Options for Reducing the Deficit: 2019 to 2028

December 13, 2018

Report

CBO periodically issues a volume of options—this year’s installment presents 121—that would decrease federal spending or increase federal revenues. CBO’s website allows users to filter options by topic, date, and other categories.

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Summary

Since 2007, federal debt held by the public has more than doubled in relation to the size of the economy, and it will keep growing significantly if the large annual budget deficits projected under current law come to pass. The Congress faces an array of policy choices as it confronts the challenges posed by such large and growing debt. To help inform lawmakers, the Congressional Budget Office periodically issues a compendium of policy options that would help reduce the deficit, reporting the estimated budgetary effects of those options and highlighting some arguments for and against them.

This report, the latest in the series, presents 121 options that would decrease federal spending or increase federal revenues over the next 10 years (see Summary Table below). Of those options, 112 are presented in the main body of the report, and most of those 112 would save $10 billion or more over that period. The remaining 9 options are presented in an appendix and would generally have smaller budgetary effects.

The options in this report 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—defense, health, Social Security, provisions of the tax code, and more. The budgetary effects identified for most of the options span the 10 years from 2019 to 2028 (the period covered by CBO’s baseline budget projections), although many of the options would have longer-term effects as well.

Chapters 2 through 4 present options in the following categories:

Chapter 2: Mandatory spending,
Chapter 3: Discretionary spending, and
Chapter 4: Revenues.

Each chapter begins with a description of budgetary trends for the topic area, a general discussion of the method underlying the estimates of budgetary effects, and an overview of the options in the chapter. Then the chapter offers individual entries for each option that provide background information; describe the option; discuss the estimated budgetary effects, the basis of those estimates, and the largest sources of uncertainty; and summarize arguments for and against the change.

As a collection, the options are intended to reflect a range of possibilities, not a ranking of priorities or an exhaustive list. The inclusion or exclusion of any particular option does not imply that CBO endorses it or opposes it, and the report makes no recommendations. The report also does not contain comprehensive budget plans; it would be possible to devise such plans by combining certain options in various ways (although some would overlap and would interact with others).

CBO’s website includes a search tool that allows users to filter options by major budget category, budget function, topic, and date. That tool is regularly updated to include only the most recent version of budget options from various CBO reports. Therefore, the tool currently includes all of the options that appear in this report. It also includes options that were analyzed in the past, were not updated for this report, but remain informative. Those options were either in previous editions of this report or in different CBO reports analyzing specific federal programs or aspects of the tax code.

Summary Table of Options

Mandatory Spending
Title	Savings, 2019–2028 (Billions of Dollars)
Limit Enrollment in the Department of Agriculture’s Conservation Programs	3 to 10
Eliminate Title I Agriculture Programs	20
Reduce Subsidies in the Crop Insurance Program	4 to 21
Limit ARC and PLC Payment Acres to 30 Percent of Base Acres	10
Raise Fannie Mae’s and Freddie Mac’s Guarantee Fees and Decrease their Eligible Loan Limits	3 to 12
Eliminate or Reduce the Add-On to Pell Grants, Which Is Funded With Mandatory Spending	31 to 62
Limit Forgiveness of Graduate Student Loans	12 to 32
Reduce or Eliminate Subsidized Loans for Undergraduate Students	7 to 22
Reduce or Eliminate Public Service Loan Forgiveness	9 to 22
Remove the Cap on Interest Rates for Student Loans	11 to 16
Adopt a Voucher Plan and Slow the Growth of Federal Contributions for the Federal Employees Health Benefits Program	35 to 37^a
Establish Caps on Federal Spending for Medicaid	162 to 703
Limit States’ Taxes on Health Care Providers	15 to 344
Reduce Federal Medicaid Matching Rates	55 to 394
Introduce Enrollment Fees Under TRICARE for Life	12
Introduce Minimum Out-of-Pocket Requirements Under TRICARE for Life	27
Change the Cost-Sharing Rules for Medicare and Restrict Medigap Insurance	44 to 116
Increase Premiums for Parts B and D of Medicare	40 to 418
Raise the Age of Eligibility for Medicare to 67	15 to 22
Reduce Medicare’s Coverage of Bad Debt	12 to 39
Require Manufacturers to Pay a Minimum Rebate on Drugs Covered Under Part D of Medicare for Low-Income Beneficiaries	154
Modify Payments to Medicare Advantage Plans for Health Risk	47 to 67
Reduce Quality Bonus Payments to Medicare Advantage Plans	18 to 94
Consolidate and Reduce Federal Payments for Graduate Medical Education at Teaching Hospitals	34 to 40
Convert Multiple Assistance Programs for Lower-Income People Into Smaller Block Grants to States	88 to 247
Eliminate Subsidies for Certain Meals in the National School Lunch, School Breakfast, and Child and Adult Care Food Programs	11
Reduce TANF’s State Family Assistance Grant by 10 Percent	13
Eliminate Supplemental Security Income Benefits for Disabled Children	100^a
Link Initial Social Security Benefits to Average Prices Instead of Average Earnings	77 to 121
Make Social Security’s Benefit Structure More Progressive	7 to 36
Raise the Full Retirement Age for Social Security	28
Require Social Security Disability Insurance Applicants to Have Worked More in Recent Years	50
Eliminate Eligibility for Starting Social Security Disability Benefits at Age 62 or Later	20
Narrow Eligibility for Veterans’ Disability Compensation by Excluding Certain Disabilities Unrelated to Military Duties	4 to 33
End VA’s Individual Unemployability Payments to Disabled Veterans at the Full Retirement Age for Social Security	7 to 48
Reduce VA’s Disability Benefits to Veterans Who Are Older Than the Full Retirement Age for Social Security	11
Narrow Eligibility for VA’s Disability Compensation by Excluding Veterans With Low Disability Ratings	6 to 38
Use an Alternative Measure of Inflation to Index Social Security and Other Mandatory Programs	202
Divest Two Agencies of Their Electric Transmission Assets	2^a
Change the National Flood Insurance Program	1
Tighten Eligibility for the Supplemental Nutrition Assistance Program	8
Reduce Pension Benefits for New Federal Retirees	3
Eliminate the Special Retirement Supplement for New Federal Retirees	5

Discretionary Spending
Title	Savings, 2019–2028 (Billions of Dollars)
Reduce the Department of Defense’s Budget	248 to 517
Reduce DoD’s Operation and Maintenance Appropriation (Excluding Funding for the Defense Health Program)	70 to 195
Cap Increases in Basic Pay for Military Service Members	18
Replace Some Military Personnel With Civilian Employees	14
Cancel Plans to Purchase Additional F-35 Joint Strike Fighters and Instead Purchase F-16s and F/A-18s	13
Stop Building Ford Class Aircraft Carriers	10
Reduce Funding for Naval Ship Construction to Historical Levels	50
Reduce the Size of the Nuclear Triad	8 to 9
Cancel the Long-Range Standoff Weapon	11
Defer Development of the B-21 Bomber	32
Modify TRICARE Enrollment Fees and Cost Sharing for Working-Age Military Retirees	11^a
Reduce the Size of the Bomber Force by Retiring the B-1B	17
Reduce the Size of the Fighter Force by Retiring the F-22	27
Cancel the Ground-Based Midcourse Defense System	18
Reduce the Basic Allowance for Housing to 80 Percent of Average Housing Costs	15^a
Cancel Development and Production of the New Missile in the Ground-Based Strategic Deterrent Program	24
Reduce Funding for International Affairs Programs	116
Reduce Appropriations for Global Health to Their Level in 2000	57
Eliminate Human Space Exploration Programs	89
Reduce Department of Energy Funding for Energy Technology Development	3 to 16
Eliminate Funding for Amtrak and the Essential Air Service Program	2 to 20^a
Limit Highway and Transit Funding to Expected Revenues	116
Eliminate the Federal Transit Administration	87
Increase the Passenger Fee for Aviation Security	21
Eliminate Federal Funding for National Community Service	9
Eliminate Head Start	92
Tighten Eligibility for Pell Grants	3 to 86^a
Increase Payments by Tenants in Federally Assisted Housing	21
Reduce Funding for the Housing Choice Voucher Program or Eliminate the Program	9 to 125
End Enrollment in VA Medical Care for Veterans in Priority Groups 7 and 8	57^a
Reduce the Annual Across-the-Board Adjustment for Federal Civilian Employees’ Pay	58
Reduce the Size of the Federal Workforce Through Attrition	35
Reduce Funding for Certain Grants to State and Local Governments	1 to 42
Repeal the Davis-Bacon Act	12^a
Eliminate Certain Forest Service Programs	6
Limit the Number of Cities Receiving Urban Areas Security Initiative Grants	1
Eliminate the International Trade Administration's Trade-Promotion Activities	3
Convert the Home Equity Conversion Mortgage Program Into a Direct Loan Program	3

Revenues
Title	Savings, 2019–2028 (Billions of Dollars)
Increase Individual Income Tax Rates	123 to 905
Raise the Tax Rates on Long-Term Capital Gains and Qualified Dividends by 2 Percentage Points and Adjust Tax Brackets	70 to 81
Eliminate or Modify Head-of-Household Filing Status	66 to 165
Curtail the Deduction for Charitable Giving	146 to 176
Eliminate Itemized Deductions	1,312
Change the Tax Treatment of Capital Gains From Sales of Inherited Assets	105
Eliminate the Tax Exemption for New Qualified Private Activity Bonds	32
Expand the Base of the Net Investment Income Tax to Include the Income of Active Participants in S Corporations and Limited Partnerships	199
Tax Carried Interest as Ordinary Income	14
Include Disability Payments From the Department of Veterans Affairs in Taxable Income	4 to 93
Include Employer-Paid Premiums for Income Replacement Insurance in Employees’ Taxable Income	342
Reduce Tax Subsidies for Employment-Based Health Insurance	256 to 638
Further Limit Annual Contributions to Retirement Plans	103
Tax Social Security and Railroad Retirement Benefits in the Same Way That Distributions From Defined Benefit Pensions Are Taxed	411
Eliminate Certain Tax Preferences for Education Expenses	188
Lower the Investment Income Limit for the Earned Income Tax Credit and Extend That Limit to the Refundable Portion of the Child Tax Credit	8
Require Earned Income Tax Credit and Child Tax Credit Claimants to Have a Social Security Number That Is Valid for Employment	24
Increase the Payroll Tax Rate for Medicare Hospital Insurance	898 to 1,787
Increase the Payroll Tax Rate for Social Security	716 to 1,422
Increase the Maximum Taxable Earnings for the Social Security Payroll Tax	785 to 1,223
Expand Social Security Coverage to Include Newly Hired State and Local Government Employees	80
Tax All Pass-Through Business Owners Under SECA and Impose a Material Participation Standard	163
Increase Taxes That Finance the Federal Share of the Unemployment Insurance System	18
Increase the Corporate Income Tax Rate by 1 Percentage Point	96
Repeal Certain Tax Preferences for Energy and Natural Resource–Based Industries	2 to 8
Repeal the “LIFO” and “Lower of Cost or Market” Inventory Accounting Methods	58
Require Half of Advertising Expenses to Be Amortized Over 5 or 10 Years	63 to 132
Repeal the Low-Income Housing Tax Credit	49
Increase All Taxes on Alcoholic Beverages to $16 per Proof Gallon and Index for Inflation	68 to 83
Increase the Excise Tax on Tobacco Products by 50 Percent	42
Increase Excise Taxes on Motor Fuels and Index for Inflation	237 to 515
Impose an Excise Tax on Overland Freight Transport	358
Impose Fees to Cover the Costs of Government Regulations and Charge for Services Provided to the Private Sector	0 to 14
Impose a 5 Percent Value-Added Tax	1,920 to 2,970
Impose a Tax on Emissions of Greenhouse Gases	1,099
Impose a Fee on Large Financial Institutions	90 to 103
Impose a Tax on Financial Transactions	777
Tax Gains from Derivatives as Ordinary Income on a Mark-to-Market Basis	19
Increase Federal Civilian Employees’ Contributions to the Federal Employees Retirement System	45
Increase Appropriations for the Internal Revenue Service’s Enforcement Initiatives	35

ARC = Agriculture Risk Coverage; DoD = Department of Defense; LIFO = last in, first out; PLC = Price Loss Coverage; SECA = Self-Employment Contributions Act; TANF = Temporary Assistance for Needy Families; VA = Department of Veterans Affairs.

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.

a. Savings do not encompass all budgetary effects.

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Options for Reducing the Deficit: 2019 to 2028

Summary

Mandatory Spending

Discretionary Spending

Revenues

Data and Supplemental Information

Corrections and Updates