FACT SHEET: THE PRESIDENT’S FRAMEWORK FOR SHARED PROSPERITY
AND SHARED FISCAL RESPONSIBILITY
The
President believes that we need a comprehensive, pro-growth economic
strategy that invests in winning the future, lays the foundation for
strong private-sector job growth and ensures that shared prosperity
will keep the American dream alive for generations to come. A key
component of that strategy must be a commitment to fiscal
responsibility and to living within our means. Today, the President is
laying out a comprehensive, balanced deficit reduction framework to cut
spending, bring down our debt and increase confidence in our nation’s
fiscal strength, while supporting our economic recovery and ensuring we
are making the investments we need to win the future.
·
$4 Trillion in Deficit Reduction: The
President is setting a goal of reducing our deficit by
$4
trillion in 12 years or less.
This deficit reduction would be phased in over time to protect and
strengthen our economic recovery and the recovering labor market.
·
Debt on a Declining Path, Backed Up By An
Across the Board “Debt Failsafe” Trigger: The President’s framework
would require that, by the second half of the decade,
our
nation’s debt is on a declining path as a share of our economy.
To enforce this requirement, the President is calling on Congress to
enact:
Ø
A Debt Failsafe that will trigger across-the-board spending reductions (both in direct spending and spending through
the tax code) if, by 2014, the projected ratio of debt-to-GDP is
not
stabilized and declining toward the end of the decade. Consistent with
prior fiscal enforcement triggers put in place by Presidents Reagan,
George H.W. Bush and Clinton, the trigger should not apply to Social
Security, low-income programs, or Medicare benefits.
·
Balance Between Spending Cuts and Tax Reform:
The President’s framework would seek a balanced approach to bringing
down our deficit, with
three dollars of spending cuts and
interest savings for every one dollar from tax reform that contributes
to deficit reduction. This is consistent with the bipartisan
Fiscal Commission’s approach.
·
Shared Sacrifice from All, Including the Most
Fortunate Americans: The
President believes strongly that, as we make difficult choices to live
within our means, we cannot afford to make our deficit problem worse by
extending the Bush tax cuts for the wealthiest Americans.
·
Bipartisan, Bicameral Negotiations on a
Legislative Framework:
The President has asked Majority Leader Reid, Speaker Boehner, Minority
Leader Pelosi and Minority Leader McConnell to each designate four
Members from their caucuses to participate in bipartisan, bicameral
negotiations led by the Vice President, beginning in early May. The
goal of these negotiations is to agree on a legislative framework for
comprehensive deficit reduction.
·
Policy Highlights. The policy highlights in
the President’s framework build on the down-payment included in his FY
2012 Budget. They include:
Ø
Non-security discretionary spending: The
President is proposing to build on the savings from the FY 2011 budget
agreement, while investing in key drivers of economic growth like
energy innovation, education, and infrastructure. This would entail cutting
non-security discretionary spending to levels consistent with the
Fiscal Commission, saving $770 billion by 2023.
Ø
Security spending: The
President’s framework will go beyond the Fiscal Year 2012 Budget to
achieve deeper reductions in security spending. It sets a goal of
holding the growth in base security spending below inflation, while
ensuring our capacity to meet our national security responsibilities,
which would save $400 billion by 2023.
Ø
Health care: The
President’s framework builds on the Affordable Care Act by including
new reforms aimed at further reducing the growth of health care
spending – a major driver of long-term deficits. The President opposes
any plan that would simply shift costs to seniors and the vulnerable by
undermining Medicare and Medicaid. Building on the foundation of the
historic deficit reduction achieved through the Affordable Care Act, the
framework
would save an additional $340 billion by 2021, $480 billion
by 2023, and at least an additional $1 trillion in the subsequent decade.
These
savings complement the new patient safety initiative that could
lower Medicare costs by another $50 billion over the next decade by
providing better care. The President’s framework includes initiatives
that will:
o
Bend the long-term cost curve
by setting a more ambitious target of holding Medicare cost growth per
beneficiary to GDP per capita plus 0.5 percent beginning in 2018,
through strengthening the Independent Payment Advisory Board (IPAB).
o
Make Medicaid more flexible, efficient and
accountable
without resorting to block granting the program, ending our partnership
with States or reducing health care coverage for seniors in nursing
homes, the most economically vulnerable and people with disabilities. Combined
Medicaid savings of at least $100 billion over 10 years.
o
Reduce Medicare’s excessive spending on
prescription drugs and lower drug premiums for beneficiaries
without shifting costs to seniors or privatizing Medicare. Combined
Medicare savings of at least $200 billion over 10 years.
Ø
Other mandatory spending:
Outside of health care, comprehensive deficit reduction must include
savings in other mandatory programs, including agricultural subsidies,
the federal pension insurance system, and anti-fraud measures, while
protecting and strengthening programs that serve low-income families
and other vulnerable Americans. The President’s framework includes a
target of $360 billion in savings from other mandatory programs by 2023.
Ø
Tax reform: the President is calling for
individual tax reform that closes loopholes and produces a system which
is simpler, fairer and not rigged in favor of those who can
afford lawyers and accountants to game it.
The President supports the Fiscal Commission’s goal of reducing tax
expenditures enough to both lower rates and lower the deficit.
Ø
Social Security:
The President does not believe that Social Security is in crisis nor is
a driver of our near-term deficit problems. But, in the context of an
aging population and a Social Security wage base that is declining as a
share of overall earnings, Social Security faces long-term challenges
that are better addressed sooner than later to ensure that the program
remains for future generations the rock-solid benefit for older
Americans that it has been for past generations. That is why the
President supports bipartisan efforts to strengthen Social Security for
the long haul. These efforts should be guided by several principles,
including strengthening the program and not privatizing it, improving
retirement security for the vulnerable while protecting people with
disabilities and current beneficiaries, and not slashing benefits for
future generations.
DETAILS OF THE
PRESIDENT’S FRAMEWORK FOR
SHARED PROSPERITY
AND SHARED FISCAL RESPONSIBILITY
1.
A Fiscally Responsible Economic Strategy to Invest
in Competitiveness and Growth
The
President believes that, if we are going to promote economic recovery,
invest in our long-term competitiveness and meet our values of dignity
for retirees, protection for the most vulnerable and opportunity for
all Americans, a comprehensive, balanced deficit reduction framework
must be part of our overall economic growth strategy.
The
question is not whether we need to bring down long-term deficits and
debt to build economic confidence and promote investment in the United
States; instead it is how to best do so consistent with a pro-growth
economic strategy. The framework the President outlined today charts a
course to achieve deficit reduction and support economic growth, with a
balanced approach and an enforceable backstop to ensure that we achieve
our economic and fiscal goals.
2.
A Deficit Reduction Goal and Enforceable Debt
Failsafe
The
framework the President announced today offers a balanced approach to
maintaining our economic recovery while living within our means. It
centers on the following goal:
·
Achieving $4 trillion in deficit reduction over
12 years or less. The
President believes that this goal is achievable over a 12 year period,
consistent with the goals of promoting economic growth that benefits
the middle class and strengthening the health and economic security of
our nation’s seniors, people with disabilities and most vulnerable. The
Administration projects that this framework will reduce deficits as a
share of our economy to about 2.5% of GDP in 2015, and put deficits on
a declining path toward close to 2.0% of GDP toward the end of the
decade.
·
Deficit
reduction should be phased in over time to ensure that fiscal policy
does not undermine the momentum of our economic recovery. Our
economy has created 1.8 million private sector jobs over the last 13
months and the pace of job growth has accelerated in recent months.
While long-term deficit reduction is a crucial component of the
President’s economic strategy, this goal cannot be used as an excuse to
undermine the near-term policies and investments we need to continue
our economic recovery.
·
Deficit reduction efforts should be held
accountable by a “Debt Failsafe” trigger:
The President is confident that, with a robust economic recovery and
bipartisan agreement on deficit reduction, we will put our debt as a
share of the economy on a declining path by the second half of the
decade. However we must provide a strong incentive for Congress to act
on a deficit reduction framework and renew confidence that we will hit
this goal. Therefore, the President is calling for:
Ø
A
debt failsafe that will ensure that our nation’s debt is on a declining
path as a share of our economy. If by 2014, budget projections do not
show that the debt-to-GDP ratio has stabilized and is declining in the
second half of the decade, the failsafe will trigger an across the
board spending reduction, including on spending through the tax code.
Ø
The
trigger will ensure that deficits as a share of the economy average no
more than 2.8% of GDP in the second half of the decade.
Ø
Consistent
with prior fiscal enforcement mechanisms put in place by Presidents
Reagan, George H.W. Bush and Clinton, the trigger should not apply to
Social Security, low-income programs, or benefits for Medicare
enrollees.
Ø
The
trigger should also include a mechanism to ensure that it does not
exacerbate an economic downturn or interfere with our nation’s ability
to respond to a national security emergency.
3.
Discretionary Spending
·
Non-Security Savings Equal to the Fiscal
Commission’s, While Investing In Our Future:
Ø
The budget
agreement negotiated by the President last week represented the largest
one-year reduction in discretionary spending in our history, even as it
invested in areas key to our long-run economic growth and
competitiveness.
Ø
We should
build on this year’s savings, while ensuring that we continue to make
the investments we need to win the future and not threaten the economic
recovery. The President believes we can do so while generating
additional deficit reduction by cutting non-security spending to levels
consistent with what the Fiscal Commission recommended over the next
decade.
Ø
This
would generate an additional $200 billion in savings over 10 years
beyond the $400 billion in savings from the President’s Budget. Over 12
years, it will generate a total of $770 billion in deficit reduction.
·
Additional Discipline on Security Spending
While Keeping America Safe:
Ø
While
the President will never accept cuts that compromise our ability to
defend our homeland or America’s interests around the world, Secretary
Gates has shown over the last two years that there is substantial waste
and duplication in our security budget that we can and should
eliminate—proposing savings of $400 billion in current and future
defense spending.
Ø
As part
of a comprehensive deficit reduction framework, the President is
calling for pushing harder to not only eliminate waste and improve
efficiency and effectiveness, but conduct a fundamental review of
America’s missions, capabilities, and our role in a changing
world.
Ø
The framework
sets a goal of holding the growth in base security spending below
inflation, while ensuring our capacity to meet our national security
responsibilities, which would save $400 billion by 2023.
(The President will make decisions on specific cuts after working with
Secretary Gates and the Joint Chiefs on the comprehensive review.)
Ø
Note: this deficit reduction is in addition to the
savings generated from ramping-down overseas contingency operations.
4.
Health Care
·
Medicare
and Medicaid Savings of $480 Billion by 2023 and At Least an Additional
$1 Trillion over the Subsequent Decade, Providing Better Care at Lower
Costs:
Ø
Building
on the Affordable Care Act, the President is proposing additional
reforms to Medicare and Medicaid designed to strengthen these critical
programs by reducing waste, increasing accountability, promoting
efficiency, and improving the quality of care, without shifting the
cost of care to our seniors or people with disabilities.
Ø
The
framework will save $340 billion over ten years and $480 billion by
2023 (including the proposals already included in the President’s
Budget). This framework includes the same aggregate savings that
House Budget Committee Chairman Paul Ryan proposed in his November 2010
plan with Alice Rivlin
and an amount sufficient to fully pay to reform the Medicare
Sustainable Growth Rate (SGR) physician payment formula while still
reducing the deficit.
Ø
Over the subsequent decade, the
President’s proposal will save well over $1 trillion by further bending
the cost curve, doubling the savings from the Affordable Care Act.
Ø
The
President’s framework offers a stark contrast with the House Republican
plan that would increase seniors’ health costs by $6,400 annually
starting in 2022, raise health insurance premiums for middle-class
Americans and small businesses, cut Federal Medicaid spending by
one-third by the end of the decade, and increase the number of
uninsured by 50 million.
·
The President’s framework proposes specific
reforms to strengthen Medicare and Medicaid over the long term,
including:
Ø
Addressing the long-term drivers of Medicare
cost growth:
The President’s framework would strengthen the Independent Payment
Advisory Board (IPAB) created by the Affordable Care Act. The IPAB has
been highlighted by economists and health policy experts as a critical
contributor to Medicare’s solvency and sound operations. Under the
Affordable Care Act, IPAB analyzes the drivers of excessive and
unnecessary Medicare cost growth. When Medicare growth per beneficiary
exceeds growth in nominal GDP per capita plus 1 percent, IPAB
recommends to Congress policies to reduce the rate of growth to meet
that target, while not harming beneficiaries’ access to needed
services. Congress must consider IPAB’s recommendations or, if it
disagrees, enact policies that achieve equivalent savings. If neither
acts, then the Secretary of Health and Human Services would have to
develop and implement a proposal to achieve the savings target.
The
President’s framework will strengthen IPAB to act as a backstop to the
other Medicare reforms by ensuring that Medicare spending growth does
not outpace our ability to pay for it over the long run, while
improving the program and keeping Medicare beneficiaries’ premium
growth under control. Specifically, it would:
o
Set
a new target of Medicare growth per beneficiary growing with GDP per
capita plus 0.5 percent. This is consistent both with the reductions in
projected Medicare spending since the Affordable Care Act was passed
and the additional reforms the President is proposing.
o
Give
IPAB additional tools to improve the quality of care while reducing
costs, including allowing it to promote value-based benefit designs
that promote proven services like prevention without shifting costs to
seniors.
o
Give
IPAB additional enforcement mechanisms such as an automatic sequester
as a backstop for IPAB, Congress, and the Secretary of Health and Human
Services.
Ø
Reforming the Federal-State partnerships to
strengthen Medicaid and promote simplicity, efficiency, and
accountability:
Under current law, States face a patchwork of different Federal payment
contributions for Medicaid and the Children’s Health Insurance Program
(CHIP). The President’s framework would replace the current complicated
Federal matching formulas with a single matching rate for all program
spending that rewards States for efficiency and automatically increases
if a recession forces enrollment and State costs to rise.
In
addition, the President has called on the National Governors
Association (NGA) to make recommendations for ways to reform and
strengthen Medicaid, and the framework will consider the ideas that its
Task Force produces. The President also supports reform of
Medicaid to incentivize more efficient, higher quality, care for
high-cost beneficiaries, including those who are eligible for both
Medicaid and Medicare. These nine million beneficiaries comprise 15
percent of Medicaid enrollment but consume nearly 40 percent of total
Medicaid spending.
Ø
Improving patient safety:
Together with employers, States, hospitals, physicians and nurses, the
Administration has launched a new public-private partnership called
Partnership for Patients that will help improve the quality, safety and
affordability of health care for all Americans. The two goals of this
new Partnership are: preventing patients from getting injured or sicker
while they are in the hospital and helping patients heal without
complication. Achieving the initiative’s goal would mean more than 1.6
million patients will recover from illness without a preventable
complication, reducing costs by up to $50 billion in Medicare and
billions more in Medicaid over the next 10 years.
Ø
Cutting unnecessary prescription drug spending:
The
framework would limit excessive payments for prescription drugs by
leveraging Medicare’s purchasing power – similar to what was called for
by the bipartisan Fiscal Commission. It would speed up the availability
of generic biologics, and prohibit brand-name companies from entering
into “pay for delay” agreements with generic companies. And, it would
implement Medicaid management of high prescribers and users of
prescription drugs.
Ø
Reducing abuse and increasing accountability in
Medicaid and Medicare:
The framework would clamp down on States’ use of provider taxes to
lower their own spending while not providing additional health services
through Medicaid; recover erroneous payments from Medicare Advantage;
establish upper limits on Medicaid payments for durable medical
equipment; and take other actions to improve program integrity.
·
A major contrast with the House Republican
approach.
The President’s framework rejects plans that would end Medicare as we
know it or transform Medicaid into a dramatically underfunded block
grant, putting at serious risk not only seniors but also the most
vulnerable children and people with disabilities. Some of the major
problems with the House Republican approach include:
Ø
The
House Republican plan does nothing to reduce health costs. Instead it
actually increases costs by doing nothing to reform the way health care
is delivered in addition to putting a larger fraction of the burden on
beneficiaries and States.
o
In
the first year the Republican plan goes into effect, a typical
65-year-old who becomes eligible for Medicare would pay an extra $6,400
for health care, more than doubling what he or she would pay if the
plan were not adopted.
o
States
would get one-third less for Medicaid by 2021, potentially leaving 15
million people without coverage, including seniors in nursing homes,
people with disabilities, children and pregnant women.
Ø
The
House Republican plan would no longer guarantee the same level of
benefits and choices that seniors have today in Medicare, because the
proposal allows private health plans to determine benefits, raise cost
sharing, and limit choice of doctors and hospitals.
5.
Other Mandatory Spending
·
Outside of health care, comprehensive deficit
reduction must include savings in other mandatory programs.
·
The
President’s Budget includes measures to reform agricultural subsidies,
shore up the federal pension insurance system, restore solvency to the
federal unemployment insurance trust fund, and enact anti-fraud
measures.
·
Building on these efforts, the President’s
framework includes a target of $360 billion in savings from
other mandatory programs by 2023.
·
The
Fiscal Commission and other bipartisan efforts have put forward
additional proposals that should be considered as part of a
comprehensive deficit reduction effort to meet this target.
·
Reforms
to mandatory programs should protect and strengthen the safety net for
low-income families and other vulnerable Americans.
6.
Tax Reform
·
The
President is calling on Congress to undertake comprehensive tax reform
that produces a system which is fairer, has fewer loopholes, less
complexity, and is not rigged in favor of those who can afford lawyers
and accountants to game it.
·
He believes we cannot afford to make our deficit
problem worse by extending the Bush tax cuts for the wealthiest
Americans.
·
He
also supports efforts to build on the Fiscal Commission’s goal of
reducing tax expenditures so that there is enough savings to both lower
rates and lower the deficit. Reform should be designed to ask more of
those who can afford it while protecting the middle class and promoting
economic growth.
·
In
addition, as he explained in the State of the Union, the President is
continuing his effort to reform our outdated corporate tax code to
enhance our economic competitiveness and encourage investment in the
United States. By eliminating loopholes, reducing distortions and
leveling the playing field in our corporate tax code, we can use the
savings to lower the corporate tax rate for the first time in 25 years
without adding to the deficit.
7.
Social Security
·
The
President does not believe that Social Security is a driver of our
near-term deficit problems or is currently in crisis. But he supports
bipartisan efforts to strengthen Social Security for the long haul,
because its long-term challenges are better addressed sooner than later
to ensure that it remains the rock-solid benefit for older Americans
that it has been for past generations. The President in the State of
the Union laid out his principles for Social Security reform which he
believes should form the basis for bipartisan negotiations that could
proceed in parallel to deficit negotiations:
Ø
Strengthen
retirement security for the low-income and vulnerable; maintain robust
disability and survivors’ benefits.
Ø
No privatization
or weakening of the Social Security system; reform must strengthen
Social Security and restore long-term solvency.
Ø
No current beneficiary
should see the basic benefit reduced; nor will we accept an approach
that slashes benefits for future generations.
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