President Obama's panel on reducing the federal debt released a proposal today aimed at reducing $4 billion in projected deficits through 2020, achieving those savings through deep cuts in defense and domestic spending. It would affect everything from Social Security, to medical spending, to tax rates. It's just a proposal, with ideas that could be taken separately or as a whole. Members of the bipartisan deficit-reduction panel are expected to hold discussions aimed at ironing out differences until Dec. 1, the date of the commission's last public meeting. The panel would need 14 of 18 votes to send the plan to Congress, which would put it up for a vote. Here's a breakdown of how it would affect government, business and consumers.
How it would affect government:
- Cuts 10% of the federal work force by 2015 through attrition, and eliminates 250,000 contractor jobs
- Freezes salaries and bonuses of federal employees for 3 years bans earmarks
- Cuts Pentagon spending through closing one-third of overseas military bases and
- Freezing noncombat pay for three years, among other cuts
How it would affect consumers:
- Raises the full retirement age for collecting Socal Security from 67 to 68 by 2050; rising to 69 by 2075, but adds an exemption for hardship cases at age 62 and creates new benefits to reduce elderly poverty.
- Lowers individual income tax rates to as low as 8 percent on the lowest income bracket (now 10%) and to 23 percent on the highest bracket (now 35%)
- Abolishes the alternative minimum tax (AMT)
- Eliminates mortgage interest deduction on second homes, home-equity loans, and mortgages over $500,000
- Caps exemption from taxes for employees’ health benefits
How it would affect business:
- Reduces corprate tax rates to as low as 26%, from the current 35%
- Slashes farm subsidies by $3 billion annually
