Stabilize the US Debt

Your goal is to achieve 60% of GDP by 2024


Current Choices Possible Choices your adjusted Debt
sixty percent

Zero Percent

 

$
Dollars in billions that you need to cut to get under 60% of the GDP by 2024

Savings Relative to Current Law in Billions
$



  • Stabilize the Debt: An Online Exercise in Hard Choices NEXT

    Everyone has an opinion on what should be done about America's finances. Here's your chance to try out your ideas.

    The long-term debt of the United States is rising to unprecedented – and unsustainable – levels. Under official budget projections, the public debt of the U.S. is projected to grow to about 100% of the economy by 2035 and nearly 150% and still climbing by 2050. Debt at these levels will threaten economic growth and the standard of living for all Americans.

    Drastic action now could threaten the already fragile economic recovery, but failing to address our debt in the longer term would have serious repercussions, from lower wages to weakened investment to higher borrowing costs for families and businesses. Moreover, the longer we wait to put policies in place, the more deficit reduction will eventually be needed.

    We need to establish an ambitious yet attainable fiscal goal and commit as a nation to achieving it. Public debt at 60% of GDP is an internationally recognized standard that represents a sound target for stabilizing the debt over the next decade. We should also look to reduce the debt further in the long term, toward the historical level of around 40% of GDP. See more about the reasoning behind this goal and explanations of items such as "Savings Relative to Current Law" on the FAQ page.

    This simulation was designed to illustrate the tough budget choices that will have to be made and to promote a public dialogue on how we can set a sustainable fiscal course. How do your choices stack up? Good luck.

    YOUR CHALLENGE:

    Stabilize the U.S. Debt at 60% of GDP by 2024.

    To begin the simulation, click the "Next" button above. There are eight categories where your choices will affect the debt. Negative numbers next to a choice indicate how much the debt will be reduced, positive numbers add to the debt. Use the "Next" and "Back" buttons to navigate to each section; do not use your browser's navigation arrows. Click the "Done" button when finished making all the choices you want. The bar graph on the right will chart how your choices affect the debt-to-GDP ratio relative to the 60% goal. Visit the FAQ page for more on how the exercise works.

    More Info Example

    For more information on any choice simply click the icon to the left of that choice.






  • Choose Budget Path NEXT BACK

    The federal budget is more than numbers; it’s about setting national priorities. Before moving to discrete budget choices, you must choose a starting point by making decisions on the broader policy issues (below) that cannot be avoided. The starting path you choose will greatly impact the budget, and our society. All numbers represent cumulative changes in debt through 2024 and include interest. Numbers in red add to the debt and blue numbers decrease it.
    CLICK ANY OPTION TO SEE MORE INFORMATION

    • Afghanistan

      Click For More Information -$680B
    • Click For More Information -$820B
    • Click For More Information $0
    • Alter the Sequester

      Click For More Information $1,040B
    • Click For More Information $540B
    • Click For More Information -$320B
    • Click For More Information $0
    • Alter the Sustainable Growth Rate

      Click For More Information $150B
    • Click For More Information $190B
    • Click For More Information $100B
     

    Afghanistan

    There are three broad policy choices that you must make before proceeding to the larger set of options. These determine your starting budget path. This option establishes what you would choose to do about troop levels for the conflict in Afghanistan. Only one of these options may be chosen.

    Reduce Troop Levels to 30,000 by 2017

    Under this option, spending on military operations in Afghanistan would be reduced from the current level of $92 billion to $62 billion in 2015, $46 billion in 2016, and $35 billion per year after that. This option comes from the Congressional Budget Office (CBO) policy alternatives.

    Eliminate War Funding After 2021

    Under this option, spending on military operations in Afghanistan would be reduced from the current level of $92 billion to $85 billion in 2015 and $30 billion from 2016-2021 before it is eliminated entirely after 2021. This option comes from the President's budget.

    Maintain Current Funding Levels

    Under this option, military operations in Afghanistan will continue to be funded at 2014 levels for the next two decades.

    Alter the Sequester

    There are three broad policy choices that you must make before proceeding to the larger set of options. These determine your starting budget path. This option establishes what you would choose to do about the automatic spending cuts of sequestration, created by 2011 legislation that reduces discretionary spending through 2021 and includes relatively small cuts certain non-safety net mandatory spending, such as a 2 percent reduction in Medicare provider and plan payments, through 2024. The discretionary cuts are split evenly between defense and non-defense spending, which includes funding for the various federal departments and agencies. Only one of these options may be chosen.

    Fully Repeal the Sequester

    This option would immediately repeal the sequester on mandatory spending and return discretionary spending to pre-sequester levels starting in 2016.

    Repeal About Half of the Sequester

    This option would provide sequester relief for discretionary spending starting in 2015. The sequester relief would restore funding by equal amounts to defense and non-defense spending, but it would replace less of the sequester gradually over time. This policy would not change the sequester on mandatory spending.

    Further Reduce Discretionary Spending

    This option would preserve the mandatory spending sequester and gradually reduce discretionary spending below sequester levels while shifting the prescribed sequester cuts in defense spending to non-defense spending. This policy reflects the option in the FY 2015 House budget resolution (Ryan budget).

    Maintain the Sequester

    This option would leave future sequestration cuts unchanged.

    Alter the Medicare Sustainable Growth Rate

    These are three options to fix the Sustainable Growth Rate (SGR), also known as the "doc fix." The SGR is the formula that determines physician payments under Medicare. Under current law, the SGR calls for a 24% cut in physician payments in April 2015. Because the cuts are so steep, the SGR has been "patched" each year to avoid cuts to provider payments. The temporary fixes have hidden the true cost of a permanent solution. These options would provide a permanent fix. Only one of these options may be chosen.

    Freeze Physician payment Levels

    The Sustainable Growth Rate calls for drastic cuts to Medicare physician payments. This option would instead permanently freeze payments at 2014 levels.

    Provide for 0.5% Annual Increase in Physician Payments

    The Sustainable Growth Rate calls for drastic cuts to Medicare physician payments. This option would instead increase physician payment rates by 0.5% annually. It would also extend a number of smaller payment increases to various health care providers and a few programs that benefit low-income individuals.

    Adopt Medicare Payment Advisory Commission Recommendations

    This option would adopt the SGR recommendations from the Medicare Payment Advisory Commission (MedPAC), which advises Congress on Medicare payment policies. This recommendation would freeze payments for primary care physicians and reduce payments for other physicians by 1% per year for three years before freezing them.

  • Defense, Diplomacy & Security DONE NEXT BACK

    The federal government spends a significant portion of its budget on defense, security, and foreign relations. Many of the programs in these categories are vital to keeping America safe and maintaining global leadership. A balance must be struck between national security and fiscal responsibility. All numbers represent cumulative changes in debt through 2024 and include interest. Numbers in red add to the debt and blue numbers decrease it.
    CLICK ANY OPTION TO SEE MORE INFORMATION

    • Click For More Information -$50B
    • Foreign Aid

      Click For More Information -$150B
    • Click For More Information $150B
    • Veteran Benefits

      Click For More Information -$50B
    • Click For More Information $50B

    • Click For More Information -$50B
    • Click For More Information -$110B
    • Click For More Information $70B
    • Troop Levels

      Click For More Information $130B
    • Click For More Information -$30B
     

    Replace the Joint Strike Fighter Program with F-16s and F/A-18s

    The Joint Strike Fighter is a new stealth aircraft under development. This option would terminate that program and instead purchase the existing advanced aircraft, the F-16 and the F/A-18. Although these two aircraft are not as advanced as the JSF, they are cheaper to produce, resulting in significant cost savings.

    Foreign Aid

    Here you may make a choice between two options about whether you think more or less should be spent on U.S. aid to other countries. You may also choose not to make either choice.

    Cut International Assistance Programs by 25%

    Critics of foreign aid believe that the United States devotes too many resources to assisting foreign governments, and that these funds have not delivered the economic or security benefits promised. In 2014, we will spend about $25 billion on international development and humanitarian assistance. This option would cut that amount by 25%.

    Increase International Assistance Programs by 25%

    Proponents of foreign aid argue that the United States should spend more than it currently does to help countries around the world build successful economies and avoid future military conflicts. We currently spend less than one percent of our economy on foreign aid, while other developed countries devote a much larger share of their GDP to international assistance. This option would increase foreign development and humanitarian assistance by 25%.

    Veteran Benefits

    Veterans of the military receive a variety of benefits not available to other members of the population. These include pensions, medical, housing, and education benefits, to name just a few. Here you may make a choice between two options about whether you think more or less should be spent on the total annual amount dedicated to veteran benefits related to income security – that is, compensation, pensions, and life insurance programs. You may also choose not make either choice.

    Reduce Veteran Income Security Benefits

    Some veterans are currently eligible for medical benefits, though their disabilities are not related to military service. Additionally, these veteran's incomes are above a means-tested threshold. Choosing this option would close enrollment for certain veterans and un-enroll others. It would additionally reduce veteran disability compensation to account for Social Security disability insurance payments they also receive.

    Expand Veteran Income Security Benefits

    This option would expand veteran benefits in several ways by enacting the policies described in the Comprehensive Veterans Health and Benefits and Military Retirement Pay Restoration Act. Among other things, this option would expand VA health and dental care and provide additional educational and job placement benefits.

    Cancel the Ground Combat Vehicle and Defer Development of the Long-Range Bomber

    This option would cancel the Army’s Ground Combat Vehicle (GCV) program. The Army is planning to develop and purchase a GCV, which serves the dual purposes of operating as a combat vehicle and transporting soldiers to the battlefield. The Air Force is in the early stages of developing a new bomber by the mid-2020s. This program could be delayed, as the current fleet of bombers is expected to last beyond that point. However, if the anticipated life of the current bombers is incorrect, it could cause a delay in capabilities.

    Reduce U.S. Navy Fleet to 230 Ships

    Currently, the U.S. Navy has 282 ships in its fleet, with the Department of Defense planning to increase that number to 306 in a decade. Instead, this option would reduce the size of the fleet to 230 ships by the end of the decade.

    Increase Homeland Security Spending

    This option would increase funding for the Department of Homeland Security by 10%. Proponents argue that this is necessary in order to secure our borders and combat terrorism. Critics worry it would leave the country vulnerable in certain areas, and that spending on items such as the border fence between the U.S. and Mexico or the Coast Guard’s Deepwater program have been ineffective and are an inefficient use of resources.

    Troop Levels

    Here you may make a choice between two options related to military personnel. One option would keep the Army at its current level rather than reduce it as planned, while the second option would replace certain military personnel with civilians. You may also choose not to make either choice.

    Maintain Current Army Levels

    This option would maintain the Army’s current troop level of about 510,000 instead of reducing it to between 440,000 and 450,000 as the Pentagon currently plans to do.

    Replace Military Personnel with Civilians

    Under this option, the Department of Defense would gradually replace 70,000 of the more than 500,000 uniformed military personnel in commercial jobs that do not involve combat with 47,000 civilian employees. The Pentagon would not need as many civilian employees as military personnel to fill these positions because civilian employees have fewer other duties to fulfill.

  • Domestic Social & Economic Spending DONE NEXT BACK

    The recession has reminded us of the importance of an adequate safety net, but has also significantly worsened our debt situation. Decisions must be made as to the best way to keep the economy strong. It may also be time to rethink the appropriate role of government in providing for education, welfare, and other social spending. All numbers represent cumulative changes in debt through 2024 and include interest. Numbers in red add to the debt and blue numbers decrease it.
    CLICK ANY OPTION TO SEE MORE INFORMATION

    • Click For More Information $250B
    • Click For More Information $340B
    • Highway Funding

      Click For More Information -$90B
    • Click For More Information $100B

    • Click For More Information -$140B
    • Click For More Information -$80B
    • Click For More Information -$80B
    • Click For More Information -$120B
    • Click For More Information -$30B
    • Click For More Information $80B
    • Click For More Information $110B
     

    Restart the NASA Moon Mission and Create a Moon Colony

    This option would restart the Constellation moon mission with the goal of creating a fully functioning moon base within the decade.

    Enact New Jobs Bill

    With the economy recovering only modestly since the end of the Great Recession, many people believe additional fiscal stimulus is necessary to accelerate the recovery. This option would provide an additional stimulus package of $125 billion this year and another $125 billion over the following two years. Policies in the stimulus package could include infrastructure spending, extended emergency unemployment benefits, and public works projects.

    Highway Funding

    Here you may make a choice between two options about whether you think surface transportation funding should be cut back or increased. You may also choose to not make either choice.

    Limit Highway Funding to Dedicated Revenue

    The federal government provides grants to states for highway and other surface transportation projects. Funding for the highway program comes from the Highway Trust Fund, whose main revenue source is a federal gas tax. However, in recent years, spending on highways has exceeded revenue, and Congress has had to transfer general revenue to the Trust Fund. The highway account of the Trust Fund faces a $120 billion shortfall over the next ten years. This option would limit highway spending to expected revenue from the gas tax.

    Enact Increased Transportation Funding

    In his FY 2015 budget, President Obama proposed increasing surface transportation spending over its projected level. The President has also proposed creating a national infrastructure bank that would make loans to transportation, energy, and water infrastructure projects. This option would enact those proposals.

    Block Grant Food Stamps and Reduce to 2008 Levels

    The Supplemental Nutrition Assistance Program (SNAP, or food stamps) is a federally financed but state-administered program that provides food assistance to people of limited income and assets. This option would convert SNAP into a block grant to states, in which states would be given a fixed amount and would set eligibility standards and benefit levels. The initial block grant would be set at 2008 SNAP levels and indexed to inflation and eligibility growth thereafter.

    Cut Temporary Assistance to Needy Families (TANF) Program

    The TANF program currently costs about $17 billion a year. Typically referred to as "welfare" and formerly called Aid to Families with Dependent Children (AFDC), TANF provides support for needy families and is distributed to states in the form of a block grant. It is intended as temporary support, with a goal that families become economically self-sufficient. This option would gradually cut funding for TANF in half.

    Cut Federal Funding of K-12 Education by 25%

    Federal spending on K-12 education was about $36 billion in 2014. This option would gradually reduce federal K-12 spending 25% by 2019, shifting more responsibility for funding K-12 education to the states.

    Restrict Eligibility for Pell Grants

    Eligibility for Pell Grants is primarily determined by the “expected family contribution,” which uses a family’s income and other metrics to determine its ability to pay for higher education. This option would restrict Pell Grant eligibility to those with an expected family contribution of $0, down from about $5,100 for the 2014 school year. About 35% of current Pell Grant recipients would lose eligibility and the remaining grants would be targeted to those with the greatest need.

    Cut School Breakfast Programs

    The federal government provides money to states so that they can operate nonprofit breakfast programs in schools and residential childcare. Choosing this option would reduce that funding for breakfast programs. School lunch programs would remain as they are.

    Double Funding on Adoption and Foster Care

    The federal government funds states to help them place children with families, with additional money going to states placing special needs children. Funds are split roughly evenly between the foster and adoption programs. This option would double annual funding for these two programs, increasing funding by nearly $10 billion a year.

    Increase Education Funding by $10 Billion Each Year

    This option would increase federal education funding by $10 billion per year from currently projected levels.

  • Social Security DONE NEXT BACK

    Social Security is the single largest government program, and it’s on an unsustainable path. The combination of increasing life expectancy and the retirement of the "baby boom" population threatens to push its costs well above its dedicated revenue sources. The longer we wait to address this shortfall, the worse it will get. All numbers represent cumulative changes in debt through 2024 and include interest. Numbers in red add to the debt and blue numbers decrease it.
    CLICK ANY OPTION TO SEE MORE INFORMATION

    • Click For More Information -$80B
    • Slow Initial Benefit Growth

      Click For More Information -$150B
    • Click For More Information -$90B
    • Click For More Information -$30B

    • Click For More Information -$150B
    • Click For More Information -$10B
    • Click For More Information -$70B
    • Click For More Information -$90B
    • Click For More Information $70B
     

    Raise the Normal Retirement Age to 70

    The Social Security retirement age is currently 66, and it is scheduled to gradually increase to 67 starting in 2017. This option would begin to increase the retirement age to 67 in 2015 and would additionally increase it by two months per year until it reaches 70, instead of stopping at 67. The retirement age would reach 70 for people born in 1976 or later.

    Slow Initial Benefit Growth

    Here you may choose one of three options for slowing the growth of benefit payments, compared to estimated growth. Benefits would still be expected to grow for most beneficiaries under each of these options, just not by as much as currently expected. The first option would implement phased in benefit reductions for all beneficiaries. The other two options are considered "progressive," meaning they include protections against reduced benefits for those at certain income levels. You may also choose not make any choice.

    Gradually Reduce Scheduled Benefits

    Currently, initial Social Security benefits are determined in a way that allows them to grow with wage growth throughout the economy. This option would instead "price index" all benefits. Since prices generally grow more slowly than wages, this option will gradually slow the growth of Social Security benefits, leading them to be about 40 percent lower than currently projected by 2080.

    Progressively Reduce Benefits, Protecting Low Income Earners

    Initial Social Security benefits under current law are determined in a manner that allows them to grow annually with wage growth. This option would institute what is known as "progressive price indexing." Workers who earn below the 30th percentile of earnings would have their benefits adjusted for wage inflation as usual. Beyond the 30th percentile, an increasing share of benefits would be adjusted by price inflation; workers making just above the 30th percentile would have their benefits adjusted mostly by wage inflation, while top earners would have their benefits adjusted mostly by price inflation.

    Progressively Reduce Benefits, Protecting Low and Middle Income Earners

    Initial Social Security benefits under current law are determined in a way that allows them to grow annually with wage growth. This option would institute what is known as "progressive price indexing." Workers who earn below the 60th percentile of earnings would have their benefits adjusted for wage inflation as usual. Beyond the 60th percentile, an increasing share of benefits would be adjusted by price inflation; workers making just above the 60th percentile would have their benefits adjusted mostly by wage inflation, while top earners would have their benefits adjusted mostly by price inflation.

    Use a More Accurate Measure of Inflation for COLAs

    Every year, Social Security recipients receive a “Cost of Living Adjustment" (COLA) so benefits keep pace with inflation. Many believe that the indexing formula, the consumer price index (CPI), overstates inflation. This option would compute the COLA using something called the "chained CPI," which is believed to offer a more accurate measure of inflation. This new computation is estimated to result in an annual COLA that is 0.3 percentage points less on average.

    Reduce Spousal Benefits from 50% to 33%

    Under current law, retirees receive the higher of benefits calculated from their own earnings or 50 percent of their spouse’s benefits. This can create inequities whereby a dual-earner family would receive lower benefits than a single-earner family making the same income. This option would aim to correct that inequity by reducing spousal benefits from 50 percent of the primary earner’s to 33 percent.

    Increase Years Used to Calculate Benefits

    Currently, Social Security benefits are calculated based on a retiree’s 35 highest years of earnings. This option would increase the number of years to 38. For workers with less than 38 years of earnings, "zero earnings years" would count in their average.

    Include All New State and Local Workers

    Under current law, some state and local government employees are not required to pay into Social Security. This option would include all new state and local workers in the Social Security program, requiring them to pay the 12.4 percent payroll tax but also allowing them to collect benefits when they retire. This would only apply to employees hired in 2015 and beyond, not to current state and local government workers.

    Institute a Minimum Benefit

    This option would change benefit calculations such that a worker with 30 years of earnings at the minimum wage level would receive a minimum retirement benefit of 125 percent of the federal poverty level. It would also allow parents to claim credit for up to 8 years when they were not working if they were raising a child under age 5.

  • Health Care DONE NEXT BACK

    Despite the passage of health care reform, Medicare and Medicaid will continue to grow at an unsustainable pace. These two programs, more than any other area of the budget, threaten to break the bank. Meanwhile, private health care costs also continue to grow, and 31 million people are projected to remain uninsured after the reform bill is fully implemented. All numbers represent cumulative changes in debt through 2024 and include interest. Numbers in red add to the debt and blue numbers decrease it. CLICK ANY OPTION TO SEE MORE INFORMATION

    • Modify Health Care Reform Law

      Click For More Information -$220B
    • Click For More Information -$550B
    • Click For More Information $170B
    • Click For More Information -$1,010B

    • Click For More Information -$160B
    • Click For More Information -$90B
    • Click For More Information -$170B
    • Click For More Information -$70B
    • Click For More Information -$70B
    • Click For More Information -$380B
    • Modify Federal Medicaid Funding to States


      Click For More Information -$230B
    • Click For More Information -$860B
     

    Modify Health Care Reform Law

    This option allows you to make modifications to the health care reform legislation passed in 2010. One option would institute a “public option” in the health insurance exchanges, while others would either reduce coverage or repeal the law entirely. You may make only one out of four possible choices. You may also choose not to make any modifications to the legislation.

    Establish a Public Option in the Health Exchanges

    The 2010 health care reform legislation creates health insurance exchanges where individuals can purchase insurance. This option would create a "public option" administered by the federal government that would compete with private plans. According to the Congressional Budget Office, savings would result from lower premiums for the public option in certain regions (and thus lower federal subsidies) and lower amounts of health insurance coverage obtained through employers.

    Repeal Individual Mandate

    The health care reform legislation passed in March 2010 contains a requirement that all legal U.S. residents obtain health insurance by 2014 or pay a penalty. This option would repeal the individual mandate for health insurance. Since repeal would significantly reduce the number of people who would purchase insurance through the new health exchanges, subsidies for the purchase of individual health insurance would drop significantly.

    Repeal Entire Legislation

    This option would repeal the 2010 health care reform legislation in its entirety. Not only would this option repeal the costly coverage provisions, but it would also get rid of the spending cuts and tax increases in the legislation. As a result, this repeal would have the effect of increasing projected debt levels.

    Repeal Legislation, but Keep Medicare/Medicaid Cuts

    This option would repeal the coverage provisions and tax increases in the 2010 health care reform legislation. However, the spending cuts in the bill would be preserved. Instead of being used to finance the expansion of insurance coverage, these savings would be used to help reduce the debt.

    Modernize Cost Sharing for Medicare

    Currently, cost-sharing (deductibles and co-pays/co-insurance) in Medicare varies greatly depending on the type of service performed and whether it is in a hospital, outpatient facility, or another care setting. This option would make cost-sharing uniform for all services provided by Medicare Parts A and B, combine the current separate deductibles for Part A and B, and provide beneficiaries the protection of an annual cap on cost-sharing liability. Additionally, this option would restrict the ability of supplemental insurance policies (such as Medigap) to cover cost-sharing. On average, beneficiaries would be better off financially after this proposal, with the savings accruing from lower utilization and lower premiums paid for Medigap policies.

    Increase Medicare Premiums for High-Income Beneficiaries

    Under current law, high-income Medicare beneficiaries must pay Part B and D premiums equal to 35-80% of program spending, compared to 25% for everyone else. This option would further increase those premiums to 40%-90% and freeze the income thresholds at which they apply after 2019.

    Require Manufacturers to Pay a Minimum Drug Rebate for Medicare Low-Income Beneficiaries

    Dual eligibles – people eligible for both Medicare and Medicaid – are currently enrolled in a low-income subsidy (LIS) program that reduces their required cost-sharing in Part D of Medicare. This option would require drug manufacturers to pay a rebate to the federal government worth 23.1% of the average manufacturer price for prescription drugs provided to LIS enrollees. This rebate is the same as the one that is currently provided to the government for Medicaid prescription drugs.

    Enact Medical Malpractice Reform

    This option would cap awards of noneconomic damages at $250,000, awards of punitive damages at $500,000, and a statute of limitations of one year for claims brought by adults and three years for those brought on behalf of children. These limitations would reduce the cost of medical malpractice insurance, and the practice of "defensive medicine." The result would be lower costs for Medicare, Medicaid, and private insurance.

    Bundle Payments for Inpatient and Post-Acute Care

    This option would bundle Medicare payments for inpatient care and 90 days of related post-acute care. Currently, Medicare makes separate payments to providers for each illness or course of treatment. Bundling these payments could encourage hospitals, doctors, and other post-acute care providers (like home health agencies and skilled nursing facilities) to partner to improve efficiency and quality of care.

    Introduce Premium Support to Medicare

    This option would allow private Medicare Advantage insurance plans to compete directly against the traditional, government-run Medicare option on costs and quality. In each region of the country, Medicare beneficiaries would choose between traditional Medicare and available private insurance plans (that provide the same level of benefits as traditional Medicare, albeit often with more narrow provider networks), and the government would contribute enough toward premiums to provide access to the second-lowest cost plan for the same premium that seniors pay today. Beneficiaries who choose to enroll in a plan that is more expensive – even if that plan is traditional Medicare – would be required to pay the incremental additional cost. A beneficiary who enrolls in the plan with the lowest price would be rebated the full difference in cost. This option would save money because private plans offer the full range of Medicare benefits for less money than traditional Medicare in many regions across the country.

    Modify Federal Medicaid Funding to States

    This option allows you to make only one of two choices about changing Medicaid funding. Medicaid is a joint federal-state program in which the federal government sets standards for the program and shares the cost with states. You may also choose not to modify current Medicaid funding levels.

    Reduce the Floor on Federal Matching Rates for Medicaid

    Currently, the federal government pays a significant, varying portion of state Medicaid costs, 57 percent on average. There is also a floor on Medicaid matching rates such that the federal government will pay at least half of each state’s program costs. This option would reduce that floor to 45% of program costs.

    Block Grant Medicaid and Grow With Inflation Plus Population Growth

    Medicaid is a joint federal-state program in which the federal government sets standards for the program and shares the cost with states. This option would convert Medicaid into a block grant to states. The level of these block grants would be set by the federal government at 2013 levels and grow at inflation plus population growth, but states would be given flexibility over program eligibility, coverage, and other details. Note that this option would not affect the Medicaid expansion in the Affordable Care Act.

  • Other Spending DONE NEXT BACK

    Farm subsidies, R & D, housing – what should be done with these and other programs? Should we reduce farm subsidies? Should we increase R & D spending? These choices won’t be easy – every cut will hurt someone – and every increase will worsen the debt. All numbers represent cumulative changes in debt through 2024 and include interest. Numbers in red add to the debt and blue numbers decrease it.
    CLICK ANY OPTION TO SEE MORE INFORMATION

    • Click For More Information -$190B
    • Click For More Information -$110B
    • Click For More Information -$40B
    • Click For More Information -$110B
    • Click For More Information -$30B
    • Click For More Information -$30B
    • Click For More Information $110B
    • Click For More Information -$20B
    • Click For More Information $130B
     

    Use the Chained CPI for Mandatory Programs and the Tax Code

    Many mandatory programs rely on a measure of inflation to determine annual benefit adjustments or eligibility. Specifically, federal retirement programs use the Consumer Price Index (CPI) to determine annual cost-of-living adjustments and many low-income support programs rely on the CPI to determine eligibility based on the federal poverty line. In addition, the tax code uses the CPI to adjust tax brackets and many tax benefits. This option would switch to an alternate inflation measure ("chained CPI"), which most economists believe more accurately measures inflation, that would grow more slowly than the current CPI. Over time, this would reduce civil retirement benefits and eligibility for poverty-related programs and increase revenue by making tax brackets and tax benefits grow more slowly.

    Reduce Federal Civilian Employees’ Pay Increases and Cap Increases in Military Pay

    As specified in law, federal civilian employees usually receive an automatic adjustment to their pay equal to the change in the employment cost index (ECI) minus 0.5 percentage points. Also, military personnel pay increases must at least equal the change in the ECI. This option would limit military pay raises to the change in the ECI minus 0.5 percentage points, and it would limit civilian pay raises to the ECI minus 1 percentage point.

    Introduce Minimum Out-of-Pocket Requirements Under TRICARE for Life

    TRICARE for Life is a free, supplemental insurance policy provided for non-disabled military retirees and their families who are eligible for Medicare. Whereas other Medicare beneficiaries are required to cover roughly 20 percent of their Medicare-covered health care costs, TRICARE for Life beneficiaries face virtually no cost-sharing and pay only a small premium that has never been increased. This option would introduce minimum out-of-pocket requirements for these beneficiaries. Specifically, TRICARE for Life would cover none of the first $550 of an enrollee’s cost-sharing payments and only half of the next $4,950.

    Reform Federal Retiree Benefits

    This option would make three changes to federal retiree benefits. It would increase the number of years used to calculate federal retiree pensions from the average of an employee's highest three consecutive years to five years. It would also increase retirement contributions to half of the total contribution. Finally, it would defer cost-of-living adjustments on pensions until age 62 with a “catch-up” benefit at that age.

    Reform Fannie Mae and Freddie Mac

    Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) whose role is to expand the mortgage market. In September 2008, the government formally took control of these entities, and their operations were counted in the federal budget. This option would increase the fees Fannie and Freddie charge to guarantee loans in mortgage-backed securities by ten basis points (0.1%) to 60 basis points (0.6%) and extend a previously enacted increase beyond 2021.

    Reduce Crop Insurance Subsidies

    This option would prohibit new enrollments in the Conservation Stewardship Program, prohibit re-enrollments in the Conservation Reserve Program, reduce crop insurance subsidies paid to crop insurance providers, and eliminate crop subsidies for farmers.

    Expand Spending on Federal Research & Development

    In 2013 the federal government spent an estimated $132 billion on research and development (R&D) across all agencies. For example, the Agriculture Department conducts R&D on various ways to create biofuels, the Defense Department explores new types of weapons systems, and the Energy Department spends R&D money on nuclear and fossil fuel technologies. This option would broadly increase R&D spending by $10 billion each year.

    Repeal the Davis-Bacon Act

    The Davis-Bacon Act was passed in 1935 and requires federally funded or federally assisted construction projects pay “prevailing wages” in the area in which the project is located. These wages are higher than what would be paid in the absence of the Act. This option would repeal the Act, which would lower federal spending on construction.

    Provide Funding to States to Fill Budget Gaps

    This option would provide $95 billion to states over the next two years to reverse cuts to public services in the wake of the Great Recession. The money could be used by states to hire first responders, teachers, and health care workers.

  • Revenues DONE NEXT BACK

    Taxes are the price we pay for the government we want. Yet we currently raise far less in taxes than we spend each year. Without sufficiently large spending cuts, stabilizing the debt will require raising existing taxes, implementing new taxes, or both. All numbers represent cumulative changes in debt through 2024 and include interest.
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    • Raise Social Security Payroll Tax Cap

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    Raise Tax Rates on Capital Gains and Dividends

    Under the current tax system, long-term capital gains and dividends are subject to lower rates than ordinary income. Right now, certain dividends and proceeds from sales of stock held for more than a year are subject to a top tax rate of 20%, compared to 39.6% for ordinary income. Taxpayers in the 10% and 15% income tax brackets do not pay any taxes on capital gains and dividends, and taxpayers in the 25-35% brackets pay a 15% rate. This option, one of many possible reforms to capital gains, would raise tax rates on capital gains and dividends by two percentage points, to 2%, 17%, and 22%.

    Increase Excise Taxes on Alcohol

    Currently, the alcohol content of beer and wine is taxed at a much lower rate than the alcohol content of distilled spirits because the taxes are determined on the basis of different liquid measures. This option would raise taxes excise taxes on alcohol starting in 2017 and eliminate tax discrepancies across different types of alcoholic beverages.

    Impose a Financial Crisis Responsibility Fee

    This option would require the largest financial firms (over $50 billion in assets) to pay a fee to compensate taxpayers for the use of the Troubled Asset Relief Program (TARP). The amount of the fee would be based on the firm’s size and its debt.

    Restore 2009 Estate Tax Parameters

    The estate tax currently applies a 40% tax rate on estates larger than $5.25 million (the exemption is $10.5 million for couples), indexed for inflation. This option would permanently set the estate tax at 2009 parameters starting in 2017. Estates worth more than $3.5 million ($7 million) would pay a 45% tax rate on amounts over those thresholds, and the thresholds would not be indexed for inflation.

    Enact Carbon Tax or Cap-and-Trade

    There are generally two types of energy taxes in today’s discourse – a direct tax based on carbon or a "cap and trade" regime. A carbon tax would impose a fee based on the estimated amount of emissions released into the air. A cap and trade solution sets a maximum on the amount of carbon allowed to be emitted, and then allows companies to buy and sell these pollution permits on an open market. If the government auctions – rather than freely distributes – initial permits, this regime would simulate a tax. The Congressional Budget Office estimates that either version could raise over $100 billion a year. In addition, part of the revenue raised would be sent back to taxpayers in the form of rebates.

    Increase Gas Tax by 10 Cents per Gallon

    The current federal gas tax is 18.4 cents per gallon, and the revenues from the tax are put into the Highway Trust Fund. This option would increase the federal gas tax by 10 cents to 28.4 cents per gallon. Proponents of the increase argue that it will reduce consumption of gas and consequently reduce carbon emissions. Opponents say federal gas taxes are already too high and would disproportionately impact working-class Americans and certain industries.

    Enact Five Percent VAT with Partial Rebate

    Considering the magnitude of our fiscal problems, many experts have been advocating new revenue sources for the federal government. One potential new tax is a value-added tax (VAT), a form of consumption tax. To consumers, a VAT would resemble an increased fee at purchase time. This option would create a 5% VAT. The VAT would exclude from taxation new housing, health care, groceries, education, and financial services. In addition, part of the revenue from the VAT would be sent back to taxpayers in the form of rebates.

    Increase the Standard Deduction

    In 2014, taxpayers could take a standard deduction of $6,200 for single filers and $12,400 for married couples. This option would increase the deduction to $7,800 and $15,600 respectively, and phase it out for roughly the top 1 percent of earners. This option is similar to a policy proposed by House Ways and Means Committee Chairman Dave Camp.

    Impose a 5.4% Surtax on Income Above $1 Million

    Currently, earned income is taxed at seven different rates, with a top rate of 39.6% for income above roughly $460,000. This option would put in place a 5.4% surtax on income above $1 million, creating a new top income bracket of 45%.

    Enact the "Buffett Rule"

    The "Buffett Rule" is intended to ensure that people making over $1 million pay at least 30% of their income in taxes. Although salaries and wages are taxed at a top rate of 39.6%, lower rates on capital gains and dividends and other tax preferences can allow millionaires to reduce their tax rates below that amount. This option would implement the rule by subjecting people making over $1 million to a minimum tax rate of 30%.

    Raise Social Security Payroll Tax Cap

    This option allows you to make only one of two choices about changing the cap on the amount of income subject to payroll taxes that fund Social Security. Both options would increase cap levels, increasing Social Security revenues. You may also choose not to modify current cap levels.

    Raise Cap to Cover 90% of Earnings

    Workers and their employers pay Social Security taxes on their income until its taxable maximum. The share of total income covered by Social Security taxes has fallen due to rising incomes at the high end of the earnings distribution. In 2014, earnings up to $117,000 are subject to the Social Security payroll tax, and that amount increases annually by the average wage growth. Originally, in 1937, about 92% of all earnings were subject to the tax, but by 2007 only about 80% of earnings were. This proposal would raise the taxable maximum so it would cover 90% of aggregate earnings, about $200,000 in today’s terms.

    Institute Two Percent Surtax on Earnings Above Cap

    Workers and their employers pay Social Security taxes on their income until its taxable maximum. The share of total income covered by Social Security taxes has fallen due to rising incomes at the high end of the earnings distribution. Currently, earnings above $117,000 are exempt from the Social Security payroll tax. The exemption amount is indexed annually for average wage growth. Although this option would not increase that cap, it would impose a 2 percent surtax on earnings above this cap.

    Reduce Corporate Tax Rate to 30%

    Currently, C corporations face a progressive corporate income tax structure comprised of four separate rates, with a top marginal rate of 35%. Most corporate income is taxed at this higher marginal rate, which is the highest among developed countries, although the average rate that corporations actually pay is lower due to deductions and other provisions. This option would reduce the top corporate tax rate to 30%.

    Increase HI Tax by 0.1%

    The primary source of funding for Medicare Part A Hospital Insurance (HI) benefits comes from the payroll tax, which assesses a 2.9% tax on income below $250,000 and a 3.8% tax on income above that amount. This option would increase both rates by 0.1%, split between employees and employers, to increase Hospital Insurance revenues.

    Improve Tax Collection (Reduce Tax Gap)

    It is popular to propose closing the "tax gap" as a way to bring in more revenue. The tax gap is an estimate of how much in owed federal taxes goes uncollected in any given year. Some estimates put the amount as high as $350 billion to $400 billion per year. This option would implement a number of proposals in the President’s budget to begin to collect more of these taxes.

  • Tax Expenditures DONE BACK

    The tax code is filled with hundreds of deductions, credits, exclusions, exemptions, and other forms of "spending through the tax code." Although some of these tax expenditures serve important social and economic needs, many are costly, distorting, and regressive. Reducing tax expenditures may be a preferable alternative to increasing marginal tax rates. All numbers represent cumulative changes in debt through 2024 and include interest.
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    • Tax Credits for Children and Families


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    • Tax Treatment of Employer Sponsored Health Insurance


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    Eliminate Domestic Production Activities Deduction

    The American Jobs Creation Act of 2004 allows businesses to deduct a percentage of what they earn from qualified domestic production activities from their taxable income. These activities include property rentals, energy production, film production, and engineering among other activities. This option would repeal the deduction for domestic production activities.

    Gradually Phase Out Mortgage Interest Deduction

    Currently, homeowners who itemize can deduct interest paid on mortgages up to $1.1 million. However, this deduction has been criticized as being regressive and contributing to an overconsumption of housing. This option would gradually eliminate the deduction starting in 2015 by phasing down the cap on mortgages by $100,000 each year. By 2025, the mortgage interest deduction would be eliminated.

    Eliminate the State and Local Tax Deduction

    Currently, taxpayers may deduct their state and local income tax payments from their federal income tax. This option would gradually eliminate the deduction over five years. Some supporters of eliminating or reducing this deduction claim that it mainly benefits wealthy localities that provide more services and, consequently, pay more taxes.

    Eliminate LIFO Accounting and Oil and Gas Preferences

    Many U.S. companies use the last-in, first-out (LIFO) cost accounting method, which reduces their income tax liability compared to the international standard of first-in, first-out (FIFO) accounting. This option would eliminate this technique. It also eliminates tax breaks for the fossil fuel industry, excluding the domestic manufacturing deduction for oil and gas. Tax preferences to be abolished include expensing for intangible drilling expenditures, deductions for tertiary injectants and passive investments, and the percentage depletion allowance. It also lengthens the write-off period for geological expenditures to seven years.

    Curtail the Deduction for Charitable Giving

    Currently, taxpayers can deduct the amount they donate to charity from their income tax bill, which provides an incentive for donations. In 2011, 38 million tax returns claimed $174 billion in contributions. This option would limit the deduction for charitable giving to contributions that exceed 2% of a taxpayer’s income.

    Make Research & Experimentation Tax Credit Permanent

    Currently, businesses can take a nonrefundable tax credit for 20 percent of research expenses above a certain amount. The credit is temporary though, so it has been extended numerous times since its enactment thirty years ago. This option would make the R&E tax credit permanent.

    Increase EITC for Childless Workers

    The Earned Income Tax Credit (EITC) was created in 1975 as a way to offset payroll taxes for low-income workers with children. It has since been expanded to include some workers who do not have children, but it provides very limited benefits to childless workers. This option would double the EITC for childless workers and expand eligibility to include workers between the ages of 21 and 25.

    Tax Credits for Children and Families

    This option allows you to choose between expanding and reducing tax credits that primarily benefit lower-income families. The Earned Income Tax Credit (EITC) goes only to families with incomes below a certain threshold; the Child Tax Credit is available to all families with children, but begins to be reduced for families above certain income levels. You may also choose not to make either of these choices.

    Reduce and Reform the EITC

    The Earned Income Tax Credit (EITC) was created in 1975 as a way to offset payroll taxes for low-income workers with children. It has since been expanded to include some workers who do not have children. It is currently one of the largest refundable tax credits in the tax code, and one of the largest income support programs as well. This option would reduce the maximum credit amount for all beneficiaries and index those amounts to the chained CPI rather than the typically faster-growing CPI-U. At the same time, it would increase the income level at which the credit phases out for filers with children.

    Expand the EITC and Child Tax Credit

    This option would make permanent certain temporary expansions of these two tax credits. For the Earned Income Tax Credit (EITC), it makes permanent marriage penalty relief by raising the phase-out levels of the credit for married couples, and increased benefit levels for families with three or more children made in recent stimulus measures. For CTC, it makes the $3,000 refundability threshold permanent and eliminates indexing, which allows the program to benefit more people and increase over time.

    Extend American Opportunity Tax Credit

    The American Opportunity Tax Credit (AOTC) was created in the American Recovery and Reinvestment Act (ARRA) as a way to help students pay for college. It provides a maximum $2,500 partially refundable credit to students. The AOTC replaced the Hope credit, which provided less generous benefits to fewer taxpayers. The credit was only made available for 2009 and 2010 but was extended twice, most recently through 2017 by the American Taxpayer Relief Act of 2012. This option would make the AOTC permanent.

    Tax Treatment of Employer Sponsored Health Insurance

    This option allows you to choose one from among three options affecting the tax treatment of these benefits, which gives a tax credit to employers for providing employees with health benefits. These options relate to the recently passed health care bill – two of them would raise more revenue than under the current law, and one would cost money compared to estimates of the current law. You may also choose not to make any of these changes to current law.

    Accelerate and Modify Excise Tax on High-Cost Health Plans in 2016

    Under health care reform, health insurance plans with premiums above $10,200 for single coverage and $27,500 for family coverage will be hit with a 40% tax starting in 2018. Employer-provided healthcare is not taxed, so the excise tax will change that for the most generous employer plans. This option would instead start the excise tax in 2016 and lower the thresholds to $7,970/$19,910.

    Repeal Excise Tax on High-Cost Plans

    Under health care reform, a 40 percent excise tax on health care plans above $10,200/$27,500 will apply starting in 2018. This option would repeal the excise tax before it takes effect.

    Cap Employer Health Care Exclusion at Median Premium

    Under current law, employer-paid health insurance premiums do not count as taxable income for employees who receive the benefit, although an excise tax on high cost plans will start in 2018. In place of the excise tax, this option would cap the exclusion at the estimated median premium for employer coverage in 2015, or $6,420 for individual coverage and $15,620 for family coverage (increased with inflation in future years). Employer premium contributions above that amount would be considered taxable income for the employee.

  • Your Results: Stabilize the Debt BACK

    uh oh uh oh

    You failed to reduce the debt to a sustainable level.


    Where did my savings come from

    By Category
    • Budget Path
    • Defense
    • Domestic
    • Social Security
    • Healthcare
    • Other Spending
    • Revenues
    • Tax Expenditures

    -1,50001,500

    Savings in Billions

    By Type
    • Revenue
    • Spending
    -3,00003,000

    Savings in Billions (excluding choices made in Budget Path)

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