A bipartisan group of Senators “is considering legislation that would trigger new taxes and budget cuts if Congress fails to meet a set of mandatory spending targets and other fiscal goals aimed at reducing federal deficits,” the Wall Street Journal reports.
The plan would break the task of deficit reduction into four pieces: a tax code overhaul; discretionary spending cuts; changes to Medicare, Medicaid and other entitlements; and changes to Social Security, aides said. The Social Security system is on firmer financial footing than other major entitlement programs and raises political sensitivities that lawmakers want to deal with separately.
The proposal builds on the work of President Barack Obama’s deficit commission, according to aides working on it.
"We’re getting close," said Senate Majority Whip Richard Durbin (D., Ill.), one of six senators working on the plan. "We understand that if we’re going to do something that’s important, it has to be timely." He said the group hopes to reach agreement "in a matter of weeks, or months."
In addition to Mr. Durbin, the second-ranking Senate Democrat, the group include[s] Budget Committee Chairman Kent Conrad (D., N.D.), and one of the Senate’s most conservative fiscal hawks, Tom Coburn (R., Okla.). Messrs. Coburn and Durbin are personally close to President Obama.
The Senate group’s working plan calls for placing separate caps on security and nonsecurity spending, and missing a budget target in one area would not trigger mandatory cuts in the other. The spending targets would follow proposals laid out by the deficit commission, which recommended cutting discretionary spending by $1.7 trillion through 2020. Lawmakers on the spending committees would draft legislation to meet the targets. But if they were not met, automatic, across-the-board cuts would go into effect.
The tax-writing committees would be given two years to overhaul both the individual and corporate tax codes, with general instructions to close tax breaks and minimize or eliminate tax deductions while lowering tax rates. The committees would be given a target for additional revenues to be raised by the new code. The deficit commission’s version of tax reform would net $180 billion in additional revenues over 10 years.
If Congress failed to enact the tax code overhaul, the legislation would mandate an across-the-board tightening of tax deductions to meet the higher target.
Changes to Medicare, Medicaid and other entitlements such as agriculture subsidies and military and civil service retirement plans would also have to meet fixed targets. Social Security, however, would not incur automatic penalties if lawmakers failed to make changes.
If the Social Security effort failed, the deficit commission’s plan—a mix of raising the level of wages subject to Social Security taxes, slowly increasing the retirement age and other smaller changes—would go to Congress for an up-or-down vote. But there appears to be little appetite for automatic cuts if neither option were to pass.
Other Senators “involved in the negotiations include Virginia Sen. Mark Warner, a Democrat, and two Republican senators, Mike Crapo of Idaho and Saxby Chambliss of Georgia.”
The framework of “targets and penalties is expected to be circulated to a broad group of senators by early next month.”