When the Gang of Six constituted itself after the Fiscal Commission submitted its report in December 2010, its apparent mission was to turn the Commission’s proposals into legislative language in a way that could potentially be added to the debt limit bill and that would achieve the Commission’s proposed savings.
Yesterday the Gang released an only an executive summary of a “bipartisan plan to reduce our nation’s deficits.” If the Gang had produced legislative language as it had originally intended, it would be straightforward to identify the elements of the plan and see how they add up. Unfortunately, the summary is vague and sometimes contradictory, and does not include enough information to demonstrate how the numbers add up.
For example, the summary identifies $1.2 trillion in outlay reductions and $1 trillion in additional revenue, but $3.7 trillion in total deficit reduction. What is the source of the other $1.5 trillion in deficit reduction? How much of that is interest savings?
Regarding the $1 trillion in additional revenue assumed in the plan—this is relative to what specific baseline? The CBO baseline assumes the expiration of ’01 and ’03 tax relief, the AMT patch, and the annual tax extenders like the R&D tax credit. The Gang of Six outline says if CBO scored the plan, “it would find net tax relief of approximately $1.5 trillion.” Doesn’t this imply tax increases totaling at least $2 trillion over the next 10 years compared to current tax policy extended?
CBO’s current-law baseline projects that total federal spending will amount to $46 trillion over the next ten years, with spending increasing by 57 percent from 2011 to 2021. The Gang’s summary suggests specific spending reductions will occur that add up to $1.2 trillion over the next decade. How much would the federal government spend over the next decade under the Gang of Six outline? Would this constitute a negative change in spending year over year or just a reduction in the rate of growth? How much higher will federal spending be in the tenth year of this plan versus the current fiscal year? Is there any year in the ten-year budget window in which total spending (outlays) under this plan would be less than the previous year?
Treasury Secretary Timothy Geithner said he agrees with the research of Rogoff and Reinhart that, because our gross debt already exceeds 90 percent of GDP and will be more than 100% by the end of this fiscal year, the U.S. is already losing one percentage point of economic growth (and accompanying job creation) per year. At any point in the next ten years under the Gang’s plan, will the gross debt go below 90 percent of GDP?
Nearly all of the immediate $500 billion of the plan’s “down payment” on deficit reduction would result from setting statutory caps on discretionary appropriations. But so far, no one from the Gang wants to lay out the levels of such caps for 2012-2015. What are those caps?
Most of the plan’s savings would be deferred to later legislation to be developed by Congress. Why does the outline give committees six months (next February) to come up with legislation to achieve savings? Why not sooner?
Does the plan rely on dynamic scoring to achieve the reported deficit reduction? If so, who has performed that scoring?