Last week, President Obama’s debt commission released its final report, but failed to find the required 14 votes to advance the proposal to Congress. Of the commission’s 18 members, 11 voted for the final report, and only four of those affirmative votes came from members of the incoming 112th Congress.
Even though the commission failed to craft a plan that could receive enough votes to move forward, many of the commission members cited the proposal as a good starting point for discussions on reducing the country’s deficit and debt. “I believe we’ve crossed an important hurdle here and laid out a plan that will be resurrected because it must be,” said commission member Sen. Kent Conrad (D-ND).
But the deficit commission’s plan is not a feasible path toward reducing the long-term structural deficit, and it included some very misguided policy prescriptions like raising the retirement age for Social Security and cutting huge swaths of the non-defense discretionary budget. In a new report, “The First Step: A Progressive Plan for Meaningful Deficit Reduction by 2015,” the Center for American Progress has laid out an alternative vision for deficit reduction that gets the budget into primary balance by 2015 (which means that federal revenue equals outlays), while protecting vital and popular programs and promoting economic growth, as opposed to austerity. Here’s how it works:
— New Revenue: The plan, which relies on roughly equal parts revenue increases and spending cuts, proposes removing the cap on the employer side of the payroll tax, which raises about $76 billion in 2015; imposing a new fee of $5 per barrel on foreign oil imports, to raise about $22 billion; and applying a new surtax of 2 percent to adjusted gross income above $1 million, and an additional 3 percent to adjusted gross income above $10 million, to raise about $29 billion. These increases would raise federal revenue to about 19.8 percent of GDP, which is higher than it was under the Bush administration, but lower than when President Clinton brought the budget into surplus.
— Spending Cuts: The plan also lays out about $128 billion in total spending cuts in 2015, including about $60 billion in defense spending cuts, $35 billion in tax expenditures (which are essentially spending programs that are administered through the tax code), and $12 billion in non-defense discretionary cuts. The plan would also cut $3.8 billion from in agricultural subsidies and index all relevant federal programs to the chained Consumer Price Index for all Urban Consumers, which would result in “slower increases to those aspects of the code that are indexed.”
As CAP President and CEO John Podesta wrote, “Our plan would achieve primary balance by 2015 through an even mix of spending cuts and new revenue. We identify specific spending cuts, rather than employing opaque budget mechanisms, or mere ‘illustrative examples.'” And it should be remembered that getting the long-term structural deficit under control does not contradict with short-term efforts to boost the economy and ensure that those still feeling the effects of the Great Recession have an adequate social safety net on which to fall back.