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

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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

 

2013-2017

2013-2022

Discretionary Savings below CBO Current Policy Baseline Required by Initial BCA Caps

$170

$502

Additional Discretionary Savings Beyond BCA Caps

$129

$624

Total Discretionary Savings

$299

$1,126

Gross Health Care Savings

$214

$576

SGR

-$100

-$271

Cap Health Growth at GDP+1%

$0

$50

Net Health Care Savings

$114

$355

Other Mandatory Savings (Including All PI)

$102

$305

Chained CPI

$64

$266

Match Highway Spending and Revenues

$87

$156

Comprehensive Tax reform

$360

$1,200

Social Security Reform (Excluding Chained CPI)

$48

$232

Interest Savings

$55

$547

TOTAL DEFICIT REDUCTION

$1,129

$4,187

Deficit at End of Window (2017/2022) in Percent of GDP

1.9%

1.4%

Debt at End of Window (2017/2022) in Percent of GDP

73.9%

67.9%

 

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Mar 27, 2012
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A summary of the "Simpson-Bowles" Budget Alternative.