–Ex Sen. Domenici, Ex OMB Chief Rivlin: Must Act Soon To Avert Crisis
–Domenici-Rivlin Panel Calls For Payroll Tax Holiday To Boost Econ
–Panel Backs Sweeping Tax Reform, Simplification
–Panel Seeks To Reduce Spending To 22% of GDP By 2050
–Domenici: Must Act Now To Avoid ‘An Economic Disaster’
–Rivlin: Deficit Reduction Should Be ‘Phased In Slowly’

By John Shaw

WASHINGTON (MNI) – Former Senate Budget Committee Chairman Pete
Domenici and former White House budget director Alice Rivlin released
Wednesday an ambitious fiscal overhaul plan that would secure nearly $6
trillion of budget savings by 2020.

At a briefing, Domenici and Rivlin said the plan developed by the
task force they chair would restructure major spending programs such as
Social Security and Medicare, place a multiyear freeze on many domestic
and defense programs and fundamentally overhaul the U.S. tax system.

Domenici and Rivlin are co-chairs of a budget project sponsored by
the Bipartisan Policy Center. They have been working on this report for
nearly a year.

Domenici said the fiscal stakes could not be larger. He called the
nation’s current fiscal policy a “quiet killer that is eating away at
the foundation of America.”

“It is an economic disaster awaiting…Everybody must sacrifice,”
he said.

In their report, Domenici and Rivlin call for a one-year payroll
tax holiday in 2011 which would suspend Social Security payroll taxes
for employers and employees. This is an effort to boost the economy in
the short term.

Domenici said it would be effectively a $650 billion tax cut that
would stabilize and strengthen the American economy.

The bulk of their report focuses on driving down the deficit.
Between 2012 and 2020, it outlines $2.7 trillion in spending savings,
$1.9 trillion in tax expenditure savings, $435 billion in new revenues
and $877 billion in debt service savings.

Domenici and Rivlin said their plan would stabilize the federal
debt below 60% of GDP by 2020. It would reduce federal spending from 26%
of GDP to 23% by 2020. Under their plan, revenues would reach 21.4% of
GDP by 2020.

“These fiscal changes will enable the Federal Reserve to hold
interest rates down longer in order to strengthen the economic
recovery,” the report says.

Domenici and Rivlin said one of the centerpieces of their report is
a plan to “dramatically” overhaul the tax system, creating individual
rates of 15% and 27%, down from the current high of 35% and cutting the
corporate tax rate from 35% to 27%.

They call for a 6.5% debt reduction sales tax.

Domenici and Rivlin call for broad Social Security reform,
including raising the amount of wages subject to a payroll tax, reducing
benefits for wealth recipients of Social Security and changing the cost
of living formula.

Domenici and Rivlin call for Medicare reform and capping and then
phasing out the tax exclusion for employer-provided health care
insurance.

Domenici and Rivlin also call for freezing most parts of the
discretionary budget, including defense, for at least four years.

This is one of three major reports that have been released in the
last week to address the nation’s deficit problems.

The National Commission on Fiscal Responsibility and Reform will
meet again Wednesday afternoon to discuss a discussion draft by the two
chairmen of the panel, former senator Alan Simpson and former White
House chief of staff, Erskine Bowles.

Simpson and Bowles said they are carefully going through their
draft with commission members. Future meetings will determine if there
are 14 votes on the 18 member panel to approve the plan–or some
variation of it.

President Obama created the commission on Feb. 18 by executive
order after an attempt by lawmakers to create a panel by statute failed
in the Senate.

The commission is charged to issue a report by Dec. 1 that would
cut the deficit to about 3% of gross domestic product by fiscal year
2015 and begin slowing the growth of debt over the long term. In order
for the panel to issue recommendations, 14 of the 18 members need to
reach an agreement.

The draft budget plan Simpson and Bowles released last week calls
for more than $4 trillion in budget savings over a decade.

Their draft plan, which was presented to their panel Wednesday,
would bring the federal budget deficit down to 2.2% of gross domestic
product by 2015. It would reduce the nation’s debt to 60% of GDP by 2024
and to 40% of GDP by 2037.

The plan would wring deep savings out of every corner of the
federal budget, including defense and Social Security.

The Bowles-Simpson plan would put in place tough discretionary
spending caps that would help achieve about $1.4 trillion in savings. It
calls for $733 billion in entitlement savings and $751 billion in
savings from overhauling tax expenditures over a decade.

The plan calls for fiscal changes that would bring federal spending
down to about 21% of GDP and boost revenues to bring them up to 21% of
GDP. The plan would balance the federal budget by 2037.

In their draft, Bowles and Simpson call for fundamental tax reform
in which the marginal rates are reduced, the tax base is broadened, and
revenue is capped at 21% of GDP.

** Market News International Washington Bureau: (202) 371-2121 **

[TOPICS: M$U$$$,MFU$$$,MCU$$$]