president's fiscal framework

8/6/2019 President's Fiscal Framework

1/17

PolicyBackgrounder:

Reduction

Framework

5/09/2011

1


2/17

ABalancedandFairEconomicStrategytoEnsureWeLiveWithinOur

Means

Occurringover12yearsorless

Phasedintoprotecteconomicrecovery$4TrillioninDeficit Willreducedeficitsasashareofoureconomyto

about2.5%ofGDPby2015Reduction

If,in2014,debttoGDPratioisnotprojectedtodecline

bytheendofthedecade,thedebtcapmechanismis

triggered

AcrosstheboardreductionsindirectspendingandDebtCap spen ng roug e axco ew eexemp ng oc a Security,Medicarebenefitsandlowincomeprograms

o spen ngcutsan nterestsav ngs oreveryoftaxreformthatcontributestodeficitreduction

Sharedsacrificefromall,includingendingtheBush

taxcutsforthewealthiestAmericans.

SpendingCutsand

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3/17

PresidentObamasApproachReducestheDeficitby$4Trillionover

theNext12Years

$770Bin

NonSecurity

Discretionary

S endin

$1TrillionFromlowerinterest

$400Bin

$2TrillionFromreductionsin

domestic&security

debtSecurity

Spending

spending$1TrillionFromtax

reform

$480Bin

Medicareand

Medicaid

Savings

$360Bin

3

Other

Mandatory

Savings


4/17


5/17

OverviewofthePresidentsFramework

RelativetoOMBBaseline:$4TrillioninDeficitReductionOvertheNext12Years

SpendingCuts $1.5Trillion $2.01Trillion

SecurityDiscretionary $290Billion $400Billion

NonSecurityDiscretionary $620Billion $770 Billion

HealthSpending $340Billion $480Billion

Other MandatorySpending $290Billion $360Billion

TaxReform $760Billion $1Trillion

Interest $620Billion $990Billion

5

o a e c e uc on . r on r on


6/17

DiscretionarySpending:$1.2Trillionindeficitreductionover

12years

NonSecuritySavingsEqualtotheFiscalCommissions,WhileInvestingInOurFuture:

BuildsonthesavingsfromtheFY11budgettocuttingnonsecurity

spending

to

levels

consistent

with

what

the

Fiscal

Commission

recommendedoverthenextdecade;reducingnonsecurity

discretionaryspendingtoitslowestlevelasshareoftheeconomy

sinceEisenhower

Over12years,atotalof

Stillensuresthatwecontinuetomaketheinvestmentsweneed

towinthefutureandnotthreatentheeconomicrecovery.reduction.AdditionalDisciplineonSecuritySpendingWhileKeepingAmericaSafe:

ecretary ates ass ownovert e asttwoyearst att ere s

substantialwasteandduplicationinoursecuritybudgetthatwe

canandshouldeliminateproposingsavingsof$400billionin

currentandfuturedefensespending.

Over12years,savings

6

,

Presidentisproposinggoingbeyondeliminationofwasteand

improvementofefficiencybyconductingafundamentalreviewof

Americasmissions,capabilities,andourroleinachangingworld.


7/17

HealthCare:BuildsontheSavingsintheAffordableCareAct

2023:

Another$140billioninsavings foratotal

HealthCareSavingsTimeline:

of$480billionsavedontopofACAsavings

:

Another$340billionsaved

inaddition to $200billionfrom

the

ACA

:

IntheseconddecadetheFrameworkwillsave

another$1trillioninaddition tothe$1trillionfromtheACA

Saves$340Billionoverthenext10yearsontopofthe$200BillionsavedintheACA

MakeMedicaidmoreflexible,efficientandaccountable withoutresortingtoblockgrantingtheCombinedMedicaidsavings1

Bendthelongtermcostcurve throughstrengtheningtheIndependentPaymentAdvisory

Board(IPAB)withamoreambitioustargetforsavings.

,

nursinghomes,themosteconomicallyvulnerableandpeoplewithdisabilities.

HoldingMedicarecostgrowthper

beneficiarytoGDPpercapitaplus

0.5percentbeginningin2018.

2

10years.

ReduceMedicaresexcessivespendingonprescriptiondrugsandlowerdrugpremiumsfor

beneficiaries without

shifting

costs

to

seniors

or

privatizing

Medicare.

7

CombinedMedicaresavings

ofatleast$200billionover

10years

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8/17

HealthCare:MoreToolstoSaveCostsandImproveQuality

Undercurrentlaw,StatesfaceapatchworkofdifferentFederalpaymentcontributionsforMedicaidandtheChildrens

HealthInsuranceProgram(CHIP).

ThePresidentsframeworkwouldreplacethecurrentcomplicatedFederalmatchingformulaswithasinglematching

rateforallprogramspendingthatrewardsStatesforefficiencyandautomaticallyincreasesifarecessionforces

Reformingthe

FederalState.

Inaddition,thePresidenthascalledontheNationalGovernorsAssociation(NGA)tomakerecommendationsforways

to

reform

and

strengthen

Medicaid,

and

the

framework

will

consider

the

ideas

that

its

Task

Force

produces. The

PresidentalsosupportsreformofMedicaidtoincentivizemoreefficient,higherquality,careforhighcostbeneficiaries,

includingthosewhoareeligibleforbothMedicaidandMedicare.

Theseninemillionbeneficiariescomprise15percentofMedicaidenrollmentbutconsumenearly40percentoftotal

Medicaidspending.

par ners ps o

strengthen

Medicaid;

promoteefficiency,&

accountability

ThetwogoalsofthisnewPartnershipare:preventingpatientsfromgettinginjuredorsickerwhiletheyareinthe

hospitalandhelpingpatientshealwithoutcomplication.

Achievingtheinitiativesgoalwouldmeanmorethan1.6millionpatientswillrecoverfromillnesswithouta

preventablecomplication,reducingcostsbyupto$50billioninMedicareandbillionsmoreinMedicaidoverthenextImproving

patient

safety10years.

LimitexcessivepaymentsforprescriptiondrugsbyleveragingMedicarespurchasingpower similartowhatwascalled

forbythebipartisanFiscalCommission.

Speeduptheavailabilityofgenericbiologics,andprohibitbrandnamecompaniesfromenteringintopayfordelay

Cuttingunnecessary

prescriptiondrug

agreements

with

generic

companies.

And,

implement

Medicaid

management

of

high

prescribers

and

users

of

prescriptiondrugs.spending

ClampdownonStatesuseofprovidertaxestolowertheirownspendingwhilenotprovidingadditionalhealthservices

8

throughMedicaid.

RecovererroneouspaymentsfromMedicareAdvantage;establishupperlimitsonMedicaidpaymentsfordurable

medicalequipment.

Take

other

actions

to

improve

program

integrity.

increasing

accountability


9/17

OtherMandatorySpending

ATargetof$360BillioninSavingsover12Years

Reformstomandatoryprogramsshouldprotectandstrengthenthesafetynetforlow

incomefamiliesandothervulnerableAmericans.

Outsideofhealthcare,comprehensivedeficitreductionmustincludesavingsinother

mandatoryprograms.

ThePresidenthasproposedmeasurestoreformagriculturalsubsidies,shoreupthe

federalpensioninsurancesystem,restoresolvencytothefederalunemployment

insurancetrustfund,andenactantifraudmeasures.

TheFiscalCommissionandotherbipartisaneffortshaveputforwardadditional

proposalsthatshouldbeconsideredaspartofacomprehensivedeficitreductioneffort

tomeetthistarget.

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10/17

TaxReform:$1TrillioninDeficitReductionWhileMoving

TowardAFairerandSimplerSystem

ThePresidentiscallin onCon resstoundertakecom rehensivetaxreformthat

WeCannotAffordtoContinuetheBushTaxCutsfortheWealthiestAmericans&andWe

NeedTaxReformtoSupportEconomicGrowth

producesasystemwhichissimpler,morefair,hasfewerloopholes,andisnotriggedin

favorofthosewhocanaffordlawyersandaccountantstogameit.

e e eves orrow ngnear y r on oex en e us axcu s or ewea es

Americansisntourmosturgentnationalpriorityandonlymakesdeficitsworse.

Inaddition,healsosupportseffortstobuildontheFiscalCommissionsgoalof

reducingtaxexpendituressothatthereisenoughsavingstobothlowerratesand

lowerthedeficitby$1trillion.Reformshouldbedesignedtoaskmoreofthosewho

canafforditwhileprotectingthemiddleclassandpromotingeconomicgrowth.

Inaddition,asheexplainedintheStateoftheUnion,thePresidentiscontinuinghis

efforttoreformouroutdatedcorporatetaxcodetoenhanceoureconomic

competitivenessandencourageinvestmentintheUnitedStates.Byeliminating

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loopholes,reducingdistortionsandlevelingtheplayingfieldinourcorporatetaxcode,

wecanusethesavingstolowerthecorporatetaxrateforthefirsttimein25years

withoutaddingtothedeficit.


11/17

L ckin in D tR cti n

LockinginDebtReduction

ThePresidentsframeworklocksindebtreduction throughadebtcapthattargetswhatmattersdebtreduction. Unlikeaspendingcap,adebtcapputsusonapathtowardfiscalresponsibilityandwouldnotspendingcutstosimplygotopayformoretaxbreaksforthewelloff.

Debt

reduction

under

the

Presidents

framework.

The

Presidents

framework

is

projected

to

reduce

the

deficitto2.5percentby2015andputsdeficitsonadecliningpathtowardcloseto2.0%ofGDPtowardthe

endofthedecade. Thiswillbegintoreducethedebtasashareoftheeconomy.

Debtcap. TolockinthisdebtreductionandtogiveCongressevengreaterreasontoact,wearecallingfor:

A

debt

cap

that

will

ensure

that

our

nations

debt

is

on

a

declining

path

as

a

share

of

our

economy.

If

by

2014,budgetprojectionsdonotshowthatthedebttoGDPratioisdeclininginthesecondhalfofthe

decade,thefailsafewilltriggeranacrosstheboardspendingreduction,includingonspendingthrough

thetaxcode.

Thetriggerwillensurethatdeficitsasashareoftheeconomyaveragenomorethan2.8%ofGDPin

the

second

half

of

the

decade.

ConsistentwithpriorfiscalenforcementmechanismsputinplacebyPresidentsReagan,GeorgeH.W.

BushandClinton,thetriggerwouldnot applytoSocialSecurity,lowincomeprograms,orMedicare

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.


12/17

Gl al n in Ca

GlobalSpendingCapsAreUnbalanced,ThreatenCoreInvestmentsand

Commitments,andDoNotEnsureDeficitReduction

TheCAPAct(CorkerMcCaskill)andotherglobalspendingcapswouldforcecutstoinvestmentsinourNationsfuture,aswellasinourcorecommitmentstotheNationsseniorsandmostvulnerablecitizens.And,itmaynotevenreducethedeficitsincethesespendingcutscouldjustbeusedtopayoradditionaltaxbreaks.

CAPActdoesnotseekbalance;aimstosolvethedeficitproblembycuttingspendingalone.However,

Spendingcapsalone

failbalanceanddo, .

deficit.

T ecapswou gointop acein2013.Itwou capspen ingatt eaverageo t e ast40yearsor

about20.6%ofGDPby2022.However,comparedto2000,thenumberofAmericansonMedicareand

SocialSecuritywillgoupby50percent withnearly25millionmorerecipientsoneach by2020.

Thatagingcannotbecappedorrepealed,whichmeansglobalspendingcapswilllikelyforcedeepcuts

toSocialSecurityandMedicare.

apsa averageo

last40yearscannot

repealtheagingof

thepopulation

Thecapwouldbeenforcedviaanautomaticsequesteronall federal spending,excludinginterest. That

meansitcouldproduceanautomaticcutoncurrentSocialSecuritybenefits,aswellaslowincome

Sequesteronall

spendingincluding

currentSocial

12

.

Securitybenefits.


13/17

CAP Act: C t C m ar t Fi cal C mmi i n

CAPAct: CutsComparedtoFiscalCommission

Thereisnodenyingthemath. TheCAPActwouldforcecutstoinvestmentsinourNationsfuture,aswellasinourcorecommitmentstotheNationsseniorsandmostvulnerablecitizens.And,cuttingonearealessrequirescuttingothersmoretohitacap.

Ifweadoptedall ofthespendingcutslaidoutbythe

FiscalCommissionincludinga20percentcuttoall

on u ,nee e w en e apswouldbefullyphasedinasof2022Translatesto:

scre onaryspen ng nc u ngsecur yan

hundredsofbillionsfromSocialSecurityand

Medicarethatwouldstillleavearoughly$280

billioncutneededwhenthecapswerefullyphased

.

programstogether. Foranaverage

retiree,thatmeansaSocialSecurity

benefitcutofmorethan$1,700per

Acutofmorethan15%inSocialSecurity

alone.

13

year. cu o near y n e care a one.


14/17

Gl al n in Ca

CAPActsSequesterWouldAutomaticallyCutSocialSecurity&

Medicare

Cutstocurrentbenefitswouldstartin2013andtotalmorethan$2trillionofthedecade.

Securityandlowincomeprograms.

Infact,becauseCAPActassignsthelargestcutstothefastestgrowingpartsofthe

budget,thesequesterwouldhitSocialSecurityandMedicareparticularlyhard. Cutsto

currentbenefitswouldstartin2013andtotalmorethan$2trillionofthedecade.

IfweadoptedallofthespendingcutslaidoutbytheFiscalCommissionincludinga20

IfCongressfailstocutspending

tothelevelsundertheCAPAct

caps,thecapswouldenforced

viaanautomaticsequesteron

percentcuttoalldiscretionaryspendingincludingsecurityandhundredsofbillionsfrom

SocialSecurityandMedicarethatwouldstillleavearoughly$280billioncutneeded

whenthecapswerefullyphasedinasof2022.Thatwouldrequirecuttingabout$220

billionfromSocialSecurityandMedicare(saving$60billionininterest).

a programs nc u ngcurrent

SocialSecuritybenefits.

CutsinMedicareandSocialSecurityOverNextDecade UnderCAPActsAutomaticMechanism

(inbillionsofdollars)

2013 2014 2015 2016 2017 2018 2019 2020 2021 20132021

Medicare 28 47 66 93 97 101 122 141 161 856

SocialSecurity 41 71 100 138 147 157 184 210 237 1,285

Total 69 118 166 231 244 258 306 351 398 2,141

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MEMOITEM:

PercentageCut5% 8% 11% 15% 15% 15% 16% 18% 19%

Source: CenteronBudgetandPolicyPriorities

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15/17


16/17


17/17

MajorAreasofContrastwiththeHouseGOPPlan(3of3)

Targets$360billioninsavingsby2023by

ThePresidentsFramework HouseGOPBudgetResolution

Makesdeepcutstoprogramsthatprovide6buildingonproposalsinthePresidents2012

Budget.

securitytofamiliesintimesofneed

Includescuts

of

up

to

30%

to

income

securityprogramssuchastheSupplemental

NutritionAssistanceProgram(SNAP)

Other

Mandatory

pen ng

Pursuesindividualtaxreformthatcloses

loopholesandproducesasystemwhichis

simpler,morefair,andnotriggedinfavorof

thosewhocangamethesystemwithlawyers

Proposes$1.1trillionintaxcutsforfamilies

makingmorethan$250,000

Anaveragetaxcutofnearly$200,000per

millionaire

7

an accoun an s

Doesnotmakeourdeficitproblemworseby

extendingtheBushtaxcutsforthe

wealthiestAmericansTaxReform

17

president's fiscal framework

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