For all the hand-wringing over the deficit, there still aren’t that many new deficit-reduction plans out there: the Ryan budget, Obama’s budget, and Simpson-Bowles remain the basic guideposts in the debate. To broaden the horizon of possibilities, the Peterson Foundation commissioned five think-tanks to come up with their own plans for reducing the deficit over 10 and 25 years: the Center for American Progress and the Economic Policy Institute on the left; the American Action Forum and the Heritage Foundation on the right; and the Bipartisan Policy Center in the middle.
Many of their solutions are radically different, going well beyond the bounds of the current debate in Congress: AAF, for instance, would replace the entire income tax with a progressive consumption tax, while the EPI wants to let all of the Bush tax cuts expire—including those for lower-income Americans—and replace them with an “enhanced work and family credit for low and middle-income taxpayers.” The BPC and EPI want a tax on sweetened beverages, while Heritage would turn the gas tax over to the states. But all of them would reduce the deficit significantly in the medium- and long-term:
(Source: Peterson Foundation)
Interestingly, the chart also reveals just how much government spending would skyrocket if we simply continue the status quo—extending all of the Bush tax cuts, turning off the sequester, and not touching entitlements (current policy)—and just how much the fiscal cliff itself would reduce the deficit if we did nothing else (current law). The changes under the fiscal cliff would, in fact, reduce the deficit more over 10 years than every think-tank’s plan except for Heritage’s, and more than EPI and BPC’s over 25 years.
You can look at a basic breakdown of the five think-tank plans here and a more detailed outline here. But here’s how these groups would construct a budget for the long-term, from the 10,000-foot perspective: