Simpson, Bowles Reduce New Deficit Plan to Prod Congress

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.