(Reuters) - A presidential commission tasked with balancing the budget likely will fail to secure enough support on Wednesday to trigger a congressional vote on its deficit-cutting plan, aides and analysts say.
The commission’s co-chairmen have released a draft proposal that would reduce spending and benefits and overhaul the tax code to reduce the deficit to 2.2 percent of GDP by 2015, a level many economists consider sustainable, but they are still scrambling to nail down support among other commission members.
Following is a summary of the proposal put forward by the commission’s co-chairmen, former Republican Senator Alan Simpson and former Democratic White House official Erskine Bowles:
SPENDING CUTS
- Would reduce discretionary spending (programs like defense and law enforcement that are set by Congress each year) in fiscal 2012 to 2010 levels; impose 1 percent cuts in each of the next three fiscal years
- In 2015, defense spending would be $100 billion lower and nondefense spending also $100 billion lower than envisioned in the White House’s current budget scenario
- Eventually bring government spending down to 21 percent of gross domestic product, from its current level of 24 percent of the economy
- Automatic cuts would take effect at the end of each year if Congress exceeds spending caps
- Set up bipartisan committee to eliminate outdated and inefficient programs
- Stretch out budget cycle over two years
- Sample cuts include: freeze pay for federal workers; reduce overseas military bases by one-third; cut federal workforce by 10 percent; slow growth of foreign aid
OVERHAUL TAX CODE
- Would eliminate all of the $1.1 trillion exemptions in the tax code, such as the mortgage-interest deduction and the earned-income tax credit
- Lower and simplify individual income tax rates: 8 percent for those with annual incomes below $70,000; 14 percent for those with incomes up to $210,000; and 23 percent for incomes above that level
- Lower corporate tax rate from 35 percent to 26 percent
- Treat dividends and capital gains as ordinary income
- Set aside $80 billion for deficit reduction
- Gradually raise gas tax by 15 cents starting in 2013 to pay for transportation spending
- Abolish the alternative minimum tax
REDUCE HEALTH CARE COSTS
- Would pay doctors and other providers less for seeing patients under government programs like Medicare and Medicaid
- Cap damages in malpractice suits
- Require Medicare participants to pay more costs themselves
- Require lower costs for brand-name drugs covered by government programs
- Expand successful cost-containment programs
- Strengthen independent oversight board
- If costs grow more than 1 percent faster than the economy after 2020, require president to propose further cost cuts or a robust public health insurance option
OTHER SAVINGS
- Would reduce farm subsidies by $3 billion per year
- Revamp consumer price index, used to calculate benefit increases, to better reflect actual rate of inflation
- Increase employee contributions to government retirement programs
- Postpone military retirement programs and make them take effect after age 60
SOCIAL SECURITY
- Would revamp the retirement program to ensure its long-term stability, but separately from the deficit reduction effort
- Add minimum benefits for poorest retirees
- Increase benefits for older retirees
- Require more affluent earners to pay more
- Raise the retirement age to 68 in 2050 and 69 in 2075
- Exempt those who work physically demanding jobs; allow them to retire at 62
Reporting by Andy Sullivan; Editing by Stacey Joyce
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