Options for Reducing the Deficit: 2017 to 2026

December 8, 2016

Report

CBO periodically issues a volume of options—this year’s installment presents 115—that would decrease federal spending or increase federal revenues over the next decade. The report is available both as a PDF and in a searchable format.

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Summary

The Congress faces an array of policy choices as it confronts the challenges posed by the amount of federal debt held by the public—which has more than doubled relative to the size of the economy since 2007—and the prospect of continued growth in that debt over the coming decades if the large annual budget deficits projected under current law come to pass. To help inform lawmakers, CBO periodically issues a compendium of policy options that would help to reduce the deficit. This edition reports the estimated budgetary effects of various options and highlights some of the advantages and disadvantages of those options.

This volume presents 115 options that would decrease federal spending or increase federal revenues over the next decade. The options included in this volume come from various sources. Some are based on proposed legislation or on the budget proposals of various Administrations; others come from Congressional offices or from entities in the federal government or in the private sector. The options cover many areas—ranging from defense to energy, Social Security, and provisions of the tax code. The budgetary effects identified for most of the options span the 10 years from 2017 to 2026 (the period covered by CBO’s March 2016 baseline budget projections), although many of the options would have longer-term effects as well.

Summary Table of Options

Mandatory Spending (Other than that for health-related programs)
Option Number	Title	Savings, 2017–2026 (Billions of Dollars)
1	Change the Terms and Conditions for Oil and Gas Leasing on Federal Lands	3
2	Limit Enrollment in the Department of Agriculture's Conservation Programs	10
3	Eliminate Title I Agriculture Programs	25
4	Reduce Subsidies in the Crop Insurance Program	27
5	Eliminate ARC and PLC Payments on Generic Base Acres	4
6	Limit ARC and PLC Payment Acres to 50 Percent of Base Acres	11
7	Raise Fannie Mae’s and Freddie Mac’s Guarantee Fees and Decrease Their Eligible Loan Limits	6
8	Eliminate the Add-On to Pell Grants, Which Is Funded With Mandatory Spending	60
9	Limit Forgiveness of Graduate Student Loans	19
10	Reduce or Eliminate Subsidized Loans for Undergraduate Students	8 to 27
11	Eliminate Concurrent Receipt of Retirement Pay and Disability Compensation for Disabled Veterans	139
12	Reduce Pensions in the Federal Employees Retirement System	7
13	Convert Multiple Assistance Programs for Lower-Income People Into Smaller Block Grants to States	367^a
14	Eliminate Subsidies for Certain Meals in the National School Lunch, School Breakfast, and Child and Adult Care Food Programs	10
15	Tighten Eligibility for the Supplemental Nutrition Assistance Program	88
16	Reduce TANF's State Family Assistance Grant by 10 Percent	14
17	Eliminate Supplemental Security Income Benefits for Disabled Children	104^a
18	Link Initial Social Security Benefits to Average Prices Instead of Average Earnings	72 to 114
19	Make Social Security's Benefit Structure More Progressive	8 to 36
20	Raise the Full Retirement Age for Social Security	8
21	Reduce Social Security Benefits for New Beneficiaries	105 to 190
22	Require Social Security Disability Insurance Applicants to Have Worked More in Recent Years	45
23	Eliminate Eligibility for Starting Social Security Disability Benefits at Age 62 or Later	17
24	Narrow Eligibility for Veterans’ Disability Compensation by Excluding Certain Disabilities Unrelated to Military Duties	26
25	Restrict VA’s Individual Unemployability Benefits to Disabled Veterans Who Are Younger Than the Full Retirement Age for Social Security	40
26	Use an Alternative Measure of Inflation to Index Social Security and Other Mandatory Programs	182

Discretionary Spending (Other than that for health-related programs)
Option Number	Title	Savings, 2017–2026 (Billions of Dollars)
1	Reduce the Size of the Military to Satisfy Caps Under the Budget Control Act	251
2	Reduce DoD’s Operation and Maintenance Appropriation, Excluding Funding for the Defense Health Program	49 to 151
3	Cap Increases in Basic Pay for Military Service Members	21
4	Replace Some Military Personnel With Civilian Employees	13
5	Cancel Plans to Purchase Additional F-35 Joint Strike Fighters and Instead Purchase F-16s and F/A-18s	23
6	Stop Building Ford Class Aircraft Carriers	15
7	Reduce Funding for Naval Ship Construction to Historical Levels	27
8	Reduce the Size of the Nuclear Triad	9 to 13
9	Build Only One Type of Nuclear Weapon for Bombers	6 to 8
10	Defer Development of the B-21 Bomber	27
11	Reduce Funding for International Affairs Programs	117
12	Eliminate Human Space Exploration Programs	81
13	Reduce Department of Energy Funding for Energy Technology Development	16
14	Eliminate Certain Forest Service Programs	6
15	Convert the Home Equity Conversion Mortgage Program From a Guarantee Program to a Direct Loan Program	23^a
16	Eliminate the International Trade Administration’s Trade Promotion Activities	3
17	Eliminate Funding for Amtrak and the Essential Air Service Program	16^a
18	Limit Highway Funding to Expected Highway Revenues	40
19	Eliminate Federal Funding for National Community Service	8
20	Eliminate Head Start	84
21	Restrict Pell Grants to the Neediest Students	4 to 65^a
22	Increase Payments by Tenants in Federally Assisted Housing	18
23	Reduce the Number of Housing Choice Vouchers or Eliminate the Program	16 to 111
24	Reduce the Annual Across-the-Board Adjustment for Federal Civilian Employees’ Pay	55
25	Reduce the Size of the Federal Workforce Through Attrition	50
26	Impose Fees to Cover the Cost of Government Regulations and Charge for Services Provided to the Private Sector	24
27	Repeal the Davis-Bacon Act	13^a
28	Eliminate or Reduce Funding for Certain Grants to State and Local Governments	56

Revenues (Other than those related to health)
Option Number	Title	Savings, 2017–2026 (Billions of Dollars)
1	Increase Individual Income Tax Rates	93 to 734
2	Implement a New Minimum Tax on Adjusted Gross Income	66
3	Raise the Tax Rates on Long-Term Capital Gains and Qualified Dividends by 2 Percentage Points	57
4	Use an Alternative Measure of Inflation to Index Some Parameters of the Tax Code	157
5	Convert the Mortgage Interest Deduction to a 15 Percent Tax Credit	105
6	Curtail the Deduction for Charitable Giving	229
7	Limit the Deduction for State and Local Taxes	955
8	Limit the Value of Itemized Deductions	119 to 2,232
9	Change the Tax Treatment of Capital Gains From Sales of Inherited Assets	68
10	Eliminate the Tax Exemptions for New Qualified Private Activity Bonds	28
11	Expand the Base of the Net Investment Income Tax to Include the Income of Active Participants in S Corporations and Limited Partnerships	160
12	Tax Carried Interest as Ordinary Income	20
13	Include Disability Payments From the Department of Veterans Affairs in Taxable Income	38 to 94
14	Include Employer-Paid Premiums for Income Replacement Insurance in Employees' Taxable Income	336
15	Further Limit Annual Contributions to Retirement Plans	92
16	Tax Social Security and Railroad Retirement Benefits in the Same Way That Distributions From Defined Benefit Pensions Are Taxed	423
17	Eliminate Certain Tax Preferences for Education Expenses	195
18	Lower the Investment Income Limit for the Earned Income Tax Credit and Extend That Limit to the Refundable Portion of the Child Tax Credit	7
19	Require Earned Income Tax Credit and Child Tax Credit Claimants to Have a Social Security Number That Is Valid for Employment	37
20	Increase the Maximum Taxable Earnings for the Social Security Payroll Tax	633 to 1,008
21	Expand Social Security Coverage to Include Newly Hired State and Local Government Employees	78
22	Increase the Payroll Tax Rate for Medicare Hospital Insurance by 1 Percentage Point	823
23	Tax All Pass-Through Business Owners Under SECA and Impose a Material Participation Standard	137
24	Increase Taxes that Finance the Federal Share of the Unemployment Insurance System	13 to 15
25	Increase Corporate Income Tax Rates by 1 Percentage Point	100
26	Capitalize Research and Experimentation Costs and Amortize Them Over Five Years	185
27	Extend the Period for Depreciating the Cost of Certain Investments	251
28	Repeal Certain Tax Preferences for Energy and Natural Resource–Based Industries	24
29	Repeal the Deduction for Domestic Production Activities	174
30	Repeal the "LIFO" and "Lower of Cost or Market" Inventory Accounting Methods	102
31	Subject All Publicly Traded Partnerships to the Corporate Income Tax	6
32	Repeal the Low-Income Housing Tax Credit	34
33	Determine Foreign Tax Credits on a Pooling Basis	82
34	Require a Minimum Level of Taxation of Foreign Income as It Is Earned	301
35	Further Limit the Deduction of Interest Expense for Multinational Corporations	68
36	Increase Excise Taxes on Motor Fuels by 35 Cents and Index for Inflation	474
37	Impose an Excise Tax on Overland Freight Transport	343
38	Increase All Taxes on Alcoholic Beverages to $16 Per Proof Gallon	70
39	Impose a 5 Percent Value-Added Tax	1,770 to 2,670
40	Impose a Fee on Large Financial Institutions	98
41	Impose a Tax on Financial Transactions	707
42	Impose a Tax on Emissions of Greenhouse Gases	977
43	Increase Federal Civilian Employees' Contributions to the Federal Employees Retirement System	48

Health
Option Number	Title	Savings, 2017–2026 (Billions of Dollars)
1	Adopt a Voucher Plan and Slow the Growth of Federal Contributions for the Federal Employees Health Benefits Program	31^a
2	Impose Caps on Federal Spending for Medicaid	370 to 680
3	Limit States’ Taxes on Health Care Providers	16 to 40
4	Repeal All Insurance Coverage Provisions of the Affordable Care Act	1,236
5	Repeal the Individual Health Insurance Mandate	416
6	Introduce Minimum Out-of-Pocket Requirements Under TRICARE for Life	27
7	Change the Cost-Sharing Rules for Medicare and Restrict Medigap Insurance	18 to 66
8	Increase Premiums for Parts B and D of Medicare	22 to 331
9	Raise the Age of Eligibility for Medicare to 67	18
10	Reduce Medicare's Coverage of Bad Debt	15 to 31
11	Require Manufacturers to Pay a Minimum Rebate on Drugs Covered Under Part D of Medicare for Low-Income Beneficiaries	145
12	Consolidate and Reduce Federal Payments for Graduate Medical Education at Teaching Hospitals	32
13	Limit Medical Malpractice Claims	62^a
14	End Congressional Direction of Medical Research in the Department of Defense	9
15	Modify TRICARE Enrollment Fees and Cost Sharing for Working-Age Military Retirees	18^a
16	End Enrollment in VA Medical Care for Veterans in Priority Groups 7 and 8	54^a
17	Increase the Excise Tax on Cigarettes by 50 Cents per Pack	35
18	Reduce Tax Preferences for Employment-Based Health Insurance	174 to 429

For options affecting primarily mandatory spending or revenues, savings sometimes would derive from changes in both. When that is the case, the savings shown include effects on both mandatory spending and revenues. For options affecting primarily discretionary spending, the savings shown are the decrease in discretionary outlays. That same approach applies for the savings shown for health options; most are mandatory spending options or revenue options, although 14, 15, and 16 are discretionary spending options.

a. Savings do not encompass all budgetary effects.

Data and Supplemental Information

Data Underlying Figures

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Options for Reducing the Deficit: 2017 to 2026

Summary

Mandatory Spending (Other than that for health-related programs)

Discretionary Spending (Other than that for health-related programs)

Revenues (Other than those related to health)

Health

Data and Supplemental Information

Corrections and Updates