Taxpayer group maps out an escape plan for 2013's 'fiscal cliff'

The nonpartisan Taxpayers for Common Sense on Monday released its plan for averting the spending cuts that are set to hit in January as part of the "fiscal cliff."

Taken together, the $109 billion in spending cuts — accomplished through a seizure of funds known as a  sequester — combined with tax increases such as the expiration of the Bush-era rates would put the United States into a recession, according to the Congressional Budget Office.

Taxpayers for Common Sense (TCS) identified $2 trillion in spending cuts and tax increases over 10 years, valued at $162 billion in 2013 alone, to replace the full $1.2 trillion in spending cuts that would be spread out from 2013 to 2022 under current law. 

The TCS plan goes after what the group sees as waste and economic inefficiency, and takes on popular tax breaks as well as spending.

“Instead of being fiscal cliff jumpers, Congress can dive into the hard work of cutting spending, finding revenue, and reforming entitlements to turn the country’s fiscal situation around,” said TCS President Ryan Alexander.

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The political viability of the $2 trillion plan could be in doubt, however. Taken as a package, the plan is about 50 percent tax revenue increases and 50 percent spending cuts, a ratio that Republicans would be unlikely to accept.

It also has $673 billion in cuts to national security, which is much greater than the $550 billion in cuts triggered under current law by the August 2011 debt-ceiling deal. Defense hawks and the Pentagon have decried the $550 billion cut as devastating to national security. 

TCS acknowledges that defense cuts are politically difficult and says the package is meant as a menu of options.

"We don’t suffer any illusions that they whole thing would get enacted, but we wanted to share a menu of a balanced approach. That’s why we came up with far more than the minimum $1.2 trillion. The Democrats want it all to be about revenue, and the Republicans want it all to be about spending. It has to be both," TCS Vice President Steve Ellis said. 

Reducing the Pentagon's reliance on costly service contracts, a long-time reformer goal, makes up half of the savings in the TCS plan, according to Ellis. The plan does away with costly Air Force projects like the V-22 Osprey aircraft and versions of the F-35 fighter that President Obama has talked about eliminating. 

On the tax side, TCS goes after popular deductions like home mortgage interest and research tax credits, as well as the ability to deduct state and local taxes from federal income tax returns. It also looks at a host of smaller tax changes like ending "last in, first out" accounting, something that benefits a handful of industries such as bourbon.

The plan would cut about $100 billion by eliminating traditional crop subsidies for farmers and scaling back crop insurance. That's compared to $29 billion in cuts to farm programs in the Senate farm bill — and shows why rural lawmakers are eager to see a farm bill passed before fiscal cliff talks get under way.

The plan goes hard after renewable energy spending and tax breaks to get a total of $123 billion in energy cuts, and funds $187 billion in transportation savings including detailed cuts to specific road construction.

TCS says it will be sharing the report with staffers and lawmakers ahead of the November lame-duck session.

The group will be looking to lawmakers such as the Senate Gang of Eight and Rep. Steven LaTourette (R-Ohio) who are set to unveil grand bargain plans in the coming weeks. 

Ellis said that the House bill passed in the spring to avert the sequester and the Democratic alternative were skewed to make political points, with the GOP going after mandatory social spending and avoiding any cuts to defense and Democrats using their bill to send a message on oil-and-gas tax breaks.

"We are showing that there is wasteful and unnecessary spending and tax breaks that could be used to obtain significant deficit reduction in a balanced manner," he said.

The group does not address major entitlements like Medicare and Medicaid but does believe savings can be found in those programs once the fiscal cliff is averted.

— This story was updated at 1:14 p.m.

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