Panel proposes $3.8T savings plan, Social Security changes

Updated 5m ago
By Richard Wolf, USA TODAY

WASHINGTON — The leaders of a federal commission charged with finding ways to reduce the government's $13.7 trillion debt Wednesday recommended more than $3.8 trillion in savings over the next decade.

The proposal includes sweeping changes to Social Security, the elimination of popular tax breaks and subsidies for special interests, and nearly $1.5 trillion in "illustrative" cuts from defense and domestic spending programs.


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The panel's chairmen, Democrat Erskine Bowles and Republican Alan Simpson, began trying to sell the plan to their 16 commission members Wednesday, three weeks before the panel must report its findings and recommendations to President Obama on Dec. 1.

"America cannot be great if we go broke," their proposal says. "Our economy will not grow and our country will not be able to compete without a plan to get this crushing debt burden off our back."

For any of the proposals to reach Congress, 14 of 18 commission members must agree — a high bar, considering six were named by congressional Democrats and six by Republicans.

Because of the weak economy, the co-chairmen recommended that none of the proposals take effect until 2012.

Highlights of the plan include:

• Future changes to Social Security designed to ensure its solvency for 75 years, rather than 27 years as currently designed. Wealthier recipients would get less in benefits, wealthier workers would pay more in payroll taxes, and the retirement age would be raised to 69 by 2075.

To make the plan more palatable, a new special minimum benefit would be added to keep minimum-wage workers who completed their careers above the poverty threshold in retirement.

• Eliminating more than $1 trillion in tax breaks and subsidies. This would contribute to deficit reduction while also enabling lawmakers to lower some tax rates and simplify the tax code.

Under one option, the top rate for individuals could be cut from 35% to 28%, and to 26% for corporations. The alternative minimum tax, used to ensure that upper-income taxpayers don't avoid taxes completely, would be eliminated. The federal gas tax, now 18.4 cents a gallon, would be increased gradually by 15 cents.

• About $200 billion in annual spending reductions, equally divided between defense and domestic programs. Weapons systems would be cut, earmarks for parochial projects eliminated, and the federal workforce would forfeit jobs, pay levels and benefits.

Spending would be capped in 2012 at this year's levels, then reduced 1% a year through 2015 before being indexed to inflation.

Other savings include reductions in health care payments to doctors, lawyers, drug companies and others. Patients would pay slightly more in deductibles and copayments.

Farm subsidies would be slashed by $3 billion a year. Interest costs would be slashed by $673 billion over the decade.

Savings would grow over time, from $69 billion in 2012 to $372 billion in 2015 and $761 billion in 2020. Taken together, the proposals would reduce the debt to 60% of the nation's economy, considered an acceptable level, by 2024. By 2037, the budget would be balanced.

Commission member Andy Stern, who retired this year as president of the Service Employees International Union, said the proposals include "lots" of objectionable provisions. Still, he said, "It's not as if doing nothing is a really great option either."

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