Deficit and Debt Ceiling Update — “Gang of Six” Proposal, “Back in Black,” a Fallback Plan and the Cut, Cap and Balance Act


July 19, 2011

“Gang of Six” Proposal Released

Today the “Gang of Six” briefed about half of the members of the Senate on their proposal to lower the deficit and raise the debt ceiling.  Major components of the proposal require follow-up work by several key committees within the Senate to find further reductions and savings in the next six months.

Key highlights include:

  • Adopt statutory discretionary spending caps through 2015
  • Repeal the CLASS Act
  • Require the Senate Finance Committee to report legislation within six months that would permanently reform or replace the Medicare SGR formula and fully offset the cost with health savings; find an additional $85 billion - $202 billion over 10 years in health savings; and maintain essential health services for the poor and elderly
  • Require the Senate Health, Education, Labor and Pensions (HELP) Committee to report legislation within six months that would find an additional $70 billion in savings over 10 years
  • Require the Senate Judiciary Committee to report legislation within six months that would advance medical malpractice reform
  • Require the Senate Finance Committee to report tax reform within six months that would include reforming – not eliminating – tax expenditures for health care
  • Require the Budget Committee to report legislation within six months that would: extend discretionary caps and enforcement mechanisms through 2021; ensure Congressional action to reduce the deficit if the debt-to-GDP ratio after 2015 has not stabilized; review total federal health care spending starting in 2020 with a goal of holding growth of the GDP to + 1% per beneficiary and require action by Congress and the President if exceeded; achieve program integrity savings of $26 billion in entitlement programs to curb fraud, abuse and other wasteful spending government-wide; and create a working group to provide updated budget concepts for CBO and OMB
  • Provide that if any Committee fails to report entitlement program savings, the Senate would consider on an expedited basis across-the-board cuts to programs in the Committee’s jurisdiction 

Source:  Patton Boggs and Congressional Quarterly

Senator Coburn’s “Back in Black” Plan

Late Monday, Senator Coburn, who had been a member of the “Gang of Six,” released his own deficit reduction plan, "Back in Black."  The legislation aims to cut more than $9 trillion in government spending over the next 10 years, including substantial cuts in the Department of Housing and Urban Development (HUD) and the Department of Health and Human Services (HHS). 

The full report can be found here: http://coburn.senate.gov/public/index.cfm/pressreleases?ContentRecord_id=1d817708-76ed-4b2b-9cc2-076415409d44. 

The legislation as a whole is dead on arrival in the Senate, a point acknowledged by Senator Coburn himself.  However, he has proposed this plan in a time of intense budget negotiations.  As such, pieces of his plan could make their way into any final budget agreement.

Source:  Patton Boggs 

McConnell's fallback plan gains steam

Senate Minority Leader Mitch McConnell’s (R-KY) debt limit fallback option, which would give President Obama nearly unilateral authority to raise the debt ceiling, continued to gain momentum Monday as Senator Dianne Feinstein (D-CA), an influential member of the Senate Democratic Conference, offered her endorsement. Senate aides say the contingency plan is increasingly “plan A” for averting a national default even as Republican conservatives in the House voiced their opposition, and leaders are reportedly nearing agreement to attach $1.5 trillion in spending cuts to the legislation.

Another expected addition to the contingency plan would set up a special committee of eight or 12 lawmakers to recommend a deficit-reduction package that would receive an automatic vote on the Senate floor. Senator Reid announced Monday that he would keep the Senate in session both weekends before the August 2 deadline to ensure enough floor time as lawmakers work to pass a deal by the beginning of next month, at which point the nation will be at serious risk of default.

Source: The Hill

Cut, Cap and Balance Act

This evening, the House is considering the Cut, Cap and Balance Act, which is expected to pass the House.  However, the administration says President Obama would veto the plan, backed by many freshman House Republicans, if it lands on his desk.  In a statement, the Office of Management and Budget says that setting arbitrary spending levels and a balanced budget amendment are not necessary in order to achieve financial stability.

The Cut, Cap and Balance Act would allow the government to borrow an additional $2.4 trillion, but only after big and immediate spending cuts and adoption by Congress of a constitutional amendment requiring a balanced federal budget.

The plan is sure to stall in the Senate, where majority Democrats say it would lead to devastating cuts and the block-granting of Medicaid. 

Sources: The Hill and Associated Press

Contact Congress

Please help us continue to let Congress know that it cannot balance the budget on the backs of the most vulnerable – the men, women and children that we serve. 

Click here to Contact your elected officials:  http://support.volunteersofamerica.org/site/Advocacy?pagename=homepage&id=177