Dec. 2 (Bloomberg) -- A proposal awaiting a vote by President Barack Obama’s deficit-cutting commission would eliminate $3.8 trillion in federal spending by 2020 and balance the budget by 2035.
The plan would raise the Social Security retirement age, slow the growth in benefits and increase the amount of income subject to the program’s payroll tax. On health care, it would cut reimbursements to doctors participating in Medicare, clamp down on medical-malpractice suits, reduce subsidies to hospitals that train doctors and set a cap on federal health-care costs.
The commission plans to vote tomorrow on the Dec. 1 proposal by co-chairmen Erskine Bowles, a former chief of staff to President Bill Clinton, and Alan Simpson, a former Republican senator from Wyoming. Agreement is needed from 14 of the panel’s 18 members to send a proposal to Congress for a vote on whether to put it into effect.
The plan would reduce the deficit from $1.3 trillion this year, or about 9 percent of the economy, to $421 billion, or 2.3 percent of the economy by 2015.
It would raise taxes by $1 trillion primarily by scaling back or eliminating hundreds of tax deductions, exclusions and credits such as those letting homeowners write off interest on their mortgage payments. At the same time, the plan would cut individual and corporate income taxes.
Shrinking Federal Workforce
Discretionary government spending would be reduced by $1.6 trillion over the next nine years, with the cuts split about evenly between security- and non-security-related programs. The federal workforce would shrink, the budgets of the White House and Congress would be cut, budget “earmarks” to fund lawmakers’ pet projects would be eliminated and excess federal property would be sold.
Other provisions would increase premiums charged by the Pension Benefit Guaranty Corp., which insures corporate pensions, reduce farm subsidies and increase costs for students who borrow money from the government for college tuition.
The proposal would grant the cash-strapped U.S. Postal Service’s request to eliminate mail delivery service on Saturdays, a move Congress has long resisted, and it would index the cost of government fees and licenses to inflation.
The co-chairmen estimated that the budget-cutting would reduce interest payments on the national debt by approximately $673 billion over nine years.
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