The details of the Gang of Six plan released today are still a bit sketchy, but it's getting plenty of support in the Senate.
Democratic and Republican senators are rallying behind a $3.7 trillion deficit-reduction plan announced Tuesday morning by the five remaining members of the Gang of Six.
Sen. Tom Coburn (R-Okla.), who pulled out of the Gang of Six in May, has rejoined the group and praised the plan as something that could win the 60 votes needed to pass the Senate.[...]
Coburn said the plan would reduce the deficit by $3.7 trillion over the next 10 years and increase tax revenues by $1 trillion by closing a variety of special tax breaks and havens.
He also noted, however, that the Congressional Budget Office would score the plan as a $1.5 trillion tax cut because it would eliminate the Alternative Minimum Tax. It would generate a significant amount of revenue out of tax reform and reduction of tax rates, which authors believe would spur economic growth.
That revenue picture, of course, could doom it with House Republicans. The package would thus have to enough protections for programs like Social Security, Medicare and Medicaid, and enough real revenue to gain significant support from House Democrats. That will still be a tough pull, based on this executive summary.
The plan is based on the Simpson-Bowles discussion, the deficit commission plan that was never official. It would include an "immediate" $500 billion in cuts. It would be two bills, one that implements an immediate $500 billion in cuts and would raise the debt ceiling, and a second that would implement larger reforms. While the executive summary goes to great lengths to say that Social Security should be dealt with on a separate track, it does keep Social Security in the mix with a strange proposal that would hold the larger deficit plan until a Social Security fix is found, but if that fix does not get the 60 votes required, the rest of the deficit plan is voided. That would hold both Social Security and further deficit reduction hostage. Guess which would lose.
But, there's more. Social Security is on the immediate chopping block, because included in the immediate cuts is shifting to the chained CPI for calculating Social Security cost of living adjustments.
Shift to the chained-CPI (a more accurate measure of inflation) government-wide starting in 2012, along with the following specifications for Social Security: (1) exempt SSI from the shift for five years, and then phase in the shift over the next five years; and (2) provide a minimum benefit equal to 125% of the poverty line for five years. (According to CBO, the shift to chained-CPI would result in the annual adjustment growing, on average, about 0.25 percentage points per year slower than the current CPI.) [page 3]
This is a cut in Social Security benefits, no matter what policy makers call it. The summary doesn't identify such specific Medicare or Medicaid cuts, but says that the Congress would be required to find savings:
Finance would permanently reform or replace the Medicare Sustainable Growth Rateformula ($298 billion) and fully offset the cost with health savings, would find an additional $202 billion/$85 billion in health savings, and would maintain the essential health care services that the poor and elderly rely upon. [page 3]
That could come from the proposals we know have been on the negotiating table from the beginning, like the proposal to shift Medicaid to a "blended rate" federal reimbursement system that would result in less money going to states for the program, or the recently proposed means-testing for Medicare. So the hurdle for both Senate and House Democrats who are committed to protecting these programs isn't a given.
But what's significant here, and puts even more pressure on House Speaker John Boehner, is that there are a bunch of Senate Republicans agreeing to including taxes. That might even include tea partyer and Club for Growth guy Sen. Pat Toomey. Once Grover Norquist hears about this, though, expect to see some of that Republican support vanish.
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