The National Commission on Fiscal Responsibility and Reform, a bipartisan commission recently created by President Obama, unveiled a proposal that could save the U.S. government nearly $4 trillion from 2012 to 2020.
Over $1.4 trillion of the savings will come from discretionary spending, over $700 billion from mandatory spending, over $700 billion from tax reforms, and over $600 billion from paying less interest on debt.
Under this proposal, in 2020, the budget deficit is projected to be to just $382 billion, or 1.6 percent of the projected 2020 GDP. By 2037, the budget would be balanced and then turned into surpluses in subsequent years.
The spending cuts will start gradually in 2012 in order to not disturb the fragile economic recovery, said the commission.
Notable parts of the discretionary spending cuts include temporarily freezing federal salary, cutting the federal full-time work force, reducing the number of federal contractors, reducing overhead costs within the Department of Defense, reducing defense procurement spending, reducing military personnel stationed at overseas bases, slowing the growth of foreign aid, and eliminating all earmarks.
Discretionary spending cuts also includes sacrifices by federal politicians, including reducing the Congressional and White House budget, cutting the federal travel budget, and trimming the federal vehicle budget.
For the health care portion of mandatory or entitlement spending the proposal has the government paying doctors, drug companies, and lawyers less. It also expands cost-sharing to patients, which promotes informed consumer health choices and spending.
Other reductions in mandatory spending were made in subsidies to agriculture, subsidies to student loans, and government civilian and military retirement benefits.
To cut Social Security costs, the proposal reforms benefit formulas and raises the retirement age by indexing it to life expectancy.