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Recommendations of the Fiscal Commission

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Discretionary Spending Cuts

1.1:  CAP DISCRETIONARY SPENDING THROUGH 2020.  Hold spending in 2012 equal to or lower than spending in 2011, and return spending to pre-crisis 2008 levels in real terms in 2013.  Limit future spending growth to half the projected inflation rate through 2020.  (Saves $183 billion in 2015, $1,760 billion through 2020)

1.2: CUT BOTH SECURITY AND NON-SECURITY SPENDING.  Establish firewall between the two categories through 2015, and require equal percentage cuts from both sides.

1.3: ENFORCE CAPS THROUGH TWO MECHANISMS -- POINT OF ORDER AND SEQUESTRATION.  Require a separate non-amendable vote in House and 60-vote point of order in Senate to waive spending beyond the caps.  Impose across-the-board sequester by the amount appropriations exceed the caps.

1.4:  REQUIRE THE PRESIDENT TO PROPOSE ANNUAL LIMITS FOR WAR SPENDING.  Create a separate category above the caps for Overseas Contingency Operations (OCO), proposed by the President to reflect the projected needs of war policy.

1.5:  ESTABLISH A DISASTER FUND TO BUDGET HONESTLY FOR CATASTROPHES.
(Costs $11 billion per year, $99 billion through 2020)

1.6:  STOP THE ABUSE OF EMERGENCY SPENDING.

1.7:  FULLY FUND THE TRANSPORTATION TRUST FUND INSTEAD OF RELYING ON DEFICIT SPENDING.  Dedicate a 15-cent increase in the gas tax to transportation funding, and reduce spending to match the revenues the trust fund collects each year.

1.8:  UNLEASH AGENCIES TO BEGIN IDENTIFYING SAVINGS.

1.9:  ESTABLISH CUT-AND-INVEST COMMITTEE TO CUT LOW-PRIORITY SPENDING, INCREASE HIGH-PRIORITY INVESTMENT, AND CONSOLIDATE DUPLICATIVE FEDERAL PROGRAMS.

1.10:  ADOPT IMMEDIATE REFORMS TO REDUCE SPENDING AND MAKE THE FEDERAL GOVERNMENT MORE EFFICIENT.  (Saves $50+ billion)

1.10.1 Reduce Congressional & White House Budgets by 15 Percent ($0.8B)
1.10.2 Impose Three-Year Freeze on Member Pay
1.10.3 Impose Three-Year Pay Freeze on Federal Workers and Defense Department Civilians ($20.4B)
1.10.4 Reduce Size of the Federal Workforce Through Attrition ($13.2B)
1.10.5 Reduce Federal Travel, Printing, and Vehicle Budgets ($1.1B)
1.10.6 Sell Excess Federal Property ($0.1B)
1.10.7 Eliminate All Congressional Earmarks ($16B)
 

Tax Reform

2.1:  ENACT FUNDAMENTAL TAX REFORM BY 2012 TO LOWER RATES, REDUCE DEFICITS, AND SIMPLIFY THE CODE.  Eliminate all tax expenditures, dedicate a portion of the additional revenue to deficit reduction and use the remaining revenue to lower rates and add back necessary expenditures and credits.

2.1.1 Cut rates across the board, and reduce the top rate to between 25 and 29 percent.
2.1.2 Dedicate $80 billion to deficit reduction in 2015 and $180 billion in 2020. 
2.1.3 Simplify key provisions to promote work, homes, health, charity, and savings while increasing or maintaining progressivity.

2.2:  ENACT CORPORATE REFORM TO LOWER RATES, CLOSE LOOPHOLES, AND MOVE TO A TERRITORIAL SYSTEM.

2.2.1 Establish single corporate tax rate between 25% and 29%.
2.2.2 Eliminate all tax expenditures in the corporate code.
2.2.3 Move to a competitive territorial tax system.

2.3:  PUT FAILSAFE IN PLACE TO ENSURE SWIFT PASSAGE OF TAX REFORM.
 

Health Care Savings

3.1:  REFORM THE MEDICARE SUSTAINABLE GROWTH RATE.   Reform Medicare Sustainable Growth Rate (“doc fix”) for physicians and require the fix to be offset.
(Saves $3 billion in 2015, $22 billion through 2020, relative to a freeze)

3.2:  REFORM OR REPEAL THE CLASS ACT.  (Costs $11 billion in 2015, $76 billion through 2020)

3.3:  PAY FOR ‘DOC FIX’ AND CLASS ACT REFORM.  Enact specific health savings to offset the costs of the Sustainable Growth Rate (SGR) fix and the lost receipts from repealing or reforming the CLASS Act. 

3.3.1 Increase authority and funding to reduce Medicare fraud. (Saves $1 billion in 2015, $9 billion through 2020)
3.3.2 Reform Medicare cost-sharing rules.  (Saves $10 billion in 2015, $110 billion through 2020)
3.3.3 Restrict first-dollar coverage in Medicare supplemental insurance.  (Medigap savings included in previous option, additional savings total $4 billion in 2015 and $38 billion through 2020)
3.3.4 Extend Medicaid drug rebate to dual eligibles in Part D.  (Saves $7 billion in 2015, $49 billion through 2020)
3.3.5 Reduce excess payments to hospitals for medical education.  (Saves $6 billion in 2015, $60 billion through 2020)
3.3.6 Cut Medicare payments for bad debts.  (Saves $3 billion in 2015, $23 billion through 2020)
3.3.7 Accelerate home health savings in ACA.  (Saves $2 billion in 2015, $9 billion through 2020)
3.3.8 Eliminate state gaming of Medicaid tax gimmick.  (Saves $5 billion in 2015, $44 billion through 2020)
3.3.9 Place dual eligibles in Medicaid managed care.  (Saves $1 billion in 2015, $12 billion through 2020)
3.3.10 Reduce funding for Medicaid administrative costs.  (Saves less than $260 million in 2015, $2 billion through 2020)
3.3.11 Medical malpractice reform. (Saves $2 billion in 2015, $17 billion through 2020)
3.3.12 Pilot premium support through FEHB.  (Saves $2 billion in 2015, $18 billion through 2020)

3.4:  AGGRESSIVELY IMPLEMENT AND EXPAND PAYMENT REFORM PILOTS. Direct CMS to design and begin implementation of Medicare payment reform pilots, demonstrations and programs as rapidly as possible and allow successful programs to be expanded without further Congressional action.

3.5:  ELIMINATE PROVIDER CARVE OUTS IN IPAB.  Give the Independent Payment Advisory Board (IPAB) authority to make recommendations regarding hospitals and other exempted providers.

3.6:  ESTABLISH LONG-TERM GLOBAL BUDGET FOR TOTAL HEALTH CARE COSTS.  Establish a global budget for total federal health care costs and limit the growth to GDP plus 1 percent.
 

Other Mandatory Savings

4.1:  REVIEW AND REFORM FEDERAL WORKFORCE RETIREMENT PROGRAMS.  Create a federal workforce entitlement task force to re-evaluate civil service and military health and retirement programs and recommend savings of $70 billion over ten years.

Use the highest five years of earnings to calculate civil service pension benefits for new retirees (CSRS and FERS) rather than highest three years prescribed under current law, to bring the benefit calculation in line with the private sector standard.
Savings in 2015: $500 million. Savings through 2020: $5 billion.

Defer COLA for retirees in the current system until age 62, including for civilian and military retirees who retire well before a conventional retirement age. In place of annual increases, provide a one-time catch-up adjustment at age 62 to increase the benefit to the amount that would have been payable had full COLAs been in effect.
Savings in 2015: $5 billion. Savings through 2020: $17 billion.

Adjust the ratio of employer/employee contributions to federal employee pension plans to equalize contributions.
Savings in 2015: $4 billion. Savings through 2020: $51 billion.

4.2:  REDUCE AGRICULTURE PROGRAM SPENDING THROUGH 2020.  Reduce net spending on mandatory agriculture programs by $10 billion from 2012 through 2020 with additional savings to fund an extension of the agriculture disaster fund and allow the Agriculture Committees to reallocate funds as necessary according to their priorities in the upcoming Farm Bill.  Savings in 2015: $1 billion. Savings through 2020: $10 billion.

4.3:  ELIMINATE IN-SCHOOL SUBSIDIES IN FEDERAL STUDENT LOAN PROGRAMS. Eliminate income-based subsidies for federal student loan borrowers in favor of better targeted hardship relief for loan repayment.  Savings in 2015: $5 billion. Savings through 2020: $43 billion.

4.4:  GIVE PENSION BENEFIT GUARANTEE BOARD AUTHORITY TO INCREASE PREMIUMS.  Savings in 2015: $2 billion. Savings through 2020: $16 billion.

4.5:  ELIMINATE PAYMENTS TO STATES FOR ABANDONED MINES.

4.6:  EXTEND FCC SPECTRUM AUCTION AUTHORITY. 

4.7:  INDEX MANDATORY USER FEES TO INFLATION.

4.8:  RESTRUCTURE THE POWER MARKETING ADMINISTRATIONS TO CHARGE MARKET RATES.

4.9:  REQUIRE TENNESSEE VALLEY AUTHORITY TO IMPOSE TRANSMISSION SURCHARGE.

4.10:  GIVE POST OFFICE GREATER MANAGEMENT AUTONOMY.

4.5-4.10 Savings in 2015: $1 billion. Savings through 2020: $8 billion.
 

Social Security Reform

5.1:  MAKE RETIREMENT BENEFIT FORMULA MORE PROGRESSIVE.  Modify the current three-bracket formula to a more progressive four-bracket formula, with changes phased in slowly.  Change the current bend point factors of 90%|32%|15% to 90%|30%|10%|5% by 2050, with the new bend point added at median lifetime income.

5.2:  REDUCE POVERTY BY PROVIDING AN ENHANCED MINIMUM BENEFIT FOR LOW-WAGE WORKERS.  Create a new special minimum benefit that provides full career workers with a benefit no less than 125 percent of the poverty line in 2017 and indexed to wages thereafter.

5.3:  ENHANCE BENEFITS FOR THE VERY OLD AND THE LONG-TIME DISABLED.  Add a new “20-year benefit bump up” to protect those Social Security recipients who have potentially outlived their personal retirement resources.

5.4:  GRADUALLY INCREASE EARLY AND FULL RETIREMENT AGES, BASED ON INCREASES IN LIFE EXPENCTANCY.  After the Normal Retirement Age (NRA) reaches 67 in 2027 under current law, index both the NRA and Early Eligibility Age (EEA) to increases in life expectancy, effectively increasing the NRA to 68 by about 2050 and 69 by about 2075, and the EEA to 63 and 64 in lock step.

5.5:  GIVE RETIREES MORE FLEXIBILITY IN CLAIMING BENEFITS AND CREATE A HARDSHIP EXEMPTION FOR THOSE WHO CANNOT WORK BEYOND 62.  Allow Social Security beneficiaries to collect half of their benefits as early as age 62, and the other half at a later age.  Also, direct the Social Security Administration to design a hardship exemption for those who cannot work past 62 but who do not qualify for disability benefits.

5.6:  GRADUALLY INCREASE THE TAXABLE MAXIMUM TO COVER 90 PERCENT OF WAGES BY 2050.

5.7:  ADOPT IMPROVED MEASURE OF CPI.  Use the chained CPI, a more accurate measure of inflation, to calculate the Cost of Living Adjustment for Social Security beneficiaries.

5.8:  COVER NEWLY HIRED STATE AND LOCAL WORKERS AFTER 2020.  After 2020, mandate that all newly hired state and local workers be covered under Social Security, and require state and local pension plans to share data with Social Security.

5.9:  DIRECT SSA TO BETTER INFORM FUTURE BENEFICIARIES ON RETIREMENT OPTIONS.  Direct the Social Security Administration to improve information on retirement choices, better inform future beneficiaries on the financial implications of early retirement, and promote greater retirement savings.
 

Budget Process Reforms

6.1:  SWITCH TO A MORE ACCURATE MEASURE OF INFLATION FOR INDEXED PROVISIONS.  Rely on chained CPI to index all CPI-linked provisions across government.

6.2:  ESTABLISH A DEBT STABILIZATION PROCESS TO ENFORCE DEFICIT REDUCTION TARGETS.  Establish a debt stabilization process to provide a backstop to enforce savings and keep the federal budget on path to achieve long term targets.

6.3:  ALLOW CAP ADJUSTMENTS FOR PROGRAM INTEGRITY EFFORTS.

6.4:  CONDUCT REVIEW OF BUDGET CONCEPTS TO MORE ACCURATELY REFLECT GOVERNMENT LIABILITIES.
 

callout iconThe Fiscal Commission offered over 60 discreet recommendations -- addressing all areas of the federal budget. Together, the plan would stabilize and then reduce the nation's debt as a share of the economy over the next decade and beyond.