Moment of Truth Project--Highlights of "Simpson-Bowles" Budget Alternative

Highlights of “Simpson-Bowles” Budget Alternative

Takes the framework and benchmarks set by the President’s bipartisan National Commission on Fiscal Responsibility and Reform and puts them into a budget resolution framework.  Provides a blueprint for committees of jurisdiction to draft specific policies to achieve savings targets, based on the general principles outlined in the Simpson-Bowles report.

Key Principles

• Embodies the Fiscal Commission approach
• Shared sacrifice: Everything is on the table
• Big enough to matter: Cuts the deficit by over $4 trillion over the next 10 years, sufficient to stabilize the debt by 2015 and reduce debt as a percentage of GDP below 70% by 2020
• Balanced approach: Achieves deficit reduction with 2/3 spending cuts, 1/3 tax reform
• Smart savings instead of dumb cuts Permanently repeals the sequester required by the Budget Control Act and replaces across-the board cuts with a balanced, comprehensive fiscal plan to reduce the deficit and stabilize the debt

Main Elements

Tax reform:

• Comprehensive tax reform to promote growth, simplify the tax code, reduce marginal tax rates across the board and reduce the deficit by $1 trillion through 2021
• Reduces the $1.1 trillion in annual tax expenditures and tax breaks
• Reduce tax rates for individuals, small businesses, and corporations

Health care:

• Immediate reforms achieving savings of $485 through 2021 based on principles and framework in Simpson-Bowles report to pay for permanent SGR fix and reduce costs over the next decade
• Sets a limit on long-term growth for federal health care spending of GDP+1 requiring additional reforms if the policies in this resolution and other reforms fail to keep spending below targets

Discretionary spending:

• Total discretionary spending for fy13 of $1.043 trillion and growth limited to 1% below inflation after 2013 for total savings of $625 billion beyond caps set in Budget Control Act

• Additional savings divided proportionally between domestic and defense spending

Other provisions

• Instructions for committees to find approximately $300 billion in savings from other mandatory programs such as agriculture and federal retirement
• Shifts to a more accurate measure of inflation for all provisions in the budget indexed to inflation
• Bipartisan cooperation to enact plan to strengthen Social Security and put it on a fiscally sustainable path based on the principles and framework outlined in Simpson-Bowles report
• Fully repeals sequester and replaces with comprehensive fiscal plan
• Strong enforcement mechanisms to enforce spending cuts and ensure budget remains on a path to stabilize and reduce debt as a percentage of GDP

Major Savings by Category in Simpson-Bowles Budget Alternative