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1 Joseph Henchman, President's Deficit Commission Says Federal Government Should Be 21 Percent of GDP 1 (2010)

handle is hein.taxfoundation/ffcfdxz0001 and id is 1 raw text is: December 2,2010 IM NM No. 253 . .\ ... .. .. President's Deficit Commission Says Federal Government Should Be 21 Percent of GDP Proposal Would Cut Spending and Raise Taxes to Reduce Deficit, Many Principled Tax Reforms Suggested By Joseph Henchman On December 1, 2010, the National Commission on Fiscal Responsibility and Reform published Moment of Truth, its recommendations to correct the nation's unsustainable fiscal path. Here we summarize the report's major recommendations. Through six maj or components (discretionary spending cuts, comprehensive tax reform, health care cost containment, savings in mandatory programs, Social Security reforms, and process changes), the Commission aims to reduce the federal deficit to 2.3% of GDP by 2015 (down from 8.9% in 2010), greatly simplify the tax code, make Social Security solvent, begin reducing the national debt, cap revenue at 210% of GDP (compared to 14.9% in 2010, an unusually low year), and bring expenses below 22% of GDP (compared to 23.8% in 2010). Compared to the deficits projected in a plausible baseline scenario, similar to the CBO's alternative fiscal scenario, the Commission estimates that its plan will reduce deficits between 2012 and 2020 by $3.885 trillion. These are summarized in Table 1 and the bullet-point lists below. Table 1: Commission Plan Deficit Reductions $B illions Shares of Deficit Reduction Category 2012-15 2012-20 (2012-20) Discretionary Spending Cuts $464 $1,661 42.8% Mandatory Spending Cuts $134 $556 14.3% Subtotal, Spending Reductions $598 $2,217 57.1% Tax Reform/Revision of Tax Preferences $140 $785 20.2% Other New Revenue $34 $210 5.4% Subtotal, Revenue Increases $174 $995 25.6% Savings in Interest Payments on National Debt $56 $673 17.3% TOTAL DEFICIT REDUCTION $828 $3,885 100.0% Joseph Henchman is tax counsel and director of state projects at the Tax Foundation.

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