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1Center for American Progress | Recommendations for the Special Joint Committee on Deficit Reduction
Recommendations or the Special JointCommittee on Deicit Reduction
 The Criteria Any Deicit Plan Must Meet and a Recommendation that Does So
By Michael Ettlinger and Michael LindenSeptember 2011
Introduction
Te Budge Conrol Ac o 2011, more commonly known as he deb ceiling deal, seup a Special Join Commitee made up o six senaors and six members o he House o Represenaives asked wih nding $1.5 rillion in deci reducion. Te commitee mus reachagreemen by Tanksgiving, aer which Congress has unil Chrismas o enac or rejec he pro-posal by a simple majoriy. No amendmens will be allowed. I he commitee does no come oan agreemen ha reduces he deci over he nex 10 years by a leas $1.2 rillion, or i Congressdoes no pass i, a series o auomaic spending cus will be riggered. Tose auomaic cus willcome on op o he nearly $1 rillion in cus already enaced as par o he Budge Conrol Ac.ypically, debaes over deci reducion revolve around quesions o “how much in new rev-enue” versus “how much in spending cus.” We saw his dynamic clearly over he course o hedeb ceiling negoiaions. Bu ha is he wrong approach. Wha maters is no he raio o rev-enue o spending cus in any paricular plan. Wha really maters is wha he plan achieves or ourcounry—or he srengh o our economy, job creaion, and our sociey.In heir negoiaions, he Special Join Commitee should keep is eye on his bigger picure. Indeveloping our guidance o he commitee, we se several crieria, which we deail below. Wehen presen our se o recommendaions based on hese crieria.
Criterion No. 1
Achieve at least $1.2 trillion in defcit reduction but not more than $1.5 trillion in order to avoidthe triggered cuts
Tis sandard is simple, clear, and obvious, given he commitee’s legal mandae. Te commiteeis ocially asked wih nding $1.5 rillion, bu so long as hey ge o $1.2 rillion, he auomaiccus won’ be riggered. Tis should be he botom-line deci reducion arge.
 
2Center for American Progress | Recommendations for the Special Joint Committee on Deficit Reduction
oal deci reducion o $2.5 rillion, including he original $1 rillion worh o spend-ing cus, is an impressive amoun. By 2021 i will cu he annual deci by a ull per-cenage poin o our naion’s gross domesic produc, he broades measure o naionaleconomic aciviy. No, i won’ resul in a balanced budge, bu deci reducion o hismagniude will pu he budge on much more susainable ooing.Moreover, given he deep divisions in Congress, he more deci reducion he commi-ee ries o achieve, he less likely hey are o succeed. Boh paries have already agreedha $1.5 rillion, on op o he rs $1 rillion, is a reasonable arge, and ha’s wha hecommitee should aim or.
Criterion No. 2
Include signiicant job creation as part o the total package
Te economy needs help. Tere is litle debae on ha poin. As he Recovery andReinvesmen Ac o 2009 winds down, economic growh is beginning o sall, and healready weak labor marke is under siege. Over he pas several weeks, a broad consensushas developed ha he ederal governmen mus increase is eors o spur job creaion.O course, he commitee’s mandae is abou deci reducion, no spurring eco-nomic growh and job creaion, bu in ac he wo are inimaely conneced. HarvardUniversiy economis and ormer Naional Economic Advisor Larry Summers esimaesha each addiional 1 percen o economic growh willclose he deci by $400 billion.Policies ha spur growh and creae jobs oday will help close he budge gap omorrow.In addiion, he measures ha are required o spur he economy will cos somehing, which means hey will need o be deal wih in he conex o he ax and spending issuesha he commitee will ake on. Tus, he commitee needs o keep jobs a he orerono is deliberaions.Tere is nohing in he Budge Conrol Ac prevening he Special Join Commiteerom including job creaion measures in heir overall package o deci reducion—eveni hose measures increase he deci in he near erm. Te commitee can and shouldrecommend he exension o he 2 percen payroll ax cu (or somehing similar), heconinuaion o exended unemploymen insurance benes, as well as oher policiesha he Congressional Budge Oce says would spark addiional growh and jobs.
 
3Center for American Progress | Recommendations for the Special Joint Committee on Deficit Reduction
Criterion No. 3
Protect Medicare, Medicaid, and Social Security beneiciaries
One o he bigges drivers o our long-erm budge deci is he rising cos o healhcare naionwide. As a resul o his rend, he coss o he wo bigges ederal healh careprograms, Medicare and Medicaid, are projeced o rise much aser han everyhing elsein he ederal budge. Bu i would be wrong o punish senior ciizens, he disabled, andhe poor or somehing ha is ar rom heir aul.I is rue ha in he long run we are going o have o nd ways o conrol he growh o healh care coss all across he economy. Bu cuting Medicare and Medicaid in waysha merely shi hose coss ono beneciaries does nohing o achieve ha goal. Inhe inermediae erm, we can reduce ederal spending on healh care by improvingeciency and in some cases by asking healh care providers o pich in a litle more.Te botom line is ha cus o hese programs mus no increase coss or Medicare andMedicaid beneciaries, and mus no undermine heir access o qualiy care. As or Social Securiy, he commitee should leave he srenghening and reorm o hisprogram or anoher process. Social Securiy aces a long-run nancing problem, oo, bu over he nex 10 years, i does no conribue signicanly o he ederal budgedeci. More imporanly, any opion o reduce Social Securiy benes ha would haveany impac by 2021 is one ha would reduce he benes o curren reirees or hose jusabou o ener reiremen. Ta is boh unair, unnecessary, and poliically unwise.
Criterion No. 4
Avoid dangerous cuts to discretionary spending, both nondeense and deense
Te Budge Conrol Ac already cu discreionary spending by nearly $1 rillion. Te bulk o hese cus ell heavies on a caegory o spending known as “non-deense discre-ionary.” Tough he bland and nebulous name does i no avors, his caegory acually includes some very imporan and popular programs and services.For insance, he single-larges program in he caegory is he Veerans Healh Adminisraion, which provides healh care services o our naion’s veerans. Also in hiscaegory are nearly all o he counry’s vial invesmens, including educaion, inrasruc-ure, energy, and science and echnology research.Nondeense discreionary spending also encompasses mos o he day-o-day operaionso he ederal governmen, such as ood and drug saey inspecions, airpor and high- way saey, law enorcemen, and border conrol. Te Budge Conrol Ac cu his enire
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