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Joseph Henchman is tax counsel and director of state projects at the Tax Foundation.
December 2, 2010
President’s Deficit Commission Says Federal
Government Should Be 21 Percent of GDP
Proposal Would Cut Spending and Raise Taxes to Reduce
Deficit; Many Principled Tax Reforms Suggested
By Joseph Henchman
On December 1, 2010, the National Commission on Fiscal Responsibility and Reform published
“Moment of Truth,” its recommendations to correct the nation’s “unsustainable fiscal path.” Here
we summarize the report’s major recommendations.
Through six major components (discretionary spending cuts, comprehensive tax reform, health
care cost containment, savings in mandatory programs, Social Security reforms, and process
changes), the Commission aims to reduce the federal deficit to 2.3% of GDP by 2015 (down from
8.9% in 2010), greatly simplify the tax code, make Social Security solvent, begin reducing the
national debt, cap revenue at 21% of GDP (compared to 14.9% in 2010, an unusually low year),
and bring expenses below 22% of GDP (compared to 23.8% in 2010).
Compared to the deficits projected in a “plausible baseline” scenario, similar to the CBO’s
alternative fiscal scenario, the Commission estimates that its plan will reduce deficits between
2012 and 2020 by $3.885 trillion. These are summarized in Table 1 and the bullet-point lists
Table 1: Commission Plan Deficit Reductions
Shares of Deficit
Discretionary Spending Cuts
Mandatory Spending Cuts
Subtotal, Spending Reductions
Tax Reform/Revision of Tax Preferences
Other New Revenue
Subtotal, Revenue Increases
Savings in Interest Payments on National Debt
TOTAL DEFICIT REDUCTION
Tax Foundation Fiscal Fact, No. 253
December 2, 2010