Simpson, Bowles Reduce New Deficit Plan to Prod Congress

Like Jackie Gleason's Buford T. Justice in 1977's Smokey and the Bandit, they're not giving up.

Alan Simpson and Erskine Bowles and released more of their updated deficit reduction plan, first announced in February, on Friday in an effort to gain bipartisan support.

The proposed plan "is smaller in scope and seeks to build on the $2.7 trillion in deficit reduction that the White House and Congress have agreed to since 2010," according to CNN Money.

That $2.7 trillion (which the White House estimates to be $2.5 trillion) does not include the sequestration cuts that went into effect in March.

Simpson and Bowles call those cuts "mindless" and think they threaten the economic recovery, according to the network. Consequently, they propose canceling 70% of the cuts for this year and next. Similarly, they recommend delaying most of their plan's deficit reduction until 2016.

But "back loading" the changes can mean a steep hit in later years, such as $500 billion in deficit reduction in 2023 alone, CNN notes.

It goes on to provide highlights of the new plan:

Debt reduction: $2.5 trillion in additional deficit reduction over 10 years is more than the $1.8 trillion that President Barack Obama called for in his 2014 budget, but less than the $5 trillion House Republicans want.

Taxes: The plan calls for "fundamental tax reform that lowers rates, reduces tax breaks and maintains progressivity. It would raise $585 billion in revenue for deficit reduction."

Defense spending: The plan would "undo most of the defense budget cuts this year and next. But it also would require that Congress achieve $220 billion of defense savings by 2023 relative to pre-sequester levels. It would cap defense spending growth at the inflation rate through 2025."

Domestic spending: As with defense spending, it would "cancel most of the nondefense discretionary budget cuts this year and next. But it also would require $165 billion of savings in domestic spending by 2023, compared with pre-sequester spending levels. And it would cap spending growth at the rate of inflation through 2025."

Medicare: Simpson and Bowles "will touch some nerves," according to CNN, with their proposals to curb spending on Medicare and other health spending by $585 billion over a decade.

For instance, they would slowly raise the Medicare eligibility age from 65 to 67 by the mid-2030s. But at the same time, they propose creating a "buy-in" option for 65- and 66-year-olds so they, too, could receive Medicare benefits.

Social Security: Lastly, CNN reports the plan calls on Congress to make the system solvent over the next 75 years. It also includes one specific and very controversial proposal: changing how annual cost-of-living increases are calculated for benefits, using the chained consumer price index to measure inflation. Obama's budget proposal does the same.

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Read Obama Blasts 'Meat Cleaver' Cuts as Simpson, Bowles Release New Plan on AdvisorOne.

Simpson, Bowles Reduce New Deficit Plan to Prod Congress

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