Taken as a whole, the president’s deficit reduction proposal includes $750 billion in revenue increases, $808 billion in programmatic spending cuts, and $202 billion in associated debt service savings. In total, then, “spending” policies would generate more than $67 billion in new revenue. Under official budget accounting rules, however, it shows up as extra revenue as well. That sounds like a compensation cut to me and, I bet, to affected workers, and would be implemented through spending legislation.
Several similar administrative changes in Social Security and unemployment insurance add almost $1 billion more.Īnother $20 billion would come from increasing federal employee contributions to pension plans. To get that funding, Congress must raise something known as a “program integrity cap.” The administration thus lists this as a spending policy, but the budget impact shows up as higher revenues (assuming it works-such spend-money-to-make-money proposals don’t always go as well as claimed, although there is evidence that IRS ones can). Almost $47 billion would come from greater funding for IRS enforcement efforts that lead to higher collections. Much media coverage has been incorrectly suggesting an increase of either $580 billion (revenue from limiting tax breaks for high-income taxpayers and implementing a “ Buffett Rule”) or $680 billion (adding in the revenue that would come from using chained CPI to index parameters in the tax code).īut there’s another $67 billion in additional revenue. The proposal would increase revenue by $750 billion over the next decade.
I found the budget presentation of this proposal somewhat confusing in particular, it is difficult to see how much deficit reduction the president wants to do through spending cuts versus revenue increases.Īfter some digging into the weeds, I pulled together the following summary to answer that question: President Obama’s budget identifies a group of policies as a $1.8 trillion deficit reduction proposal.