2) What is the ratio of spending cuts to revenue increases under the Fiscal Commission plan? Why doesn’t it rely more/less heavily on spending cuts or more/less heavily on revenue increases?
The ratio of spending cuts to revenue increases in the plan can be calculated in several different ways depending on which baseline is used, how interest savings are accounted, and other factors. Depending on which measures are used, revenues account for between 25 percent and 50 percent of the deficit reduction in the plan. With such a broad range, any representation of the ratio of spending cuts to revenue increases paints an incomplete picture.
That being the case, the Commission was not focused on baselines, but rather at bringing revenue and spending levels closely in line. Under the Commission recommendations, spending would be held to below 22 percent of GDP from 2014 onward – about a percentage point higher than historical levels but two and a half points below where it is headed by 2020. Revenues in the plan are projected to reach 20.6 percent of GDP in 2020, which is about two and a half points higher than the historical levels, but consistent with revenue levels last time we ran a budget surplus.
Both revenue and spending cuts will need to be part of the fiscal solution, and the Commission offers a balanced plan which brings the two in line.