Stabilize the US Debt

Your goal is to achieve 60% of GDP by 2021


Current Choices Possible Choices your adjusted Debt
sixty percent

Zero Percent

 

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Dollars in Billions that you need to cut to get under 60% of the GDP by 2021

Savings Relative to Current Law in Billions
$
Savings Relative to Current Policy in Billions
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  • Stabilize the Debt: An Online Exercise in Hard Choices NEXT

    Updated and Improved as of March 2012. We have updated the budget baseline as well as figures for most options and added several new choices. It is now easier to save and share results. Try it, even if you have done the simulator before.

    It's no secret that America's finances are unsustainable. So, what can be done about it? The problem has been mounting for a long time and it cannot be fixed overnight, but we need to start addressing it now.

    The debt of the United States is rising to unprecedented – and unsustainable – levels. Under reasonable assumptions, the public debt of the U.S. is projected to grow to 91% of GDP by 2025, 149% in 2040 and 415% in 2080. No country can support debt at these levels without huge costs to its standard of living, at a minimum, and most likely a severe crisis.

    Drastic action now would threaten the already fragile economic recovery. But failing to convince markets and creditors that the U.S. is serious about reducing its debt in the longer term would cause interest rates to rise dramatically and likely trigger a fiscal crisis.

    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 in the medium term. We should also look to reduce the debt further in the long term, towards the historical level of around 40% of GDP. See more about the reasoning behind this goal and explanations of items like "Savings Relative to Current Law" and "Savings Relative to Current Policy" 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 2021.

    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 game 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 2021 and include interest. Numbers in red add to the debt and blue numbers decrease it.
    CLICK ANY OPTION TO SEE MORE INFORMATION

    • Iraq and Afghanistan

      Click For More Information -$580B
    • Click For More Information -$840B
    • Click For More Information $0
    • 2001/2003/2010 Tax Cuts

      Click For More Information $4,530B
    • Click For More Information $3,430B
    • Click For More Information $2,660B
    • Click For More Information $1,130B
    • Alter the Sustainable Growth Rate

      Click For More Information $320B
    • Click For More Information $380B
    • Click For More Information $280B
     

    Iraq and 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 conflicts in Iraq and Afghanistan. Only one of these options may be chosen.

    Reduce Troop Levels to 60,000 by 2015

    Under this option, the number of U.S. troops in Iraq and Afghanistan would fall gradually. Troop levels would decrease to 195,000 in 2012, 80,000 in 2014, and 60,000 in 2015 and beyond on this path.

    Reduce Troop Levels to 45,000 by 2015

    Under this option, the number of U.S. troops in Iraq and Afghanistan would fall more sharply. Troop levels would decrease to 115,000 in 2012, and 85,000 in 2013, 60,000 in 2014, and 45,000 in 2015 on this path.

    Maintain Current Funding Levels

    Under this option, the wars in Iraq and Afghanistan will continue to be funded at 2011 levels for the next two decades.

    2001/2003/2010 Tax Cuts

    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 tax cuts enacted in 2001 and in 2003 and extended in 2010, which are set to expire at the end of 2012. Only one of these options may be chosen.

    Renew All the Tax Cuts

    This option would renew the 2001 and 2003 tax changes that were extended in 2010 and scheduled to expire after 2012. These changes include lower tax rates across the board, reduced capital gains and dividends rates, fewer marriage penalties, doubling of the child tax credit, and other changes. This option would also permanently index the Alternative Minimum Tax (AMT) to prevent it from reaching middle-earners.

    Renew the Tax Cuts On Income Below $250k/200k

    This option would allow the 2001/2003/2010 tax provisions to expire for the highest income taxpayers – those with incomes over $250,000 (joint filers) and $200,000 (individuals), but would renew those affecting all other taxpayers. The two highest individual income tax rates would rise from 33 percent and 35 percent to 36 percent and 39.6 percent respectively in 2012. This option would re-instate limitations on itemized deductions and personal exemptions and impose a 20 percent tax rate on capital gains and dividends for these taxpayers. It would also permanently index the Alternative Minimum Tax (AMT) to prevent it from reaching middle-earners.

    Renew the Tax Cuts Available at Lower Incomes and Continue AMT and Estate Tax at 2009 Level

    This option would allow the 2001/2003/2010 tax cuts to expire for incomes above $70,000, while maintaining the 10% bracket for income below $17,000, rather than letting it revert to 15%. It would also continue the child tax credit at $1,000 per child instead of letting it decrease to $500, and it would patch the Alternative Minimum Tax (AMT) to prevent it from reaching middle class earners. This option would also maintain marriage penalty relief and re-instate limitations on itemized deductions and personal exemptions. Finally, the estate tax would be set at its 2009 parameters of a 45% top rate and a $3.5 million exemption.

    Allow All the Tax Cuts to Expire, Except for AMT Patches and Estate Tax at 2009 Level

    Under this option, all of the tax cuts passed in 2001/2003/2010 would be allowed to expire at the end of 2012, but the government would continue to "patch" the Alternative Minimum Tax (AMT) to prevent it from hitting middle-class families. The expiring provisions would include lower income tax rates, an expanded child tax credit, the 10 percent tax bracket, lower capital gains rates, and marriage penalty relief. The estate tax would be set at its 2009 parameters of a 45% top rate and a $3.5 million exemption.

    Alter the 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 27% cut in physician payments in 2012. 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 the Sustainable Growth Rate

    The Sustainable Growth Rate calls for drastic cuts to Medicare physician payments. This option would instead permanently freeze payments at 2011 levels.

    Grow Sustainable Growth Rate at Medicare Economic Index

    The Sustainable Growth Rate calls for drastic cuts to Medicare physician payments. This option would instead grow payments with the Medicare Economic Index (MEI), a measure of the change in physician practice costs.

    Adopt the Bowles-Simpson Fiscal Commission Recommendations for the Sustainable Growth Rate

    This option would have the Sustainable Growth Rate, the formula which determines physician payments under Medicare, frozen through 2013, have a 1% cut in 2014, then a reinstatement of the previous formula in 2015 starting with 2014 levels.

  • 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 2021 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
    • Foreign Aid

      Click For More Information -$90B
    • Click For More Information $90B
    • Veteran Benefits

      Click For More Information -$60B
    • Click For More Information $40B

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    • Click For More Information $60B
    • Troop Levels

      Click For More Information $80B
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    Replace the Joint Strike Fighter Program with F-16s and F/A-18s

    The Joint Strike Fighter program is a program to develop a new stealth aircraft. This option would terminate that program and instead purchase the currently-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 Foreign Economic Aid in Half

    Critics of foreign aid believe we already spend too much of our own resources trying to help other countries, and that these funds have not delivered the economic or security benefits promised. Currently, we spend about $25 billion a year on foreign economic aid. This option would gradually cut that amount in half.

    Increase Foreign Economic Aid by 50%

    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 GDP on foreign aid, which is consistently among the lowest spending among OECD countries. This option would increase foreign economic aid by 50 percent, or by about $14 billion in the first year.

    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 veterans’ 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

    Since January 2003, no new enrollments have been accepted of veterans who have no service-connected disability and whose incomes are above certain geographically adjusted thresholds. This option would re-open enrollments for this group. The Department of Veterans Affairs estimates that there are 10 million veterans who are currently not enrolled for benefits, but who would be eligible under this option.

    Reduce Spending Related to the Nuclear Arsenal

    As of 2010, the US had about 2,000 deployed nuclear warheads. The START treaty that was ratified in December 2010 requires that the US cut that arsenal to 1,550. This option would take a number of steps to reduce the nuclear arsenal below that total. It would cut the deployed nuclear warhead total to 1,050, retire the bomber leg of the "nuclear triad" and end work on the Trident II missile.

    Reduce US Navy Fleet to 230 Ships

    Currently, the US Navy has 287 ships in its fleet, with the 2012 Future Years Defense Program planning to increase that number to 320 in a decade. Instead, this option would reduce the size of the fleet to 230 ships by next 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 about whether you think total Army troop levels should be larger. One option implements a phased in increase in levels, and the second option would halt an increase in troop levels that is already underway. You may also choose not make either choice. This option is related to, but not the same as, the previous choice made about troop levels in Iraq and Afghanistan.

    Increase Number of Troops by 46,000

    Many experts have argued that on-going troop deployment worldwide has left the military stretched thin. To address this strain and prepare us for any new potential conflicts, this option would increase the total number of new Army troops over the next five years by 46,000 troops, in addition to continuing the "Grow the Army" initiative described next.

    Reverse "Grow the Army" Initiative

    In 2007, the Army announced the "Grow the Army" initiative that would add 65,000 active personnel (increasing from 482,400 to 547,400) and 9,200 reservists (increasing from 555,000 to 564,200) by 2011. This option would reverse the initiative and have the service return to 482,400 active and 555,000 reserve soldiers.

  • 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 2021 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 $160B
    • Click For More Information $300B
    • Highway Funding

      Click For More Information -$130B
    • Click For More Information $260B

    • Click For More Information -$180B
    • Click For More Information -$30B
    • Click For More Information -$80B
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    • Click For More Information -$40B
    • Click For More Information $80B
    • Click For More Information $130B
     

    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 by 2020.

    Enact New Jobs Bill

    With the unemployment rate still quite high, many people are asking for another stimulus to accelerate the recovery. This option would provide an additional stimulus package of $100 billion this year and $136 billion over the next three years.

    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 and Increase Fees for Aviation Security

    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. This option would limit highway spending to expected revenue from the gas tax.

    Enact Increased Transportation Funding

    In the President’s FY 2012 budget, President Obama proposed a surface transportation reauthorization bill representing a significant increase over projected surface transportation spending. This option would enact the proposal.

    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 be able to set eligibility standards and benefit levels. The initial block grant would be set at 2008 SNAP levels and indexed to inflation and eligibility growth.

    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 the goal being for families to 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 $38 billion in 2010. This option would gradually reduce this piece of the budget, cutting the federal share 25 percent by 2015. States would thus become more responsible for funding K-12 education.

    Eliminate the New Markets Tax Credit

    The New Markets Tax Credit (NMTC) allows taxpayers to receive a 39 percent credit against their income tax for any qualified equity investments made in "Community Development Entities" The intent of the credit is to spur development in low-income communities. This option would eliminate the credit.

    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 2021 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 -$160B
    • Slow Initial Benefit Growth

      Click For More Information -$140B
    • Click For More Information -$40B
    • Click For More Information -$90B

    • Click For More Information -$110B
    • Click For More Information -$20B
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    • Click For More Information -$100B
    • Click For More Information $200B
     

    Raise the Normal Retirement Age to 68

    Currently, the retirement age is 66, and it is scheduled to gradually increase to 67 starting in 2017. This option would begin to increase the retirement age to 67 immediately and would additionally increase it by two months per year until it reaches 68, instead of stopping at 67. Increasing the age even further would provide savings in later years.

    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 economy-wide wage growth. 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 30 percent lower than currently projected by 2080.

    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.

    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.

    Use an Alternate Measure of Inflation for COLA

    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 percent 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 upon a retiree’s 35 highest years of earnings. This option would increase the number of years to 40 by 2018. For workers with less than 40 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 require all new state and local workers to contribute to the Social Security program. This would only apply to employees hired in 2012 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 120 percent of the federal poverty level. This provision would take full effect for all newly eligible workers in 2026, and would be phased in for new eligible workers in 2017 through 2025.

  • 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 23 million people are projected to remain uninsured after the reform bill is fully implemented. All numbers represent cumulative changes in debt through 2021 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 -$100B
    • Click For More Information -$330B
    • Click For More Information $80B
    • Click For More Information -$700B

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    • Modify Federal Medicaid Funding to States


      Click For More Information -$160B
    • Click For More Information -$300B
     

    Modify Health Care Reform Law

    This option allows you to make modifications to the health care reform legislation passed in 2010. Some options expand coverage – costing money, and some restrict coverage – saving money, compared to estimates of effects of the existing law. 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 through which individuals can purchase insurance. This option would create a "public option" administered by HHS which would compete with private plans. According to CBO, savings would result from lower premiums for the public option and lower amounts of health insurance coverage obtained through employers.

    Repeal Insurance Mandate

    The health care reform legislation passed in March 2010 contains a requirement that all legal US 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.

    Increase Cost Sharing for Medicare

    Currently, the Medicare program’s cost-sharing formula depends greatly on the type of service performed, whether it is in a hospital, outpatient care, or other services. This option would make the cost sharing uniform for all services provided by Medicare Parts A and B, making the deductible and coinsurance rate uniform, and providing an annual cap on cost-sharing liability. Additionally, this option would restrict the ability of Medigap policies to cover cost sharing.

    Raise Medicare Premiums to 35% of Costs

    Under current law, the Medicare Part B premium is set so that it will cover 25 percent of the program’s cost for most seniors, resulting in premiums of about $100 a month. This option would gradually increase all premiums so that they cover 35 percent of the program’s costs by 2014.

    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 at 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.

    Increase Medicare Retirement Age to 67

    Currently, the age at which people qualify for benefits is 65, the same age it has been since the program was enacted in 1965. This option would increase the retirement age by two months every year from 2014 until 2025, when it would reach 67. The argument for this increase is that life expectancy has increased since 1965, so the retirement age should reflect that; in fact, Social Security’s retirement age is already scheduled to increase to 67.

    Replace Traditional Medicare with Premium Support

    This option would replace the current Medicare program with a premium support program. Those eligible for the program would receive a voucher valued, for example, at the average per person cost of Medicare in their region of the country. To save money, these vouchers would grow at a slower rate than Medicare.

    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 portion of state Medicaid, averaging 57 percent. 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 2012 levels and grow at inflation plus population growth, but states would be allowed to fill in the details of program eligibility, coverage, etc.

  • Other Spending DONE NEXT BACK

    Farm subsidies, R & D, mass transit – 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 2021 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 -$70B
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    • Click For More Information $60B
     

    Use the Chained CPI for Other Indexed Programs

    Many mandatory programs rely on a measure of inflation to determine benefit adjustments or eligibility. Specifically, federal retirement programs use the Consumer Price Index (CPI) to determine annual cost-of-living adjustments and social programs rely on the CPI to determine eligibility based on the federal poverty line. This option would switch to an alternate inflation measure (the "chained" CPI) that would grow more slowly than the current CPI. Over time, this would reduce civil retirement benefits and reduce eligibility for poverty-related programs.

    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 Medigap policy for non-disabled military retirees and their families who are eligible for Medicare. TRICARE for Life has virtually no cost-sharing and has a small premium which 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 several changes to how federal retiree benefits are calculated, including increasing federal employees’ contributions to pension plans and reducing benefits under the Federal Employees Compensation Act. It would also increase the number of years used to calculate federal civilian retiree pensions from the average of an employee's highest three consecutive years to five years.

    Reform Fannie Mae and Freddie Mac

    Fannie Mae and Freddie Mac are government-sponsored enterprises (GSE) whose role is to stabilize the mortgage market. In September 2008, the government took control of these entities, and their operations were counted in the federal budget. This option would make two changes to the two GSEs. First, it would increase the fees they charge to guarantee loans in mortgage-backed securities by five basis points (.05%). Second, it would reduce the maximum limit on the size of mortgages they would guarantee from $625,000 to $417,000.

    Reduce Farm Subsidies

    This option would prohibit new enrollments in the Conservation Stewardship Program, prohibit reenrollments 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 2009 the federal government spent an estimated $147 billion on research and development (R&D) across all agencies (not including R&D spending under the American Recovery and Reinvestment Act). 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.

    Reduce Funding for the Arts & Humanities

    In 2010, the federal government awarded $1.8 billion in funds for arts and humanities programs such as the Smithsonian Institution and the National Endowment for the Arts. This option would reduce each award by 25 percent.

    Increase Mass Transit Funding

    Increasing federal funding for new bus and rail projects would cost about $51 billion over ten years. Mass transit is argued to be the most cost-efficient way to reduce congestion, but most of the benefits flow to people who live and work in cities. Included would also be an additional $500 million per year for Amtrak subsidies.

  • 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 2021 and include interest.
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    • Raise Social Security Payroll Tax Cap

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    Raise Tax Rates on Capital Gains

    Under the current tax system, long-term capital gains are subject to lower rates than ordinary income. Right now, proceeds from sales of stock held for more than a year are subject to a top tax rate of 15%, compared to 35% for ordinary income. In 2013, when the 2001/2003/2010 tax cuts expire, long-term capital gains will be subject to a top rate of 20%, compared to 39.6% for ordinary income; also, taxpayers in the 15% income tax bracket will be subject to a 10% capital gains rate (they are currently at 0%). This option, one of many possible reforms to capital gains, would raise both tax rates on long-term capital gains by two percentage points, to 22% and 12% respectively under current law.

    Sell Certain Government Assets

    The federal government currently owns over $2.7 trillion in assets. Under this option, the government would sell a small portion of these, including portions of the Tennessee Valley Authority, the Southeastern Power Administration, excess operating inventory and materials, and about a third of the oil in the strategic petroleum reserve.

    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.

    Repeal LIFO Accounting Methods and Eliminate Oil and Gas Preferences in the Tax Code

    Most U.S. companies use the last-in, first out (LIFO) cost accounting method, which tends to reduce their income tax liability in times of inflation. This option would eliminate this technique. It also eliminates tax breaks for the fossil fuel industry as recommended in the president's FY 2011 budget, excluding the domestic manufacturing deduction for oil and gas. Tax preferences to be abolished include deductions for intangible drilling expenditures, tertiary injectants, passive investments, and geological expenditures. It also eliminates the percentage depletion allowance subsidy and increases the geological amortization period to seven years.

    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.

    Eliminate Taxes on Capital Gains, Dividends and Interest for Families Earning Below $200,000

    Currently, long-term capital gains and qualified dividends are generally taxed at a preferential rate of 15 percent – though those at or below the 15 percent bracket for ordinary income pay a 0 percent rate. This option would extend the 0 percent bracket to families making under $200,000 per year and individuals making under $100,000 and expand this treatment to short-term capital gains, non-qualified dividends, and interest – all of which are currently taxed as ordinary income.

    Impose a 5.6% Surtax on Income Above $1 Million

    This option would impose a 5.6 percent surtax on income above $1 million. Currently, all income earned above $1 million is taxed at a marginal rate of 35 percent. If the 2001/2003/2010 tax cuts expire, this rate will increase to 39.6 percent. The surtax would make the top rate 40.6 percent now, and 45.2 percent with the expiration of the 2001/2003/2010 tax cuts.

    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. This option would implement this rule.

    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

    Currently, earnings up to $111,100 are subject to the Social Security payroll tax and that amount increases annually by the average wage growth. Originally, in 1937, about 92 percent of all earnings were subject to the tax and by 2007 it was only about 80 percent. This option would raise the percentage to 90 percent, about $200,000 in today’s terms.

    Institute Two Percent Surtax on Earnings Above Cap

    Currently, earnings above $111,100 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 two 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 rate, while the average effective rate is lower due to deductions. This option would reduce the top corporate tax rate to 30%. In exchange it also eliminates the Domestic Production Activities Deduction, which provides a deduction for some manufacturing and other production activities.

    Index Tax Code to Alternate Measure of Inflation

    This option would use the chained measure of inflation instead of the standard measure to adjust various portions of the tax code for inflation. CBO estimates that chained CPI is likely to grow 0.3 percentage points more slowly than the standard measure over the next decade, so applying the chained measure would increase the amount of income subject to taxation and result in higher tax revenues over time. Proponents of this option argue that using the current measure overstates inflation.

    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 federal taxes due goes uncollected in any given year. Some estimates put the amount as high as $350 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 2021 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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    Tax Fringe Benefits as Regular Income

    Currently, certain "fringe benefits" can be provided to employees on a tax-free basis. These include discounts, free services, meals, and holiday gifts, to name a few. This option would aim to tax these benefits as if they were wage-income.

    Gradually Phase Out Mortgage Interest Deduction

    Currently, homeowners who itemize can deduct interest paid on mortgages up to $1.1 million in size. 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 2014 by phasing down the cap on mortgages by $100,000 each year. By 2024, the mortgage interest deduction would be fully eliminated.

    Curtail State and Local Tax Deductions

    Currently, taxpayers may deduct their state and local income or sales tax payments from their federal income tax. This option would reduce the total amount allowed under this deduction to 2% of Adjusted Gross Income. Some supporters of elimination or reduction of this deduction claim that the deduction mainly benefits wealthy localities that provide more services and, consequently, pay more taxes.

    Eliminate Life Insurance Tax Benefits

    Under current law, life insurance benefits received upon the death of an insured person are exempt from taxation. This option would make these benefits subject to the individual income tax.

    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 2008, taxpayers claimed $173 billion in contributions. This option would limit the deduction for charitable giving to only 2 percent of AGI for a taxpayer who itemizes.

    Make Research & Experimenation 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.

    Reinstate $400/person Making Work Pay Credit

    One of the centerpieces of President Obama's stimulus (the American Recovery and Reinvestment Act) was the Making Work Pay (MWP) credit. The MWP credit was a refundable credit that provided up to $400 for single workers and $800 for married couples. The credit expired in 2010. This option would make the MWP credit permanent.

    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.

    Cut the EITC and Child Tax Credit

    The 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 EITC and Child Tax Credit.

    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 $4,000 refundable credit to students in exchange for 100 hours of community service at a non-profit organization. The credit was only made available for 2009 and 2010 but was extended through 2012 in the 2010 tax cut. 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 2013

    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 instead start the excise tax in 2013 and the thresholds would be lowered to $8,200/$21,000. An argument for this option is that the excise tax will encourage enrollees in employer-sponsored insurance to choose a lower-cost plan.

    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.

    Replace Employer Health Care Exclusion with a Flat Credit (In Place of Excise Tax)

    Under current law, employer provided health insurance is not counted as taxable income for the employees who receive the benefits, although an excise tax on high cost plans is scheduled to begin in 2018. In place of an excise tax this option would repeal the employer provided health insurance exclusion altogether and replace it with a flat refundable tax credit. The tax credit would grow with economic (GDP) growth.

  • Your Results: Stabilize the Debt BACK

    uh oh uh oh

    You failed to reduce the debt to a sustainable level. Without further changes, a fiscal crisis is likely to occur.


    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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