The White House
Office of the Press Secretary
For Immediate Release
April 13, 2011
FACT SHEET: The President's Framework for Shared
Prosperity and Shared Fiscal Responsibility
The President believes that we need a comprehensive, pro-growth economic
strategy that invests in winning the future, lays the foundation for strong
private-sector job growth and ensures that shared prosperity will keep the
American dream alive for generations to come. A key component of that strategy
must be a commitment to fiscal responsibility and to living within our means.
Today, the President is laying out a comprehensive, balanced deficit reduction
framework to cut spending, bring down our debt and increase confidence in our
nationfs fiscal strength, while supporting our economic recovery and ensuring we
are making the investments we need to win the future.
$4 Trillion in Deficit Reduction: The President is setting a
goal of reducing our deficit by $4 trillion in 12 years or less.
This deficit reduction would be phased in over time to protect and strengthen
our economic recovery and the recovering labor market.
Debt on a Declining Path, Backed Up By An Across the Board gDebt
Failsafeh Trigger: The Presidentfs framework would require that, by the
second half of the decade, our nationfs debt is on a declining path as a
share of our economy. To enforce this requirement, the President is
calling on Congress to enact:
- A Debt Failsafe that will trigger across-the-board spending
reductions (both in direct spending and spending through the tax
code) if, by 2014, the projected ratio of debt-to-GDP is not stabilized and
declining toward the end of the decade. Consistent with prior fiscal
enforcement triggers put in place by Presidents Reagan, George H.W. Bush and
Clinton, the trigger should not apply to Social Security, low-income programs,
or Medicare benefits.
Balance Between Spending Cuts and Tax Reform: The
Presidentfs framework would seek a balanced approach to bringing down our
deficit, with three dollars of spending cuts and interest savings for
every one dollar from tax reform that contributes to deficit reduction.
This is consistent with the bipartisan Fiscal Commissionfs approach.
Shared Sacrifice from All, Including the Most Fortunate
Americans: The President believes strongly that, as we make difficult
choices to live within our means, we cannot afford to make our deficit problem
worse by extending the Bush tax cuts for the wealthiest Americans.
Bipartisan, Bicameral Negotiations on a Legislative
Framework: The President has asked Majority Leader Reid, Speaker
Boehner, Minority Leader Pelosi and Minority Leader McConnell to each designate
four Members from their caucuses to participate in bipartisan, bicameral
negotiations led by the Vice President, beginning in early May. The goal of
these negotiations is to agree on a legislative framework for comprehensive
deficit reduction.
Policy Highlights. The policy highlights in the Presidentfs
framework build on the down-payment included in his FY 2012 Budget. They
include:
- Non-security discretionary spending: The President is
proposing to build on the savings from the FY 2011 budget agreement, while
investing in key drivers of economic growth like energy innovation, education,
and infrastructure. This would entail cutting non-security
discretionary spending to levels consistent with the Fiscal Commission, saving
$770 billion by 2023.
- Security spending: The Presidentfs framework will go
beyond the Fiscal Year 2012 Budget to achieve deeper reductions in security
spending. It sets a goal of holding the growth in base security spending below
inflation, while ensuring our capacity to meet our national security
responsibilities, which would save $400 billion by 2023.
- Health care: The Presidentfs framework builds on the
Affordable Care Act by including new reforms aimed at further reducing the
growth of health care spending – a major driver of long-term deficits. The
President opposes any plan that would simply shift costs to seniors and the
vulnerable by undermining Medicare and Medicaid. Building on the foundation of
the historic deficit reduction achieved through the Affordable Care Act,
the framework would save an additional $340 billion by 2021, $480
billion by 2023, and at least an additional $1 trillion in the subsequent
decade. These savings complement the new patient safety initiative
that could lower Medicare costs by another $50 billion over the next decade by
providing better care. The Presidentfs framework includes initiatives that
will:
- Bend the long-term cost curve by setting a more ambitious
target of holding Medicare cost growth per beneficiary to GDP per capita plus
0.5 percent beginning in 2018, through strengthening the Independent Payment
Advisory Board (IPAB).
- Make Medicaid more flexible, efficient and accountable
without resorting to block granting the program, ending our partnership with
States or reducing health care coverage for seniors in nursing homes, the most
economically vulnerable and people with disabilities. Combined Medicaid
savings of at least $100 billion over 10 years.
- Reduce Medicarefs excessive spending on prescription drugs and
lower drug premiums for beneficiaries without shifting costs to
seniors or privatizing Medicare. Combined Medicare savings of at least
$200 billion over 10 years.
- Other mandatory spending: Outside of health care,
comprehensive deficit reduction must include savings in other mandatory
programs, including agricultural subsidies, the federal pension insurance
system, and anti-fraud measures, while protecting and strengthening programs
that serve low-income families and other vulnerable Americans. The Presidentfs
framework includes a target of $360 billion in savings from other
mandatory programs by 2023.
- Tax reform: the President is calling for individual tax
reform that closes loopholes and produces a system which is simpler,
fairer and not rigged in favor of those who can afford lawyers and accountants
to game it. The President supports the Fiscal Commissionfs goal of
reducing tax expenditures enough to both lower rates and lower the deficit.
- Social Security: The President does not believe that
Social Security is in crisis nor is a driver of our near-term deficit
problems. But, in the context of an aging population and a Social Security
wage base that is declining as a share of overall earnings, Social Security
faces long-term challenges that are better addressed sooner than later to
ensure that the program remains for future generations the rock-solid benefit
for older Americans that it has been for past generations. That is why the
President supports bipartisan efforts to strengthen Social Security for the
long haul. These efforts should be guided by several principles, including
strengthening the program and not privatizing it, improving retirement
security for the vulnerable while protecting people with disabilities and
current beneficiaries, and not slashing benefits for future generations.
DETAILS OF THE PRESIDENTfS FRAMEWORK FOR
SHARED
PROSPERITY AND SHARED FISCAL RESPONSIBILITY
1. A Fiscally Responsible Economic Strategy to Invest in
Competitiveness and Growth
The President believes that, if we are going to promote economic recovery,
invest in our long-term competitiveness and meet our values of dignity for
retirees, protection for the most vulnerable and opportunity for all Americans,
a comprehensive, balanced deficit reduction framework must be part of our
overall economic growth strategy.
The question is not whether we need to bring down long-term deficits and debt
to build economic confidence and promote investment in the United States;
instead it is how to best do so consistent with a pro-growth economic strategy.
The framework the President outlined today charts a course to achieve deficit
reduction and support economic growth, with a balanced approach and an
enforceable backstop to ensure that we achieve our economic and fiscal
goals.
2. A Deficit Reduction Goal and Enforceable Debt
Failsafe
The framework the President announced today offers a balanced approach to
maintaining our economic recovery while living within our means. It centers on
the following goal:
Achieving $4 trillion in deficit reduction over 12 years or
less. The President believes that this goal is achievable over a 12
year period, consistent with the goals of promoting economic growth that
benefits the middle class and strengthening the health and economic security of
our nationfs seniors, people with disabilities and most vulnerable. The
Administration projects that this framework will reduce deficits as a share of
our economy to about 2.5% of GDP in 2015, and put deficits on a declining path
toward close to 2.0% of GDP toward the end of the decade.
Deficit reduction should be phased in over time to ensure that fiscal
policy does not undermine the momentum of our economic recovery. Our
economy has created 1.8 million private sector jobs over the last 13 months and
the pace of job growth has accelerated in recent months. While long-term deficit
reduction is a crucial component of the Presidentfs economic strategy, this goal
cannot be used as an excuse to undermine the near-term policies and investments
we need to continue our economic recovery.
Deficit reduction efforts should be held accountable by a gDebt
Failsafeh trigger: The President is confident that, with a robust
economic recovery and bipartisan agreement on deficit reduction, we will put our
debt as a share of the economy on a declining path by the second half of the
decade. However we must provide a strong incentive for Congress to act on a
deficit reduction framework and renew confidence that we will hit this goal.
Therefore, the President is calling for:
- A debt failsafe that will ensure that our nationfs debt is on a declining
path as a share of our economy. If by 2014, budget projections do not show
that the debt-to-GDP ratio has stabilized and is declining in the second half
of the decade, the failsafe will trigger an across the board spending
reduction, including on spending through the tax code.
- The trigger will ensure that deficits as a share of the economy average no
more than 2.8% of GDP in the second half of the decade.
- Consistent with prior fiscal enforcement mechanisms put in place by
Presidents Reagan, George H.W. Bush and Clinton, the trigger should not apply
to Social Security, low-income programs, or benefits for Medicare enrollees.
- The trigger should also include a mechanism to ensure that it does not
exacerbate an economic downturn or interfere with our nationfs ability to
respond to a national security emergency.
3. Discretionary Spending
Non-Security Savings Equal to the Fiscal Commissionfs, While
Investing In Our Future:
- The budget agreement negotiated by the President last week represented the
largest one-year reduction in discretionary spending in our history, even as
it invested in areas key to our long-run economic growth and competitiveness.
- We should build on this yearfs savings, while ensuring that we continue to
make the investments we need to win the future and not threaten the economic
recovery. The President believes we can do so while generating additional
deficit reduction by cutting non-security spending to levels consistent with
what the Fiscal Commission recommended over the next decade.
- This would generate an additional $200 billion in savings over 10
years beyond the $400 billion in savings from the Presidentfs Budget. Over 12
years, it will generate a total of $770 billion in deficit reduction.
Additional Discipline on Security Spending While Keeping America
Safe:
- While the President will never accept cuts that compromise our ability to
defend our homeland or Americafs interests around the world, Secretary Gates
has shown over the last two years that there is substantial waste and
duplication in our security budget that we can and should eliminate—proposing
savings of $400 billion in current and future defense spending.
- As part of a comprehensive deficit reduction framework, the President is
calling for pushing harder to not only eliminate waste and improve efficiency
and effectiveness, but conduct a fundamental review of Americafs missions,
capabilities, and our role in a changing world.
- The framework sets a goal of holding the growth in base security spending
below inflation, while ensuring our capacity to meet our national security
responsibilities, which would save $400 billion by 2023. (The
President will make decisions on specific cuts after working with Secretary
Gates and the Joint Chiefs on the comprehensive review.)
- Note: this deficit reduction is in addition to the savings generated from
ramping-down overseas contingency operations.
4. Health Care
Medicare and Medicaid Savings of $480 Billion by 2023 and At Least an
Additional $1 Trillion over the Subsequent Decade, Providing Better Care at
Lower Costs:
- Building on the Affordable Care Act, the President is proposing additional
reforms to Medicare and Medicaid designed to strengthen these critical
programs by reducing waste, increasing accountability, promoting efficiency,
and improving the quality of care, without shifting the cost of care to our
seniors or people with disabilities.
- The framework will save $340 billion over ten years and $480 billion by
2023 (including the proposals already included in the Presidentfs Budget).
This framework includes the same aggregate savings that House Budget
Committee Chairman Paul Ryan proposed in his November 2010 plan with Alice
Rivlin and an amount sufficient to fully pay to reform the Medicare
Sustainable Growth Rate (SGR) physician payment formula while still reducing
the deficit.
- Over the subsequent decade, the Presidentfs proposal will save well
over $1 trillion by further bending the cost curve, doubling the savings from
the Affordable Care Act.
- The Presidentfs framework offers a stark contrast with the House
Republican plan that would increase seniorsf health costs by $6,400 annually
starting in 2022, raise health insurance premiums for middle-class Americans
and small businesses, cut Federal Medicaid spending by one-third by the end of
the decade, and increase the number of uninsured by 50 million.
The Presidentfs framework proposes specific reforms to strengthen
Medicare and Medicaid over the long term, including:
- Addressing the long-term drivers of Medicare cost growth:
The Presidentfs framework would strengthen the Independent Payment Advisory
Board (IPAB) created by the Affordable Care Act. The IPAB has been highlighted
by economists and health policy experts as a critical contributor to
Medicarefs solvency and sound operations. Under the Affordable Care Act, IPAB
analyzes the drivers of excessive and unnecessary Medicare cost growth. When
Medicare growth per beneficiary exceeds growth in nominal GDP per capita plus
1 percent, IPAB recommends to Congress policies to reduce the rate of growth
to meet that target, while not harming beneficiariesf access to needed
services. Congress must consider IPABfs recommendations or, if it disagrees,
enact policies that achieve equivalent savings. If neither acts, then the
Secretary of Health and Human Services would have to develop and implement a
proposal to achieve the savings target.
- The Presidentfs framework will strengthen IPAB to act as a backstop to the
other Medicare reforms by ensuring that Medicare spending growth does not
outpace our ability to pay for it over the long run, while improving the
program and keeping Medicare beneficiariesf premium growth under control.
Specifically, it would:
- Set a new target of Medicare growth per beneficiary growing with GDP per
capita plus 0.5 percent. This is consistent both with the reductions in
projected Medicare spending since the Affordable Care Act was passed and the
additional reforms the President is proposing.
- Give IPAB additional tools to improve the quality of care while reducing
costs, including allowing it to promote value-based benefit designs that
promote proven services like prevention without shifting costs to seniors.
- Give IPAB additional enforcement mechanisms such as an automatic sequester
as a backstop for IPAB, Congress, and the Secretary of Health and Human
Services.
- Reforming the Federal-State partnerships to strengthen Medicaid and
promote simplicity, efficiency, and accountability: Under current law,
States face a patchwork of different Federal payment contributions for
Medicaid and the Childrenfs Health Insurance Program (CHIP). The Presidentfs
framework would replace the current complicated Federal matching formulas with
a single matching rate for all program spending that rewards States for
efficiency and automatically increases if a recession forces enrollment and
State costs to rise.
- In addition, the President has called on the National Governors
Association (NGA) to make recommendations for ways to reform and strengthen
Medicaid, and the framework will consider the ideas that its Task Force
produces. The President also supports reform of Medicaid to incentivize more
efficient, higher quality, care for high-cost beneficiaries, including those
who are eligible for both Medicaid and Medicare. These nine million
beneficiaries comprise 15 percent of Medicaid enrollment but consume nearly 40
percent of total Medicaid spending.
- Improving patient safety: Together with employers, States,
hospitals, physicians and nurses, the Administration has launched a new
public-private partnership called Partnership for Patients that will help
improve the quality, safety and affordability of health care for all
Americans. The two goals of this new Partnership are: preventing patients from
getting injured or sicker while they are in the hospital and helping patients
heal without complication. Achieving the initiativefs goal would mean more
than 1.6 million patients will recover from illness without a preventable
complication, reducing costs by up to $50 billion in Medicare and billions
more in Medicaid over the next 10 years.
- Cutting unnecessary prescription drug spending: The framework would
limit excessive payments for prescription drugs by leveraging Medicarefs
purchasing power – similar to what was called for by the bipartisan Fiscal
Commission. It would speed up the availability of generic biologics, and
prohibit brand-name companies from entering into gpay for delayh agreements
with generic companies. And, it would implement Medicaid management of high
prescribers and users of prescription drugs.
- Reducing abuse and increasing accountability in Medicaid and
Medicare: The framework would clamp down on Statesf use of provider taxes
to lower their own spending while not providing additional health services
through Medicaid; recover erroneous payments from Medicare Advantage;
establish upper limits on Medicaid payments for durable medical equipment; and
take other actions to improve program integrity.
A major contrast with the House Republican approach. The
Presidentfs framework rejects plans that would end Medicare as we know it or
transform Medicaid into a dramatically underfunded block grant, putting at
serious risk not only seniors but also the most vulnerable children and people
with disabilities. Some of the major problems with the House Republican approach
include:
- The House Republican plan does nothing to reduce health costs. Instead it
actually increases costs by doing nothing to reform the way health care is
delivered in addition to putting a larger fraction of the burden on
beneficiaries and States.
- In the first year the Republican plan goes into effect, a typical
65-year-old who becomes eligible for Medicare would pay an extra $6,400 for
health care, more than doubling what he or she would pay if the plan were not
adopted.
- States would get one-third less for Medicaid by 2021, potentially leaving
15 million people without coverage, including seniors in nursing homes, people
with disabilities, children and pregnant women.
- The House Republican plan would no longer guarantee the same level of
benefits and choices that seniors have today in Medicare, because the proposal
allows private health plans to determine benefits, raise cost sharing, and
limit choice of doctors and hospitals.
5. Other Mandatory Spending
Outside of health care, comprehensive deficit reduction must include savings
in other mandatory programs.
The Presidentfs Budget includes measures to reform agricultural subsidies,
shore up the federal pension insurance system, restore solvency to the federal
unemployment insurance trust fund, and enact anti-fraud measures.
Building on these efforts, the Presidentfs framework includes a target
of $360 billion in savings from other mandatory programs by 2023.
The Fiscal Commission and other bipartisan efforts have put forward
additional proposals that should be considered as part of a comprehensive
deficit reduction effort to meet this target.
Reforms to mandatory programs should protect and strengthen the safety net
for low-income families and other vulnerable Americans.
6. Tax Reform
The President is calling on Congress to undertake comprehensive tax reform
that produces a system which is fairer, has fewer loopholes, less complexity,
and is not rigged in favor of those who can afford lawyers and accountants to
game it.
He believes we cannot afford to make our deficit problem worse by extending
the Bush tax cuts for the wealthiest Americans.
He also supports efforts to build on the Fiscal Commissionfs goal of reducing
tax expenditures so that there is enough savings to both lower rates and lower
the deficit. Reform should be designed to ask more of those who can afford it
while protecting the middle class and promoting economic growth.
In addition, as he explained in the State of the Union, the President is
continuing his effort to reform our outdated corporate tax code to enhance our
economic competitiveness and encourage investment in the United States. By
eliminating loopholes, reducing distortions and leveling the playing field in
our corporate tax code, we can use the savings to lower the corporate tax rate
for the first time in 25 years without adding to the deficit.
7. Social Security
The President does not believe that Social Security is a driver of our
near-term deficit problems or is currently in crisis. But he supports bipartisan
efforts to strengthen Social Security for the long haul, because its long-term
challenges are better addressed sooner than later to ensure that it remains the
rock-solid benefit for older Americans that it has been for past generations.
The President in the State of the Union laid out his principles for Social
Security reform which he believes should form the basis for bipartisan
negotiations that could proceed in parallel to deficit negotiations:
- Strengthen retirement security for the low-income and vulnerable; maintain
robust disability and survivorsf benefits.
- No privatization or weakening of the Social Security system; reform must
strengthen Social Security and restore long-term solvency.
- No current beneficiary should see the basic benefit reduced; nor will we
accept an approach that slashes benefits for future generations.
April 13, 2011 12:51 PM EDT