president's fiscal framework
TRANSCRIPT
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PolicyBackgrounder:
Reduction
Framework
5/09/2011
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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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PresidentObamasApproachReducestheDeficitby$4Trillionover
theNext12Years
$770Bin
NonSecurity
Discretionary
S endin
$1TrillionFromlowerinterest
$400Bin
$2TrillionFromreductionsin
domestic&security
debtSecurity
Spending
spending$1TrillionFromtax
reform
$480Bin
Medicareand
Medicaid
Savings
$360Bin
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Other
Mandatory
Savings
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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
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o a e c e uc on . r on r on
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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
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,
Presidentisproposinggoingbeyondeliminationofwasteand
improvementofefficiencybyconductingafundamentalreviewof
Americasmissions,capabilities,andourroleinachangingworld.
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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.
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10years.
ReduceMedicaresexcessivespendingonprescriptiondrugsandlowerdrugpremiumsfor
beneficiaries without
shifting
costs
to
seniors
or
privatizing
Medicare.
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CombinedMedicaresavings
ofatleast$200billionover
10years
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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
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throughMedicaid.
RecovererroneouspaymentsfromMedicareAdvantage;establishupperlimitsonMedicaidpaymentsfordurable
medicalequipment.
Take
other
actions
to
improve
program
integrity.
increasing
accountability
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OtherMandatorySpending
ATargetof$360BillioninSavingsover12Years
Reformstomandatoryprogramsshouldprotectandstrengthenthesafetynetforlow
incomefamiliesandothervulnerableAmericans.
Outsideofhealthcare,comprehensivedeficitreductionmustincludesavingsinother
mandatoryprograms.
ThePresidenthasproposedmeasurestoreformagriculturalsubsidies,shoreupthe
federalpensioninsurancesystem,restoresolvencytothefederalunemployment
insurancetrustfund,andenactantifraudmeasures.
TheFiscalCommissionandotherbipartisaneffortshaveputforwardadditional
proposalsthatshouldbeconsideredaspartofacomprehensivedeficitreductioneffort
tomeetthistarget.
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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.
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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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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
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.
Securitybenefits.
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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.
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year. cu o near y n e care a one.
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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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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
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an accoun an s
Doesnotmakeourdeficitproblemworseby
extendingtheBushtaxcutsforthe
wealthiestAmericansTaxReform
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