Jason Fichtner Presentation on Entitlement Reform

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Jason Fichtner Presentation on Entitlement Reform

  1. 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. 2. Joint Select Committee on Deficit Reduction <ul><li>Budget Control Act of 2011 </li></ul><ul><li>Charges Joint Select Committee with finding $1.5 trillion in deficit reduction, including interest savings, through 2021 </li></ul><ul><li>Using CBO current law baseline: </li></ul><ul><ul><li>$1.5 trillion in deficit reduction -> 60% publicly-held federal debt to GDP </li></ul></ul><ul><ul><li>Assumes December 2010 tax law expires in 2012 </li></ul></ul><ul><ul><li>To get 60% debt-GDP goal would require beginning 2013: </li></ul></ul><ul><ul><li>10% cut discretionary spending only </li></ul></ul><ul><ul><li>5% cut mandatory spending only </li></ul></ul><ul><ul><li>4% cut – equal percentages discretionary & mandatory </li></ul></ul><ul><ul><li>7% increase in tax in income taxes only </li></ul></ul><ul><ul><li>3% increase in all federal revenues only </li></ul></ul><ul><ul><li>2% equal spending /revenue </li></ul></ul>Source: Pew Charitable Trusts – Analysis of CBO Data http://www.pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Reports/Fiscal_Analysis/Essential_Federal_Fiscal_Charts.pdf
  3. 3. Joint Select Committee on Deficit Reduction <ul><li>Using CBO current policy baseline: </li></ul><ul><ul><li>Assumes full extension of December 2010 tax law, index AMT for inflation, override planned cuts to Medicare Part B “doc fix,” etc. </li></ul></ul><ul><ul><li>$1.5 trillion in deficit reduction -> 79% publicly-held federal debt to GDP </li></ul></ul><ul><ul><li>To get 60% debt-GDP goal would require $6.1 trillion: </li></ul></ul><ul><ul><li>46% cut discretionary spending only (10%) </li></ul></ul><ul><ul><li>21% cut mandatory spending only (5%) </li></ul></ul><ul><ul><li>15% cut – equal percentages discretionary & mandatory (4%) </li></ul></ul><ul><ul><li>36% increase in tax in income taxes only (7%) </li></ul></ul><ul><ul><li>16% increase in all federal revenues (3%) </li></ul></ul><ul><ul><li>8% equal spending/revenue (2%) </li></ul></ul>Source: Pew Charitable Trusts – Analysis of CBO Data http://www.pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Reports/Fiscal_Analysis/Essential_Federal_Fiscal_Charts.pdf

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