domenici-rivlin 2.0, the fiscal cliff & a framework to bridge them
TRANSCRIPT
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Domenici-Rivlin 2.0, the Fiscal Cliff &
a Framework to Bridge Them
DOMENICI-RIVL IN DEBT REDUCTION TASK FORCE
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WHAT WELL COVER 2
1) Domenici-Rivlin 2.0
2) Framework for a Grand Bargain
a. Potential Down Payment
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3
Domenici-Rivlin 2.0: An Updated Plan
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PROGRESS REPORT 4
MAJOR DEBT DRIVER STATUS NOTES
Discretionary Spending Accomplished
Economic Growth Measures Some progress
Health Care Cost Containment
Social Security Sustainability
Tax Reform
Action to Address the Drivers of U.S. Debt
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DISCRETIONARY SPENDING HAS ALREADY BEEN RESTRAINED
Source: Congressional Budget Office, BPC estimates
4%
5%
6%
7%
8%
9%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Percentageo
fGDP
CBO 2010 Baseline
Lowest Level since 1970
Domenici-Rivlin
Budget Control Act
Sequester
Budget Control Act Caps Achieved a Similar Level of Domesticand Defense Discretionary Cuts to Domenici-Rivlin
Note: Each line in the graph depicts the sum of domestic and defense discretionary budget authority (including
war costs) as a percentage of GDP.
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0%
2%
4%
6%
8%
10%
12%
2012 2022 2032 2042 2052
HEALTH CARE COSTS ARE THE PRIMARY DRIVER OF THE DEBT
%o
fGD
P
Sources: Congressional Budget Offices Alternative Fiscal Scenario (August 2012), additionally assuming that
troops overseas decline to 45,000 by 2015; Bipartisan Policy Center extrapolations
6
Social Security
Discretionary Spending (Defense and Non-Defense)
Other Mandatory Programs
(e.g., federal pensions, unemployment compensation)
Health Care Spending
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REVENUE UNDER CURRENT POLICIES SIMPLY WILL NOT BE ENOUGH
15
16
17
18
19
20
21
22
1998 1999 2000 2001
18.0%
19.9%19.5%
20.6%
19.8%
(projected)
%ofG
DP
Revenues Averaged 20% of GDP When the
Budget Was Balanced
Source: Congressional Budget Office alternative fiscal scenario (August 2012)
Fiscal
years2014-2022
Average
and that Was
Before the Baby
Boomers Arrived
7
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DOMENICI-RIVLIN 2.0A PLAN FOR FISCAL SUSTAINABILITY 8
Expedite the economic recovery by replacing the payroll tax
holiday with a one-time income tax rebate for 2013
Reform the tax code to generate more revenue from amore efficient, pro-growth system
Implement structural reform to bend the health cost curveand ensure that health care entitlements aresustainable
Achieve long term solvency for Social Security
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0%
60%
120%
180%
2012 2017 2022 2027 2032 2037 2042
BPC Plausible
Baseline Debt
Held by the
Public
Bipartisan Plan
Debt Held by
the Public
DEBT DROPS DRAMATICALLY UNDER DOMENICI-RIVLIN 2.0
%ofGDP
Note: Unlike current law, the Bipartisan Policy Centers Plausible Baseline assumes that the 2001, 2003, 2009, and 2010 tax
cuts are extended, the Alternative Minimum Tax is indexed to inflation, Medicares physician payment rates are maintained
at 2012 levels (the Doc Fix), the looming sequester from the Budget Control Act of 2011 is lifted, troops stationed overseas
decline to 45,000 by 2015, and health care spending grows at rates detailed in the Congressional Budget Offices Alternative
Fiscal Scenario.
Sources: Congressional Budget Office (August 2012) and Bipartisan Policy Center projections
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NET INTEREST PAYMENTS DROP DRAMATICALLY UNDER BIPARTISAN PLAN
%ofGDP
Sources: Congressional Budget Office (August 2012) and Bipartisan Policy Center projections
0%
1%
2%
3%
4%
5%
6%
7%
2012 2017 2022 2027 2032 2037 2042
BPC PlausibleBaseline Net
Interest
Bipartisan Plan
Net Interest
Note: Unlike current law, the Bipartisan Policy Centers Plausible Baseline assumes that the 2001, 2003, 2009, and 2010
tax cuts are extended, the AMT is indexed to inflation, Medicares physician payment rates are maintained at 2012 levels
(the doc fix), the looming sequester from the Budget Control Act of 2011 is lifted, troops stationed overseas decline to
45,000 by 2015, and health care spending grows at rates detailed in CBOs Alternative Fiscal Scenario.
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DOMENICI-RIVLIN 2.0 BENDS THE MEDICARE COST CURVE
Sources: Congressional Budget Office (August 2012) and Bipartisan Policy Center projections
%o
fG
DP
0%
1%
2%
3%
4%
5%
6%
7%
2012 2017 2022 2027 2032 2037 2042
BPC Plausible
Baseline
Medicare
Spending
Bipartisan
PlanMedicare
Spending
Note: Unlike current law, the Bipartisan Policy Centers Plausible Baseline assumes that the 2001, 2003, 2009, and 2010 tax cuts are
extended, the Alternative Minimum Tax is indexed to inflation, Medicares physician payment rates are maintained at 2012 levels
(the Doc Fix), the looming sequester from the Budget Control Act of 2011 is lifted, troops stationed overseas decline to 45,000 by
2015, and health care spending grows at rates detailed in the Congressional Budget Offices Alternative Fiscal Scenario.
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BREAKDOWN OF SAVINGS IN DOMENICI-RIVLIN 2.0(INCLUDING ALREADY ENACTED SAVINGS) 12
Revenue
$1,500
Health Care
$1,000
Discretionary
$1,400
Other Mandatory$300
Debt Service
$600
$0
$1,000
$2,000
$3,000
$4,000
$5,000
Budget Savings Through 2022
Billio
nsofDollars
29% of Savings
21% of Savings
13% of
Savings
6% of Savings
31% of Savings
Note: Savings are calculated against BPCs Plausible Baseline. Unlike current law, the BPCs Plausible Baseline assumes that the 2001,
2003, 2009, and 2010 tax cuts are extended, the Alternative Minimum Tax is indexed to inflation, Medicares physician payment rates
are maintained at 2012 levels (the Doc Fix), the looming sequester from the Budget Control Act of 2011 is lifted, troops stationed
overseas decline to 45,000 by 2015, and health care spending grows at rates detailed in the Congressional Budget Offices Alternative
Fiscal Scenario.
Sources: Congressional Budget Office (August 2012), Bipartisan Policy Center estimates
D-R 2.0
Total Savings= $4.8 Trillion
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Revenue
49% Revenue
38%
Health Care
33%Health Care
33%
Other Mandatory
7%Other Mandatory
4%
Debt Service
11% Debt Service
25%
0%
20%
40%
60%
80%
100%
Budget Savings Through 2022 Budget Savings Through 2032
Percentage
of
PlansBudgetSavings
Sources: Congressional Budget Office (August 2012), Bipartisan Policy Center estimates
Note: Savings are calculated against BPCs Plausible Baseline. Unlike current law, the BPCs Plausible Baseline assumes that the 2001,
2003, 2009, and 2010 tax cuts are extended, the Alternative Minimum Tax is indexed to inflation, Medicares physician payment rates
are maintained at 2012 levels (the Doc Fix), the looming sequester from the Budget Control Act of 2011 is lifted, troops stationed
overseas decline to 45,000 by 2015, and health care spending grows at rates detailed in the Congressional Budget Offices Alternative
Fiscal Scenario.
BREAKDOWN OF SAVINGS IN DOMENICI-RIVLIN 2.0(EXCLUDING ALREADY ENACTED SAVINGS)
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A Framework:From Fiscal Cliff to Grand Bargain
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THE FISCAL CLIFF 15
With just weeks before the fiscal cliff hits, no chance of
fundamental entitlement and tax reform (e.g., Domenici-Rivlin2.0) being enacted this year
Cant just have a memorandum of understanding and workout details later must pass legislation to change the currentlaw
Need a bridge to avoid the cliff, demonstrate a commitment tosolving the problem, and set the stage for a big deal next yearon drivers of debt
The Solution: Framework for a Grand Bargain
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THE FRAMEWORK FOR A GRAND BARGAIN 16
Eliminate threat of the fiscal cliff by extending tax cuts,turning off sequester, patching AMT, extending theDoc Fix, etc.
Replace it with:
An expedited congressional procedure Accelerated RegularOrder to achieve deficit reduction, including fundamentaltax and entitlement reform, in the 113th Congress withoutmany of the traditional barriers (e.g., the filibuster)
A down-payment package with tangible savings that serves as
a stepping stone to the grand bargain
A realistic backstop that serves as an enforcement mechanismto facilitate action
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THE POTENTIAL DOWN PAYMENT 17
Demonstrates a commitment to larger changesnext year
Facilitates short-term growth (with an income taxrebate) and phases in deficit reduction
Balances reductions to entitlement spending withincreases in revenue
Avoids further cuts to discretionary spending, whichincludes nearly all public investment monies andhas already been cut significantly