The health of our economy depends on what we do right now to create the conditions where businesses can hire and middle-class families can feel a basic measure of economic security. In the long run, our prosperity also depends on our ability to pay down the massive debt the federal government has accumulated over the past decade. Today, the President sent to the Joint Committee his plan to jumpstart economic growth and job creation now – and to lay the foundation for it continue for years to come.
The President’s Plan for Economic Growth and Deficit Reduction lives up to a simple idea: as a Nation, we can live within our means while still making the investments we need to prosper – from a jobs bill that is needed right now to long-term investments in education, innovation, and infrastructure. It follows a balanced approach: asking everyone to do their part, so no one has to bear all the burden. And it says that everyone – including millionaires and billionaires – has to pay their fair share. Overall, it pays for the President’s jobs bill and produces net savings of more than $3 trillion over the next decade, on top of the roughly $1 trillion in spending cuts that the President already signed into law in the Budget Control Act – for a total savings of more than $4 trillion over the next decade. This would bring the country to a place, by 2017, where current spending is no longer adding to our debt, debt is falling as a share of the economy, and deficits are at a sustainable level.
THE AMERICAN JOBS ACT
- Tax cuts to help businesses hire and grow
- Cutting the payroll tax in half on the first $5 million in payroll, targeting the benefit to the 98 percent of firms with payroll below this threshold.
- A complete payroll tax holiday for added workers or increased wages up to $50 million
- Extending 100 percent expensing into 2012
- Reforms and regulatory reductions to help entrepreneurs and small businesses access capital
- Putting workers back on the job while rebuilding and modernizing America
- A “Returning Heroes” hiring tax credit for veterans
- Preventing up to 280,000 teacher layoffs, while keeping cops and firefighters on the job
- Immediate investments in infrastructure, school buildings, and neighborhoods as well as a bipartisan National Infrastructure Bank
- Pathways back to work for Americans looking for jobs
- The most innovative reform to the unemployment insurance program in 40 years and extension of emergency unemployment insurance preventing 6 million Americans looking for work from losing benefits
- A $4,000 tax credit to employers for hiring the long-term unemployed
- Prohibiting employers from discriminating against unemployed workers when hiring
- Expanding job opportunities for low-income youth and adults
- Tax relief for every American worker and family
- Cutting payroll taxes in half for 160 million workers next year
- Allowing more Americans to refinance their mortgages
- Fully paid for as part of the President’s long-term deficit reduction plan
PAYING FOR OUR INVESTMENTS AND REDUCING THE DEFICIT
- The plan produces approximately $4.4 trillion in deficit reduction net the cost of the American Jobs Act.
- $1.2 trillion from the discretionary cuts enacted in the Budget Control Act.
- $580 billion in cuts and reforms to a wide range of mandatory programs;
- $1.1 trillion from the drawdown of troops in Afghanistan and transition from a military to a civilian-led mission in Iraq
- $1.5 trillion from tax reform
- $430 billion in additional interest savings
- To spur economic growth and job creation, the plan includes one-time investment and relief in the American Jobs Act. That adds to the deficit in 2012 but is fully paid for over 10 years, and deficit reduction phases in starting in 2013, as the economy grows stronger.
- Deficit reduction is achieved in a balanced approach, with a spending cut to revenue ratio for the entire plan (including discretionary cuts) of 2 to 1.
Deficits and Debt
- The Joint Committee plan significantly reduces deficits and puts the country on a fiscally sustainable path by 2017.
- The deficit is projected to fall to 2.3 percent of GDP in 2021. By comparison, if we did nothing, the deficit would be 5.5 percent of GDP in 2021.
- Reaches “primary balance”— where our current spending is no longer adding to our debt — in 2017. At that point, current spending is no longer adding to our debt, debt is falling as a share of the economy, and deficits are at a sustainable level.
- The President’s plan would reduce the national debt as a share of economy
- Stable or falling debt as a share of the economy is a key metric of fiscal sustainability.
- If we did nothing, the national debt would rise to 90.7 percent of GDP in 2021. By contrast, under the President’s plan, the national debt would fall to 73.0 percent of GDP in 2021 — or an improvement of almost 18 percentage points.
- The plan includes $320 billion in health savings that build on the Affordable Care Act to strengthen Medicare and Medicaid by reducing wasteful spending and erroneous payments, and supporting reforms that boost the quality of care. It accomplishes this in a way that does not shift significant risks onto the individuals they serve; slash benefits; or undermine the fundamental compact they represent to our Nation’s seniors, people with disabilities, and low-income families.
- The plan includes $248 billion in savings from Medicare.
- Within this total, 90 percent of the savings, or $224 billion, comes from reducing overpayments in Medicare.
- Any savings that affect beneficiaries do not begin until 2017.
- The plan does not propose to change the eligibility age for Medicare benefits.
- Other health and Medicaid savings amount to $72 billion.
- Because of the structural nature of these reforms, health savings grow to over $1 trillion in the second decade.
- The President will veto any bill that takes one dime from the Medicare benefits seniors rely on without asking the wealthiest Americans and biggest corporations to pay their fair share.
- The plan includes $250 billion in savings from other mandatory programs.
- Included within these savings are:
- $33 billion in savings from agriculture subsidies, payments, and programs
- $42.5 billion in reforms to Federal employee benefit programs, including programs for civilian employees and military personnel.
- $4.1 billion from the disposal of unused government assets.
- $92.2 billion from restructuring government operations and reducing government liabilities.
- $77.6 billion from improving Federal program management and reducing waste and abuse.
- The President calls on the Committee to undertake comprehensive tax reform, and lays out five principles for it to follow: 1) lower tax rates; 2) cut wasteful loopholes and tax breaks; 3) reduce the deficit by $1.5 trillion; 4) boost job creation and growth; and 5) comport with the “Buffett Rule” that people making more than $1 million a year should not pay a smaller share of their income in taxes than middle-class families pay.
- Tax reform should draw on the specific proposals the President has put forward, together with elimination of additional inefficient tax breaks. If the Joint Committee is unable to undertake comprehensive tax reform, the President believes the discrete measures he has proposed should be enacted on a standalone basis. Their enactment as a standalone package still would significantly improve the country’s fiscal standing, represent an important step toward more fundamentally transforming our tax code, and serve as a strong foundation for economic growth and job creation.
- To advance this debate, the President is offering a detailed set of specific tax loophole closers and measures to broaden the tax base that, together with the expiration of the high-income tax cuts, would be more than sufficient to hit the $1.5 trillion target. These include:
- Allowing the 2001 and 2003 tax cuts for upper income earners to expire ($866 billion)
- Limiting deductions and exclusions for those making more than $250,000 a year ($410 billion)
- Closing loopholes and eliminating special interest tax breaks (approximately $300 billion)
President Obama appeared at the White House on Sunday night to announce that Congressional leaders have reached an agreement on the debt ceiling. The President said the agreement wasn’t the deal he “would have preferred” but said he would support it nonetheless.
Below is the fact sheet on the bipartisan debt deal:
Bipartisan Debt Deal: A Win for the Economy and Budget Discipline
- Removes the cloud of uncertainty over our economy at this critical time, by ensuring that no one will be able to use the threat of the nation’s first default now, or in only a few months, for political gain;
- Locks in a down payment on significant deficit reduction, with savings from both domestic and Pentagon spending, and is designed to protect crucial investments like aid for college students;
- Establishes a bipartisan process to seek a balanced approach to larger deficit reduction through entitlement and tax reform;
- Deploys an enforcement mechanism that gives all sides an incentive to reach bipartisan compromise on historic deficit reduction, while protecting Social Security, Medicare beneficiaries and low-income programs;
- Stays true to the President’s commitment to shared sacrifice by preventing the middle class, seniors and those who are most vulnerable from shouldering the burden of deficit reduction. The President did not agree to any entitlement reforms outside of the context of a bipartisan committee process where tax reform will be on the table and the President will insist on shared sacrifice from the most well-off and those with the most indefensible tax breaks.Mechanics of the Debt Deal
- Immediately enacted 10-year discretionary spending caps generating nearly $1 trillion in deficit reduction; balanced between defense and non-defense spending.
- President authorized to increase the debt limit by at least $2.1 trillion, eliminating the need for further increases until 2013.
- Bipartisan committee process tasked with identifying an additional $1.5 trillion in deficit reduction, including from entitlement and tax reform. Committee is required to report legislation by November 23, 2011, which receives fast-track protections. Congress is required to vote on Committee recommendations by December 23, 2011.
- Enforcement mechanism established to force all parties – Republican and Democrat – to agree to balanced deficit reduction. If Committee fails, enforcement mechanism will trigger spending reductions beginning in 2013 – split 50/50 between domestic and defense spending. Enforcement protects Social Security, Medicare beneficiaries, and low-income programs from any cuts.1. REMOVING UNCERTAINTY TO SUPPORT THE AMERICAN ECONOMY
- Deal Removes Cloud of Uncertainty Until 2013, Eliminating Key Headwind on the Economy: Independent analysts, economists, and ratings agencies have all made clear that a short-term debt limit increase would create unacceptable economic uncertainty by risking default again within only a matter of months and as S&P stated, increase the chance of a downgrade. By ensuring a debt limit increase of at least $2.1 trillion, this deal removes the specter of default, providing important certainty to our economy at a fragile moment.
- Mechanism to Ensure Further Deficit Reduction is Designed to Phase-In Beginning in 2013 to Avoid Harming the Recovery: The deal includes a mechanism to ensure additional deficit reduction, consistent with the economic recovery. The enforcement mechanism would not be made effective until 2013, avoiding any immediate contraction that could harm the recovery. And savings from the down payment will be enacted over 10 years, consistent with supporting the economic recovery.2. A DOWNPAYMENT ON DEFICIT REDUCTION BY LOCKING IN HISTORIC SPENDING DISCIPLINE – BALANCED BETWEEN DOMESTIC AND PENTAGON SPENDING
- More than $900 Billion in Savings over 10 Years By Capping Discretionary Spending: The deal includes caps on discretionary spending that will produce more than $900 billion in savings over the next 10 years compared to the CBO March baseline, even as it protects core investments from deep and economically damaging cuts.
- Includes Savings of $350 Billion from the Base Defense Budget – the First Defense Cut Since the 1990s: The deal puts us on track to cut $350 billion from the defense budget over 10 years. These reductions will be implemented based on the outcome of a review of our missions, roles, and capabilities that will reflect the President’s commitment to protecting our national security.
- Reduces Domestic Discretionary Spending to the Lowest Level Since Eisenhower: These discretionary caps will put us on track to reduce non-defense discretionary spending to its lowest level since Dwight Eisenhower was President.
- Includes Funding to Protect the President’s Historic Investment in Pell Grants: Since taking office, the President has increased the maximum Pell award by $819 to a maximum award $5,550, helping over 9 million students pay for college tuition bills. The deal provides specific protection in the discretionary budget to ensure that the there will be sufficient funding for the President’s historic investment in Pell Grants without undermining other critical investments.3. ESTABLISHING A BIPARTISAN PROCESS TO ACHIEVE $1.5 TRILLION IN ADDITIONAL BALANCED DEFICIT REDUCTION BY THE END OF 2011
- The Deal Locks in a Process to Enact $1.5 Trillion in Additional Deficit Reduction Through a Bipartisan, Bicameral Congressional Committee: The deal creates a bipartisan, bicameral Congressional Committee that is charged with enacting $1.5 trillion in additional deficit reduction by the end of the year. This Committee will work without the looming specter of default, ensuring time to carefully consider essential reforms without the disruption and brinksmanship of the past few months.
- This Committee is Empowered Beyond Previous Bipartisan Attempts at Deficit Reduction: Any recommendation of the Committee would be given fast-track privilege in the House and Senate, assuring it of an up or down vote and preventing some from using procedural gimmicks to block action.
- To Meet This Target, the Committee Will Consider Responsible Entitlement and Tax Reform. This means putting all the priorities of both parties on the table – including both entitlement reform and revenue-raising tax reform.4. A STRONG ENFORCEMENT MECHANISM TO MAKE ALL SIDES COME TOGETHER
- The Deal Includes An Automatic Sequester to Ensure That At Least $1.2 Trillion in Deficit Reduction Is Achieved By 2013 Beyond the Discretionary Caps: The deal includes an automatic sequester on certain spending programs to ensure that—between the Committee and the trigger—we at least put in place an additional $1.2 trillion in deficit reduction by 2013.
- Consistent With Past Practice, Sequester Would Be Divided Equally Between Defense and Non-Defense Programs and Exempt Social Security, Medicaid, and Low-Income Programs: Consistent with the bipartisan precedents established in the 1980s and 1990s, the sequester would be divided equally between defense and non-defense program, and it would exempt Social Security, Medicaid, unemployment insurance, programs for low-income families, and civilian and military retirement. Likewise, any cuts to Medicare would be capped and limited to the provider side.
- Sequester Would Provide a Strong Incentive for Both Sides to Come to the Table: If the fiscal committee took no action, the deal would automatically add nearly $500 billion in defense cuts on top of cuts already made, and, at the same time, it would cut critical programs like infrastructure or education. That outcome would be unacceptable to many Republicans and Democrats alike – creating pressure for a bipartisan agreement without requiring the threat of a default with unthinkable consequences for our economy.5. A BALANCED DEAL CONSISTENT WITH THE PRESIDENT’S COMMITMENT TO SHARED SACRIFICE
- The Deal Sets the Stage for Balanced Deficit Reduction, Consistent with the President’s Values: The deal is designed to achieve balanced deficit reduction, consistent with the values the President articulated in his April Fiscal Framework. The discretionary savings are spread between both domestic and defense spending. And the President will demand that the Committee pursue a balanced deficit reduction package, where any entitlement reforms are coupled with revenue-raising tax reform that asks for the most fortunate Americans to sacrifice.
- The Enforcement Mechanism Complements the Forcing Event Already In Law – the Expiration of the Bush Tax Cuts – To Create Pressure for a Balanced Deal: The Bush tax cuts expire as of 1/1/2013, the same date that the spending sequester would go into effect. These two events together will force balanced deficit reduction. Absent a balanced deal, it would enable the President to use his veto pen to ensure nearly $1 trillion in additional deficit reduction by not extending the high-income tax cuts.
- In Securing this Bipartisan Deal, the President Rejected Proposals that Would Have Placed the Sole Burden of Deficit Reduction on Low-Income or Middle-Class Families: The President stood firmly against proposals that would have placed the sole burden of deficit reduction on lower-income and middle-class families. This includes not only proposals in the House Republican Budget that would have undermined the core commitments of Medicare to our seniors and forced tens of millions of low-income Americans to go without health insurance, but also enforcement mechanisms that would have forced automatic cuts to low-income programs. The enforcement mechanism in the deal exempts Social Security, Medicaid, Medicare benefits, unemployment insurance, programs for low-income families, and civilian and military retirement.
In a column in The Huffington Post, Governor O’Malley calls out tea-partying Republicans who want to drive the country to the brink of economic ruin and then argue that the only way is to make radical cuts to important programs for the poor and vulnerable like Medicare, Medicaid, and Social Security. The GOP’s primary goal is to defeat President Obama by killing the recovery.
Everyone agrees that we have to reduce the deficit. But most also agree that reducing spending and addressing revenue have to part of the plan. This balanced approach is not partisan, its pragmatic.
Governor O’Malley’s column is reproduced below:
President Obama cannot and should not agree to the false choices being disingenuously laid out by Congressional Republican pretenders.
We must pay our bills on time, and we must retire the Bush deficit over time. And we must do this with a balanced approach that allows us to create and save jobs at the same time — just as former President Clinton did after inheriting the Reagan-Bush deficit. We cannot allow fiscally irresponsible tea-partying Republicans to kill job creation and increase unemployment under the false pretext of controlling spending and limiting debt. Whether by massive Medicaid cuts that fall on state governments or by needlessly driving the United States into a default position, the damage to the jobs recovery is the same.
These Congressional Republican pretenders would like us all to believe that notwithstanding their complicity in creating the Bush deficit with huge tax cuts for millionaires and billionaires, notwithstanding their approval of a series of desert wars financed by debt, notwithstanding routine increases in the debt ceiling during then Bush and Reagan presidencies, that now every national priority — including creating and saving jobs — must wait until the Bush deficit is immediately retired.
These Republican phonies and their new era tea-party collaborators don’t care about job creation or fiscal responsibility. Their priority isn’t jobs, it isn’t fiscal responsibility, it’s politics. They have one goal and one goal only — to defeat President Obama in the upcoming election by killing the jobs recovery now. And they do this in one of two ways: by radical, abrupt, and massive budget cuts on the one hand, or by driving our country needlessly into default on the other hand.
There is not a modern nation on the planet that can retire its debt with 10 percent unemployment.
These political calculators think they are slick, and they think Americans are all gullible and stupid. They think they have slyly figured out that they can win the election only if America loses jobs. These scammers and schemers believe they can win the election only if they can stall or stop the jobs recovery. They think no one is going to call them on it. And they might be right.
In the meantime, they are willing to inflict as much damage on state governments or the nation’s credit rating as it takes to realize their goal.
President Obama cannot and should not agree to the damaging choices being falsely laid out by Congressional Republican pretenders.
Creating and saving jobs must be our nation’s top priority.
This is what we promised; this is what we must deliver.