditure reform: Gradually eliminate the health care exclusions; phase down the home mortgage deduction from $1 million to $500k; eliminate state and local tax deduction; reduce corporate subsidies and other consolidations/eliminations; cap total amount of tax breaks as a share of income
Implement a carbon tax
Only extend the expiring 2001/2003 tax cuts temporarily (2 years at most) with the commitment to only extend permanently once a debt reduction package has been put in place
Corporate income tax rate cut
Bump up in spending on some of the most productive public investments (education, R&D, infrastructure)
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