The President’s Plan for Economic Growth and Deficit Reduction

Ed note: This has been cross-posted from the Office of Management and Budget's blog

The health of our economy depends on what we do right now to create the conditions where businesses can hire and middle-class families can feel a basic measure of economic security. In the long run, our prosperity also depends on our ability to pay down the massive debt the federal government has accumulated over the past decade. Today, the President sent to the Joint Committee his plan to jumpstart economic growth and job creation now – and to lay the foundation for it to continue for years to come.

The President’s Plan for Economic Growth and Deficit Reduction lives up to a simple idea: as a Nation, we can live within our means while still making the investments we need to prosper – from a jobs bill that is needed right now to long-term investments in education, innovation, and infrastructure. It follows a balanced approach: asking everyone to do their part, so no one has to bear all the burden.  And it says that everyone – including millionaires and billionaires – has to pay their fair share.

Overall, it pays for the American Jobs Act and produces net savings of more than $3 trillion over the next decade, on top of the roughly $1 trillion in spending cuts that the President already signed into law in the Budget Control Act – for a total savings of more than $4 trillion over the next decade. This would bring the country to a place, by 2017, where current spending is no longer adding to our debt, debt is falling as a share of the economy, and deficits are at a sustainable level.

Now, let me review some of its main components.

First, the plan includes the American Jobs Act – a set of ideas supported by both Democrats and Republicans that will put people back to work and put more money in the pockets of working Americans. It’s imperative that we pass this bill now both to get the economy moving again and creating jobs at the pace we need it, and to help with deficit reduction since a growing economy is a vital part to reducing our deficits and debt.

Second, the plan lays out a way to live within our means so that we can invest in the things that will power economic growth for decades to come: education, innovation, clean energy, and infrastructure. To do this, it follows a balanced approach to deficit reduction by drawing from across the Budget for savings and by asking everyone to pay their fair share.

Specifically, the President is proposing approximately $580 billion in cuts and reforms to a wide range of mandatory programs from cuts to agricultural subsidies that are no longer necessary to reform of the Pension Benefit Guaranty Corporation and modest changes to federal civilian worker retirement and health benefits for military retirees.

In health care programs, the President is recommending a series of reforms that builds on the historic savings and reforms in the Affordable Care Act to strengthen Medicare and Medicaid so that these vital programs are robust and healthy to serve Americans for years to come.

These proposals will save $248 billion in Medicare and $72 billion in Medicaid and other health programs over 10 years, and extend the life of the Medicare Trust Fund by three years. This is accomplished in a way that does not shift risks unfairly onto the individuals they serve; slash benefits; or undermine the fundamental compact they represent to our Nation’s seniors, people with disabilities, and low-income families. Any savings that affect beneficiaries do not begin until 2017 and do not affect middle-income and current beneficiaries. Other health and Medicaid savings amount to $72 billion, and because of the structural nature of these reforms to both programs, health savings grow to over $1 trillion in the second decade. Moreover, as he said today, the President will veto any bill that takes one dime from the Medicare benefits seniors rely on without asking the wealthiest Americans and biggest corporations to pay their fair share.

The President’s plan reflects the Administration’s current policy of drawing down our troop presence in Afghanistan and the transition from a military to a civilian-led mission in Iraq for a savings of $1 trillion.

Finally, the President calls on the Committee to undertake comprehensive tax reform and lays out five key principles. Reform should: 1) lower tax rates; 2) cut wasteful loopholes and tax breaks; 3) reduce the deficit by $1.5 trillion; 4) boost job creation and growth; and 5) comport with the “Buffett Rule” that people making more than $1 million a year should not pay a smaller share of their income in taxes than middle-class families pay.

To advance this debate, the President is offering a detailed set of specific tax loophole closers and measures to broaden the tax base that, together with the expiration of the high-income tax cuts, would be more than sufficient to hit the $1.5 trillion target for additional revenue. These measures include cutting tax preferences for high-income households, eliminating tax breaks for oil and gas companies, closing the carried interest loophole for investment fund managers, and eliminating benefits for those who own corporate jets.

We have little doubt that some of these proposals will not be popular with many of those who benefit from these affected programs and currently enjoy special tax breaks. These are tough choices that we had to make -- and some of these changes we are only putting forward to address our fiscal situation. But we are all in this together, and all of us must contribute to getting our economy moving again and on a firm fiscal footing.

If we don’t take a balanced approach to deficit reduction that includes asking the wealthiest 2 percent of families and big corporations to pay their fair share, then everyone else must shoulder the load. That could mean drastic cuts to things like education, research and development, infrastructure, and food safety; and could mean severe cuts to Medicare that would burden seniors with thousands of dollars in out-of-pocket costs.

Second, if we do nothing, our economy will not get the jolt it needs now and it will be weighed down by our debt or years to come. If we don’t take these steps now, it will only get harder.

I’ve been working on these issues for three decades, and I can tell you that making these changes in this plan will require some tough choices. Everyone will have a cut or a new policy that they do not like – or wish that they could avoid. But remember: the challenge we face is one that we all face – together – as Americans. We are in this together, and the only way that we can have a balanced approach is that we all do our part.

So read the plan, and join the debate about how we can jumpstart our economy, reduce our deficit, and win the future.