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Clarifying Some Misunderstandings about the “Gang of Six” Plan

Bob Greenstein:

Off the Charts Blog: Some of the early reporting on the deficit reduction plan that the Senate’s “Gang of Six” released today appears to have incorrectly or incompletely described two principal elements of the plan:  its reductions in health care programs and its revenue increases.

Some reports today have said that the Gang of Six agreed to expand its health care cuts by $117 billion to convince Senator Coburn to return to the Gang.  Other reports seem to have assumed that the $1 trillion in revenue that the Gang of Six plan would raise over the next 10 years is similar in amount to the $1 trillion in revenue that was purportedly part of the $4 trillion deficit reduction plan that the White House and Congressional leaders were discussing before Speaker Boehner pulled the plug on it 10 days ago.  Neither of these reports or assumptions is correct.

The Gang of Six could not reach agreement on the size of reductions in health care entitlement programs (Medicare, Medicaid, CHIP, and various provisions of the health reform law).  As a result, the Gang’s documents show two different levels of cuts in these programs, with some members of the Gang supporting the lower level and some supporting the higher level....

The Gang of Six plan calls for $1 trillion in higher revenues over ten years... [at] the same revenue baseline concept as the Bowles-Simpson commission (and as President Obama’s 2012 budget and his April budget framework).  This is the so-called “plausible” baseline, which assumes the President and Congress make permanent the Bush tax cuts for people with incomes under $250,000, while letting the tax cuts for people over $250,000 expire on schedule at the end of 2012. One trillion dollars in added revenue over the “plausible baseline” is very different from $1 trillion in added revenue relative to a baseline that assumes all of the Bush tax cuts become permanent — including those for people who make over $250,000 a year.  The $1 trillion in revenues in the $4 trillion deficit-reduction plan that Speaker Boehner walked away from used this lower revenue baseline...