Cliff Calculator: First Blood, Part II
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Policy201320142015201620172018201920202021Description2013b2014b2015b2016b2017b2018b2019b2020b2021bcategory_shortname
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Baseline-0.33.14.84.53.83.12.62.42.22.364138721318612379130142144
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Fiscal cliff componentscliff
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Repeal defense sequester/cap0.700000000This policy, included in the Budget Control Act of 2011, will take a hatchet to military spending starting January 1 (unless you reverse it). Discretionary defense spending, excepting pay and a few other categories, will take a 9.4 percent across-the-board cut, and mandatory spending will be cut 10 percent. That means a 10 percent cut in retiree benefits, a 10 percent cut in missile purchases, a 10 percent cut on tanks, and so forth.555555555555555555
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Repeal nondefense sequester/cap0.700000000As with defense spending, non-defense discretionary spending takes an across-the-board cut. It's slightly smaller, however, at 7.4 percent, and safety net programs like food stamps and Medicaid are exempted. However, the cuts could be devastating because there is little left to cut. For example, it's unclear that essential agencies like the Census or the National Institutes of Health could survive a 7.4 percent cut in their budgets.555555555555555555
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Extend Bush cuts (upper income)0.200000000These are the cuts passed in 2001 and 2003 that apply to income over $250,000, including lower brackets and more favorable treatment of capital gains and dividends income. Note that these options assume the Alternative Minimum Tax is patched.42396372829098105113
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Extend Bush cuts (low/middle income)100000000These are the cuts passed in 2001 and 2003 that apply to income under $250,000, including lower brackets, expanded credits, and additional benefits. Note that these options assume the Alternative Minimum Tax is patched.205280309332357384413443475
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Extend Payroll/UI0.9500000000Extensions to unemployment benefits are set to expire at the end of the year, as is the payroll tax holiday and various stimulus tax breaks. Extending them could aid the recovery. Note that these options assume the Alternative Minimum Tax is patched.115350000000
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Deficit reducersdeficit
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Repeal Obamacare coverage provisions000000000This would repeal the insurance subsidies and Medicaid expansion included in the Affordable Care Act while preserving the plan's taxes and Medicare cuts. Repealing the bill in its entirety would actually increase the deficit.000-129-145-145-144-145-153
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Block-grant Medicaid000000000This proposal would convert the federal government's share of Medicaid to a lump-sum grant to states to spend as they wish. That would save money, but critics argue it could hurt care and throw people off the Medicaid rolls.000-14.8-18.6-23.3-28.5-34.3-40.9
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Raise Medicare age to 67000000000This would increase the age of eligibility for Medicare to 67, though it is currently at 65. Proponents note that the Affordable Care Act means people aged 65 and 66 would still apply for government-sponsored insurance, and point to rising life expectancy as a reason for the change. Opponents note that life expectancy has not actually risen for poor and middle-class Americans, only for the rich, and argue that Medicare is a superior program to Obamacare.000-8.9-12.3-15.7-20.8-26-31.8
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Repeal individual mandate000000000Because fewer people would take advantage of Obamacare's insurance subsidies or its Medicaid expansion, this would decrease the deficit overall, even though less money would come in from the mandate's fines. However, it could damage the functioning of the Affordable Care Act and raise health care costs in the long-run, as insurance companies raise premiums to account for people who only buy insurance when they get sick.000-33-36-39-41-43-49
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Public option000000000This would establish a Medicare-like public plan that would compete with private plans on state health exchanges. The plan would pay 5 percent more to providers than Medicare does, but nonetheless its premiums would be 5-7 percent lower than the premiums for private plans. Because it would lead to less spending on premium subsidies, which offer less bang for the buck than the public option does, this would reduce the deficit.000-8.3-11.3-13.5-15.2-15.3-15.3
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Medicare cost-sharing000000000This would set a deductible of $550 for all of Medicare, and a maximum annual contribution of $5,500. Studies like the Rand Health Insurance Experiment suggest that "cost-sharing" measures like this reduce costs, a result confirmed by the CBO's prediction that this policy would reduce the deficit.000-9.7-10.1-10.9-11.6-12.1-12.6
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Medicare penalties for high-cost areas000000000This policy would reduce Medicare payments to providers in geographic areas that have high health costs. This is meant to provide an incentive for certain regions to crack down on wasteful practices, a problem identified by studies like the Dartmouth Atlas project.000-4.9-6.2-6.4-7-7.5-8
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Increase payroll tax cap000000000This would increase the cap on the payroll tax - currently set at $110,100 for 2012 - to cover 90 percent of earnings. Currently it only covers 83 percent. This would make the tax more progressive and hit people making around $100-200,000 the hardest. The very rich would be affected but less drastically. 000-47.5-49.6-52-55.7-58.6-60.8
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Index to prices, not wages000000000Currently, Social Security benefits increase with wages, which tend to grow faster than prices, especially in times of economic growth. Changing that so that the benefits increase with prices would substantially reduce future increases in benefits.000-6.8-11-16.6-23.3-31.5-41.1
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Raise full retirement age000000000This option gradually raises the age one must be to claim full Social Security benefits from 65 to 67. This would amount to an across-the-board benefit cut, and would arguably hit low-income workers, who live shorter lives on average, the hardest.000-6.7-11.2-16.2-21.6-27.3-31.4
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Raise eligibility age000000000This option gradually raises the age one must be to claim partial Social Security benefits from 62 and 64. This would disproportionately hurt workers in jobs that entail strenuous physical labor, who tend to retire earlier and thus claim Social Security benefits early.000-11.9-15-18.4-22.4-26-29.4
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Use different inflation index000000000Social Security regularly issues Cost of Living Adjustments or COLAs, which increase benefits when prices rise. Currently COLAs are pegged to CPI-U, the traditional measure of inflation. This option would change them to be pegged to chained CPI, an alternative, less generous measure. Like price indexing, it's an across-the-board cut to future benefits.000-9.8-12.1-14.5-16.9-19.3-21.9
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Delay defense cuts in Budget Control Act to 2016000000000This would delay the defense budget cuts in the debt ceiling deal from 2013 to 2016. The cuts would still be broad and unspecific, but the delay would prevent negative economic impact.000-55-55-55-55-55-55
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Delay non-defense cuts in Budget Control Act to 2016000000000This would delay the nondefense budget cuts in the debt ceiling deal from 2013 to 2016. The cuts would still be broad and unspecific, but the delay would prevent negative economic impact.000-55-55-55-55-55-55
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Limit mililtary personnel pay000000000This proposal would cut spending on TRICARE, a program that provides health care to servicemembers and their families, both during service and after retirement. Cutting TRICARE could make sense as part of an overall effort to cut health care spending.-5.6-8.7-9.9-10.7-11.3-12-12.7-13.5-14.3
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Slow federal pay growth000000000This would slow the rate with which federal employees receive regular raises to account for a higher cost of living. However, given how much the federal employee sector has been cut of late, this may not be tenable.000-4.09-5.32-6.64-8.05-9.56-11.14
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Cut highway funding000000000This would cut funding for highway construction and repairs. Given the dismal state of US infrastructure, this measure could be especially counterproductive right now.000-8.7-9.2-9.8-10.6-11.2-11.9
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Cut NIH funding000000000This would cut funding for the National Institutes of Health, which conducts medical trials and other research to advance medical science. This could slow the rate of medical progress and prevent helpful treatments and vaccines from getting to the market.000-4.2-4.3-4.39-4.49-4.59-4.68
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Limit tax expenditures to 15%000000000This would cap all benefits from tax expenditures, such as deductions and credits, at 15 percent of whatever's being deducted or credited. President Obama has proposed a less stringent 28 percent cap. On the margins, this could reduce charitable giving among high earners.000-127.5-134.7-140.6-145.3-148.7-151.5
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Eliminate state/local tax deduction000000000This would eliminate the deduction for state/local income, sales, or property taxes, which critics argue functions as a subsidy for states with high taxes. But it would amount to a large federal tax increase.000-96.5-99.6-101.7-103.6-105-107.1
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Eliminate mortgage interest deduction000000000This would eliminate the deduction for interest on mortgages, which critics argue distorts the housing market and helped lead to the housing bubble. However, it is the main itemized deduction that most middle-class families receive.000-8.4-14.3-23.3-35.7-52.6-75.1
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Speed up health care excise tax000000000The Affordable Care Act includes this tax on expensive health plans, meant to compensate for the tax exemption on health care currently in place. This option would speed up the implementation of that tax.000-37.1-44.3-39.3-42.4-41.3-42.1
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Increase gas tax000000000This would increase the gas tax by 25 cents per gallon, which could help mitigate problems ranging from global warming to smog to traffic congestion.000-30.2-30.2-30.2-30.2-30.1-30
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Limit charitable deduction000000000This would only allow taxpayers who contribute over 2 percent of their income to charity to claim the deduction. That would maintain the incentive on the margin for people to give while eliminating the subsidy for people who are miserly with their giving.000-22.5-23.8-25.1-26.5-28-29.4
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Value-added tax000000000This option would impose a value-added tax - a form of sales tax - of 5 percent on almost all goods and services. Such taxes are popular in Europe, and proponents tout the fact that they hurt growth less than income taxes. Critics note that VATs are regressive and less transparent than the kind of sales taxes popular among US state governments.000-270-290-300-310-320-330
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Carbon price000000000This would impose a cap and trade system that would auction off permits allowing firms to emit carbon dioxide and other greenhouse gases that contribute to global warming. Most economists agree that the auction provision makes the proposal equivalent to a carbon tax. This would help abate climate change and encourage green energy development.000-112.2-119.5-127.2-135.7-144.4-153.6
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Possible stimulus measuresstimulus
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Doubled make work pay credit0.90.220000000This is an expanded version of a tax credit included in the stimulus, which provided a tax break of up to $800 for couples and $400 for singles, rising as low-income workers earn more. Some organizations, notably the Tax Policy Center, have suggested doubling that to $1,600 and $800 as a replacement for the payroll tax break. However, you could also add this policy in addition to the payroll tax break for additional stimulus.91.530.90000000
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American Jobs Act10.60.3000000This is President Obama's most recent stimulus proposal. Because it is fully paid for, it would actually reduce the deficit by $62 billion in 2020, according to the CBO. It excludes the payroll tax and unemployment insurance components of the bill; see "cliff components" for those.288.322129.113-28.665-35.655-50.23-58.458-60.579-60.275-61.771
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Income tax rebate0.810.270000000Included in the Domenici-Rivlin deficit reduction plan, this would issue $120 billion in tax rebates next year, and is meant to spur the recovery and replace the payroll tax holiday. However, you could always keep the payroll tax break and add this on for good measure, as neither affect the long-run deficit.82.527.50000000
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