A Radical New Plan to Slash the Deficit by $9 Trillion
Policy + Politics

A Radical New Plan to Slash the Deficit by $9 Trillion

AP Photo/J. Scott Applewhite

As talks between President Obama and Congress to raise the $14.3 trillion debt ceiling remain stalled, former “Gang of Six” member Sen. Tom Coburn (R-Okl.) unveiled an ambitious $9 trillion deficit-reduction package on Monday.

Coburn, a fierce deficit hawk, began developing his plan after he dropped out of the Gang of Six talks in May. His plan, titled “Back in Black,” saves roughly $3 trillion from entitlements, $3 trillion from discretionary and other accounts, and $1 trillion from the defense budget. Most notably, he proposes saving an additional $1 trillion by eliminating special tax breaks such as the tax subsidy for ethanol over the next 10 years, which could put him at serious odds with fellow Republican colleagues. The hard-charging conservative, who was a practicing physician before entering politics, would also save  about $1 trillion in federal interest costs by curbing the projected growth of Medicare, Medicaid, and Social Security. Coburn would raise the eligibility age for all three, while calling for major reforms.

“Doing nothing is a tax increase,” Coburn said at a news conference Monday, acknowledging he will likely get heat from both sides of the aisle. “We can easily take several inches off of our waistline.”

Coburn’s overall plan would gradually reduce the size of government by about 25 percent and balance the budget within 10 years. But the senator doubts that his 614 page-proposal—which far exceeds any other deficit-cutting plan—will pass in the Senate. Yesterday on CBS's Face the Nation, he said that it’s dead on arrival, and he doesn't expect his fellow GOP Senators to approve the defense department cuts and targeted tax increases built into his proposal. “This is a plan that people can pick and choose from,” he said on Monday. “It’s a treasure trove of how to solve our country’s problems.” His proposal digs into every federal department in search of potential savings.

The $4 trillion “grand bargain” of spending cuts, entitlement reforms, and tax increases that President Obama has been pushing pales in size and scope to the Coburn plan. And even the $6 trillion budget-reduction blueprint put forward by Paul Ryan (R-Wisc.) earlier this year doesn’t come close to Coburn’s proposal.

While Coburn’s plan may be a non-starter with both Republicans and Democrats, the takeaway for Democrats is that even Coburn concedes that revenues are needed in a deficit -reduction plan, an issue on which Republicans have been unwilling to compromise.

“We simply can no longer afford a tax code that loses hundreds of billions of dollars in revenue every year,” Coburn said in the report, pushing for a comprehensive tax restructuring. “In this era of trillion-dollar annual deficits, even saving hundreds of billions of dollars is not enough. Tough choices will still be necessary. Everyone is going to feel a pinch. For some it may be a sting.”

Henry Aaron, a budget expert with the Brookings Institution, says that while Coburn’s plan contains some good and bad ideas, it is unlikely to play any role in reaching an agreement on how to raise the debt ceiling.  Aaron says the plan contains so much that is controversial and complex that it could not possibly be the basis of action in the next 10 days.

“Senator Coburn’s willingness to endorse loophole closing and to apply the resulting revenue to deficit reduction is a genuinely constructive step,” Aaron said. “One can only hope that more of his fellow Republican Senators and at least a few Republican House members will also step forward and declare that deficit reduction cannot—and should not—depend on spending cuts alone.”

Coburn’s plan adds to the already large menu of policy options lawmakers have to choose from to find an agreement on deficit reduction ahead of the August 2 deadline, when the Treasury Department says the federal government will run out of money to pay its bills. Senate Majority Leader Harry Reid (D-Nev.), and his Republican counterpart, Senator Mitch McConnell of Kentucky, continue to work on a plan floated by McConnell that would include modest cuts to spending and would allow the President to raise the debt ceiling by $2.4 trillion in three increments over the next 18 months without Republicans having to vote in favor of it.