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  • 1. Select Committee on Deficit Reduction -Setting the Stage & Fiscal Challenges Ahead Dr. Jason J. Fichtner Senior Research Fellow Mercatus Center October 19, 2011 Mercatus Center at George Mason University Spending and Budget Initiative Event: A Sustainable Approach to Entitlement Reform
  • 2. Joint Select Committee on Deficit Reduction
    • Budget Control Act of 2011
    • Charges Joint Select Committee with finding $1.5 trillion in deficit reduction, including interest savings, through 2021
    • Using CBO current law baseline:
      • $1.5 trillion in deficit reduction -> 60% publicly-held federal debt to GDP
      • Assumes December 2010 tax law expires in 2012
      • To get 60% debt-GDP goal would require beginning 2013:
      • 10% cut discretionary spending only
      • 5% cut mandatory spending only
      • 4% cut – equal percentages discretionary & mandatory
      • 7% increase in tax in income taxes only
      • 3% increase in all federal revenues only
      • 2% equal spending /revenue
    Source: Pew Charitable Trusts – Analysis of CBO Data http://www.pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Reports/Fiscal_Analysis/Essential_Federal_Fiscal_Charts.pdf
  • 3. Joint Select Committee on Deficit Reduction
    • Using CBO current policy baseline:
      • Assumes full extension of December 2010 tax law, index AMT for inflation, override planned cuts to Medicare Part B “doc fix,” etc.
      • $1.5 trillion in deficit reduction -> 79% publicly-held federal debt to GDP
      • To get 60% debt-GDP goal would require $6.1 trillion:
      • 46% cut discretionary spending only (10%)
      • 21% cut mandatory spending only (5%)
      • 15% cut – equal percentages discretionary & mandatory (4%)
      • 36% increase in tax in income taxes only (7%)
      • 16% increase in all federal revenues (3%)
      • 8% equal spending/revenue (2%)
    Source: Pew Charitable Trusts – Analysis of CBO Data http://www.pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Reports/Fiscal_Analysis/Essential_Federal_Fiscal_Charts.pdf