On November 7, Democratic members of the Joint Select Committee on Deficit Reduction released a one-page $2.3 trillion deficit reduction proposal. The plan would cut spending by about $1 trillion and increase revenues by the same amount. It includes $400 billion cuts to Medicare and Medicaid. For Medicare, $250 billion in savings would come from providers and $100 billion from beneficiaries. For Medicaid, $13 billion would come from limiting how states tax Medicaid providers in order to increase their federal share of Medicaid and $5 billion would be saved by changing the reimbursement rate for durable medical equipment. Take a look at the Democratic proposal.
On the same day, the Committee’s Republican members offered a $1.5 trillion deficit reduction plan, the details of which have not yet been released. It includes $750 billion in spending cuts and $500 billion in revenue over 10 years. Notably, in an apparent concession to Democrats, it would raise $300 billion in taxes from the individual tax code ($250 billion) and through an overhaul of the corporate tax code ($50 billion). It provides an additional $40 billion in tax revenue from changes to the consumer price index used to calculate federal benefits and income tax brackets. Democrats reacted by claiming the tax revenue is not enough, and must be at least $1 trillion. They also criticized the Republican plan as a large tax cut for the wealthy since it would cut the top individual income tax rate to 28 percent in 2013 (it is currently 35% and will go to 39.6 percent in 2013, when the Bush-era tax cuts would expire).
The Committee has until Nov. 23 to produce a plan that includes at least $1.2 trillion in deficit reduction. If Congress does not endorse a plan or produce an alternative, automatic sequestration of funding begins in 2013. Learn more about the deficit reduction efforts.