Committee for a Responsible Federal Budget

The Gang of Six...Simplified

Jul 21, 2011 | Budgets & Projections

To continue shedding light on the details of the Gang of Six proposal, below we provide a clear and concise overview of how the Gang of Six's proposal would wrestle control of future debt from its current course.

The Gang's plan is a two part process: enact $500 billion in savings now as a downpayment on future deficit reduction, and then instruct the relevant committees in Congress to recommend additional savings, with, at times, clear instructions and conditions for those additional savings.

The Downpayment

The downpayment would enact discretionary caps through 2015, saving about $500 billion over that period with a firewall between security and non-security spending to ensure that savings come from all areas of the discretionary budget. Although the specific levels have not been made public, the levels are presumably similar to the Fiscal Commission's updated estimates given that the security savings over ten years directly match those from the Fiscal Commission (see the Gang's charts here). The caps only go through 2015, but the Budget Committee is charged with extending the caps and enforcement mechanisms through 2021.

The Gang's discretionary caps appear lower than the Fiscal Commission's because, as we have noted before, many of the discretionary cuts have already been put in motion--from downward economic projections and enacted discretionary cuts--and are now part of the baseline. The Gang's plan would lock these savings in with enforceable caps.

Also included in the downpayment are a minimum benefit for Social Security, using the more accurate chained CPI for all inflation-indexed programs, and repealing the CLASS Act, among other smaller changes.

Getting the Rest of the Savings

To make the process of finding savings for deficit reduction more open and transparent--recognizing the reality that big reforms take time and deserve expert attention--the proposal would instruct several committees within Congress to find specified savings levels. Presumably over a few months, these committees would then report back to the Budget Committee where all the recommendations would be assembled into a larger package for lawmakers to vote on. Following this vote, lawmakers would then be required to enact Social Security reform that ensures 75-year solvency for the program.

Some critics have commented that there is a dearth of specificity in the Gang's proposal, and that it is unclear how lawmakers could achieve these targets. However, the Committee targets are based largely on the recommendations of the Fiscal Commission. Of course, this doesn't mean that lawmakers need to agree to the same policies as were proposed by the Fiscal Commission -- though some Committees do have specific instructions, there is a fair amount of wiggle room in terms of which policies to propose.

That said, the Fiscal Commission plan shows that all the targets are fully achievable. As you can see below, enacting the Fiscal Commission recommendations would do enough to achieve the targets in every area except for health care -- where there are plenty of other options out there to strengthen the Commission's proposal. Additional health savings ideas from Senators Lieberman and Coburn, proposals from MedPAC, among many others could be used to achieve the Gang's target.

The table below shows some of the Committee targets in bold, with the Commission recommendations that would fall under those targets. Note that in addition to what is below, the Gang's proposal calls for the Budget Committee to extend discretionary caps through 2021, the Finance Committee to enact Social Security reform, and the implementation of a number of procedural changes.

Committee Targets and Illustrative Savings
Finance (Taxes) $1,133 billion
Comprehensive reform (Eliminate and reduce tax expenditures and marginal rates) $1,000 billion
Revenues for Highway Trust Fund $133 billion
Finance (Health) $500 billion
Reform SGR $36 billion
Require Medicare drug rebates for dual eligibles in Part D $57 billion
Reduce spending on graduate medical education $70 billion

Expand Medicare cost-sharing, restrict Medigap coverage, and crate catastrophic coverage

$127 billion
Restrict Medicaid state gaming $51 billion
Other health savings $51 billion
Health savings beyond the Commission recommendations $108 billion
Health, Education, Labor, and Pensions (HELP) $70 billion
Eliminate in-school interest subsidies for student loans $64 billion
Reform the Pension Benefit Guaranty Corporation (PBGC) $10 billion
Armed Services $80 billion
Reform TRICARE for Life $43 billion
Reform military retirement $0 to $93 billion*
Homeland Security & Government Affairs $65 billion
Reform federal civilian retirement $0 to $93 billion*
Pilot Premium Support through Federal Employee Health Benefit (FEHB) $22 billion
Agriculture $11 billion
Reduce farm subsidies $12 billion
Judiciary Unspecified
Enact tort reform $20 billion
Commerce $11 billion
Extend/expand auction authority, enact spectrum fees, and other savings >$10 billion
Energy $11 billion
Sell or impose fees on SEPA and TVA, end certain abandoned mine payments, restructure power marketing administration, and other savings  >$10 billion

 *The Fiscal Commission called for $93 billion in total federal civilian and military retirement system savings but was not specific on how the money would be allocated.