U.S. group urges $2 trillion alternative to fiscal cliff "time bomb"

WASHINGTON Sun Sep 30, 2012 4:55pm EDT

WASHINGTON (Reuters) - The independent watchdog group Taxpayers for Common Sense will unveil a $2 trillion deficit-reduction proposal in hopes of averting an economic debacle at year's end known as the fiscal cliff.

On Monday, the group plans to detail about 130 specific deficit-reduction steps the U.S. Congress could take to replace across-the-board spending cuts of $1.2 trillion that are scheduled to take effect on January 2. These would occur just as tax increases for all income groups are due to kick in.

The combination of looming spending cuts and tax increases is commonly referred to in Washington as a "fiscal cliff" because economists say it would knock the struggling U.S. economy back into recession early next year.

Taxpayers for Common Sense noted that Congress and President Barack Obama were responsible for the August 2011 budget and debt limit deal that included the potentially harmful automatic spending cuts scheduled to begin in January with a $109 billion installment.

"And that's who is going to have to be responsible for defusing the ticking budget time bomb that would cut $1.2 trillion indiscriminately," the group said.

Targets of the group's plan include agriculture subsidies, the oil and gas industry and defense projects.

With members of Congress currently campaigning for re-election more than addressing the country's fiscal problems, private groups are stepping up with their own deficit-reduction plans. They fear that if such work is left for a short session following the November 6 presidential and congressional elections, Congress might end up letting the country go over the fiscal cliff.

Many Washington politicians say that remedies for the sluggish U.S. economy - and government budget deficits that have topped $1 trillion for four consecutive years - should be debated in this election season with the November 6 vote informing Congress on what to do.

Unwilling to wait, Taxpayers for Common Sense is touting a remedy that it argues would cleanse the U.S. budget and tax code of policies it says result in an "inefficient, ineffective or wasteful use of taxpayer dollars."

CROP SUBSIDIES TARGETED

The targeted budget reductions would eliminate all government crop subsidies, saving $56.5 billion over 10 years, end a manufacturing tax break cherished by the oil and gas industry, for a $17.2 billion savings, and stop production of some big military projects, such as the V-22 Osprey, a tilt-rotor aircraft built by Boeing Co (BA.N) and Bell Helicopter, a unit of Textron Inc (TXT.N).

In its February budget proposal to Congress, the Obama administration said it wanted to cut spending on the V-22 Osprey by reducing the number of aircraft to be built.

Other non-governmental groups, such as the Committee for a Responsible Federal Budget, have been looking at ways to cut U.S. deficit spending by about $4 trillion over 10 years.

The various ideas circulating in think tanks could be weighed by Congress whenever it finally gets down to addressing the fiscal cliff.

The Taxpayers for Common Sense proposal, obtained by Reuters, does not address some of the thorniest problems facing Washington budget writers: the accelerating growth of huge government-backed retirement and healthcare programs related to an aging U.S. population.

For example, the non-partisan Congressional Budget Office estimates that outlays for the Social Security retirement and disability programs will grow from $725 billion last year to $1.35 trillion in 2022.

Similarly, the Medicare health insurance program for the elderly is projected to expand from $560 billion last year to nearly $1.1 trillion in 2022, CBO estimates.

Voters have not signaled a willingness to support significant cuts to these programs and any reforms could take Congress many months, or years, to address.

Besides cutting military and farm programs and ending some corporate tax breaks, Taxpayers for Common Sense also would terminate some alternative energy programs and several government research projects.

In a move to save $645 billion over a decade, the group calls for placing new limits on the tax deduction on home mortgage interest.

For members of Congress who have been unable to agree on any new deficit-reduction package, there are many potentially troubling proposals.

One would hit especially close to home. It would end "an elaborate and lucrative" pension plan for lawmakers that Taxpayers for Common Sense said "is more generous" than retirement plans available to most Americans. (Editing by Bill Trott)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

Recommended Newsletters

Reuters U.S. Top News
A quick-fix on the day's news published with Reuters videos and award-winning news photography and delivered at your choice of one of four times during the day.
Reuters Deals Today
The latest Reuters articles on M&A, IPOs, private equity, hedge funds and regulatory updates delivered to your inbox each day.
Reuters Technology Report
Your daily briefing on the latest tech developments from around the world from Reuters expert tech correspondents.