Plan Also Dramatically Simplifies Taxes, Fixes Social Security
Nov. 17, 2010
Panel Includes Former White House and Cabinet Officials; Former Senate and House Members; Former Governors and Mayors; and Business, Labor, and Non-Profit Leaders
Washington, D.C. – A bipartisan task force of former top federal officials and other leading Americans unveiled a bold, comprehensive plan to solve the problem of soaring federal deficits and debt while dramatically simplifying taxes for businesses and individuals, strengthening Social Security, and creating up to 7 million new jobs.
The plan, entitled, Restoring America’s Future, from the Bipartisan Policy Center’s Debt Reduction Task Force, co-chaired by former Senate Budget Committee Chairman Pete Domenici and former White House Budget Director Alice Rivlin, would reduce the debt to below 60 percent of the economy, reduce annual deficits to manageable levels, and balance the “primary budget” (everything other than interest payments) by 2014. By doing so, the plan would resolve a crisis that, if not addressed, will raise the risks of an economic crisis and weaken the nation over the long term.
“The two of us share strong beliefs that America must learn to live within its means, that the current budget path endangers the future of our country, and that bipartisan action is urgently needed,” Domenici and Rivlin wrote in “An Open Letter to the American People” that accompanies the plan.
“We believe that [the plan] provides a comprehensive, viable path to restore our economy and build a stronger America for future generations and for those around the world who look to the United States for leadership and hope.”
Specifically, the plan would rein in federal health care spending by reforming Medicare and Medicaid; ensure that Social Security can pay benefits for the next 75 years; find savings in other entitlement programs; freeze both defense and non-defense discretionary spending for several years; establish a 6.5 percent Debt Reduction Sales Tax; and enforce all of these savings through strict budget rules.
The Task Force recognizes that the starting point for any effective plan to reduce deficits and debt is a strong economy, and its plan takes steps to strengthen the economy both immediately and in the long run.
For the short term, the plan proposes a “payroll tax holiday” for 2011, suspending Social Security payroll taxes for employers and employees in a move that the Congressional Budget Office estimates could create as many as seven million jobs. The plan also would phase in the steps to reduce deficits and debt gradually beginning in 2012, so the economy will be strong enough to absorb them.
For the long term, the plan would do more than reduce deficits and debt to economically sustainable levels. It also would dramatically simplify the tax system, establishing individual tax rates of 15 and 27 percent (from the current high of 35), cutting the corporate tax rate to 27 percent (from the current 35), ending most deductions and credits while simplifying the rest, and ensuring that nearly 90 million households no longer have to file returns.
“We offer this plan as proof that a group of Republicans, Democrats, and Independents can work together to create a balanced package of spending cuts and revenue increases that solves the debt crisis,” Domenici and Rivlin wrote. “Other groups might prefer other combinations of policies to reach the same ends. We created this plan to show that it can be done – and thereby encourage others from both political parties to bring their ideas to a constructive, respectful, and ultimately successful dialogue.”
Restoring America’s Future will:
- Revive the economy and create up to 7 million jobs with a one-year “payroll tax holiday,” suspending Social Security payroll taxes for employers and employees for 2011.
- Phase in steps to reduce deficits and debt gradually, beginning in 2012.
- Stabilize the debt at less than 60 percent of GDP (an internationally recognized standard), reduce annual deficits to manageable levels, and balance the “primary budget” (everything other than interest payments) by 2014.
- Create a simple, pro-growth tax system that lowers tax rates, broadens the tax base, and establishes a new 6.5 percent national Debt-Reduction Sales tax.
- Control health care costs for families, businesses, and government.
- Strengthen Social Security so it can pay benefits for the next 75 years and beyond.
- Freeze domestic discretionary spending for four years and defense discretionary spending for five.
- Find savings by cutting other mandatory programs.
- Enforce the savings and reform the budget process.
To download the full Restoring America’s Future plan, click here.
Economic Policy Project