October 25, 2014

Competing Plans to Cut Future Deficits

  • The national debt has grown significantly in recent years due to rising annual deficits. A deficit occurs in any year the government spends more...

Republicans and Democrats on the congressional super committee proposed two widely divergent deficit-reduction plans last week, with each side suggesting that the other had fallen far short of what was required.

With the committee operating largely behind closed doors, many details of the proposals remained uncertain. The Democrat plan was described as cutting projected deficits by $3 trillion over 10 years, with $1.3 trillion of that in increased tax revenue.  The Republicans suggested a plan to reduce the deficits by $2.2 trillion.

On the positive side, both of these proposals would far exceed the committee’s assigned deficit-reduction goal.

House Speaker John Boehner derided the Democratic proposal last week, saying “it’s time for everybody to get serious” and complaining in particular about the idea of a $1.3 trillion increase in tax revenue. He also said Democrats should be prepared to accept larger cuts in Medicaid.

Democrats said the GOP had to show some flexibility on tax increases, at least for Americans with higher incomes. House Minority Leader Nancy Pelosi said it would be unfair to ask older Americans to give up some of their federal benefits and pay higher Medicare premiums if “we are not going to touch a hair on the head of the wealthiest people in our country.”

Some members in both parties, however, expressed interest in the possibility of relying on a different measure of inflation that could result in additional tax revenue and smaller increases in future benefits, including those for Social Security.