Options for Reducing the Deficit: 2025 to 2034

December 12, 2024

Report

CBO periodically issues a compendium of policy options and their estimated effects on the federal budget. This report presents 76 options for altering spending or revenues to reduce federal budget deficits over the next decade.

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Summary

At the request of the House and Senate Committees on the Budget, the Congressional Budget Office periodically issues a compendium of budget options to help inform federal lawmakers about the implications of possible policy choices that would reduce the deficit. This report, the latest in the series, presents 76 options for altering spending and revenues to reduce federal budget deficits.

The options come from a variety of sources, including legislative proposals, budget proposals from various Administrations, Congressional staff, federal agencies, and private groups. The options are intended to reflect a range of possibilities rather than to rank priorities or present a comprehensive list. The inclusion or exclusion of a particular option does not represent an endorsement or a rejection by CBO. In keeping with CBO’s mandate to provide objective, impartial analysis, this report makes no recommendations.

Summary Table of Options

Mandatory Spending
Title	Savings, 2025–2034 (billions of dollars)
Reduce Subsidies in the Crop Insurance Program	47
Raise Fannie Mae's and Freddie Mac's Guarantee Fees and Decrease Their Eligible Loan Limits	7 to 15
Eliminate the Add-On to Pell Grants, Which Is Funded With Mandatory Spending	44^a
Establish Caps on Federal Spending for Medicaid	459 to 893
Limit State Taxes on Health Care Providers	48 to 612
Reduce Federal Medicaid Matching Rates	69 to 561
Increase the Premiums Paid for Medicare Part B	510
Reduce Medicare Advantage Benchmarks	489
Adopt a Voucher Plan and Slow the Growth of Federal Contributions for Federal Employees' Health Benefits	14 to 16^a
Introduce Enrollment Fees in TRICARE for Life	17
Introduce Minimum Out-of-Pocket Requirements in TRICARE for Life	32
Change the Cost-Sharing Rules for Medicare and Restrict Medigap Insurance	20 to 129
Reduce Medicare's Coverage of Bad Debt	17 to 54
Consolidate and Reduce Medicare Payments for Graduate Medical Education at Teaching Hospitals	94 to 103
Modify Payments to Medicare Advantage Plans for Health Risk	124 to 1,049
Reduce Payments for Hospital Outpatient Departments	6 to 157
Reduce Payments for Drugs Delivered by 340B Hospitals	15 to 74
Eliminate Subsidies for Certain Meals in the National School Lunch, School Breakfast, and Child and Adult Care Food Programs	14
Reduce Social Security Benefits for High Earners	48 to 197
Establish a Uniform Social Security Benefit	283 to 607
Raise the Full Retirement Age for Social Security	95
Require Social Security Disability Insurance Applicants to Have Worked More in Recent Years	60
Introduce Means-Testing for Eligibility for VA’s Disability Compensation	384
End VA’s Individual Unemployability Payments to Disabled Veterans at the Full Retirement Age for Social Security	14 to 61
Reduce VA’s Disability Benefits for Veterans Who Are Older Than the Full Retirement Age for Social Security	34
Narrow Eligibility for VA's Disability Compensation by Excluding Veterans With Low Disability Ratings	11 to 59
Use an Alternative Measure of Inflation to Index Social Security and Other Mandatory Programs	278

Discretionary Spending
Title	Savings, 2025–2034 (billions of dollars)
Reduce the Department of Defense's Annual Budget	959
Cap Increases in Basic Pay for Military Service Members	22^a
Replace Some Military Personnel with Civilian Employees	17^a
Stop Building Ford Class Aircraft Carriers	15
Cancel the Long-Range Standoff Weapon	15
Cancel the Army’s Future Long-Range Assault Aircraft	11
Reduce the Size of the Bomber Force by Retiring the B-1B	6
Reduce the Size of the Fighter Force by Retiring the F-22	29
Reduce the Basic Allowance for Housing to 80 Percent of Average Housing Costs	17^a
Reduce Funding for International Affairs Programs	187
Eliminate Federal Funding for National Community Service	10
Tighten Eligibility for Pell Grants	22^a
End Enrollment in VA Medical Care for Veterans in Priority Groups 7 and 8	60^a
Reduce the Annual Across-the-Board Adjustment for Federal Civilian Employees’ Pay	77^a
Reduce Selected Nondefense Discretionary Spending	339
Reduce Funding for Certain Grants to State and Local Governments	67
Repeal the Davis-Bacon Act	18^a

Revenues
Title	Savings, 2025–2034 (billions of dollars)
Increase Individual Income Tax Rates on Ordinary Income	570 to 1,185
Impose a Surtax on Individuals' Adjusted Gross Income	1,051 to 1,440
Raise the Tax Rates on Long-Term Capital Gains and Qualified Dividends by 2 Percentage Points	103
Eliminate or Modify Head-of-Household Filing Status	76 to 209
Eliminate or Limit Itemized Deductions	736 to 3,424
Limit the Deduction for Charitable Giving	324 to 348
Change the Taxation of Assets Transferred at Death	197 to 536
Eliminate the Tax Exemption for New Qualified Private Activity Bonds	43
Expand the Base of the Net Investment Income Tax to Include the Income of Active Participants in S Corporations and Limited Partnerships	420
Tax Carried Interest as Ordinary Income	13
Include VA's Disability Payments in Taxable Income	235
Reduce Tax Subsidies for Employment-Based Health Benefits	521 to 965
Further Limit Annual Contributions to Retirement Plans	187
Eliminate Certain Tax Preferences for Education Expenses	130
Lower the Investment Income Limit for the Earned Income Tax Credit and Extend That Limit to the Refundable Portion of the Child Tax Credit	11
Require People Who Claim the Earned Income Tax Credit and Child Tax Credit to Have a Social Security Number That is Valid for Employment	28
Impose a New Payroll Tax	1,282 to 2,540
Increase the Maximum Taxable Earnings That Are Subject to Social Security Payroll Taxes	728 to 1,427
Expand Social Security to Include Newly Hired State and Local Government Employees	149
Increase the Corporate Income Tax Rate by 1 Percentage Point	136
Tax All Foreign Income of U.S. Corporations at the Full Statutory Corporate Rate	340
Repeal the "Last In, First Out" Approach to Inventory Identification and the "Lower of Cost or Market" and "Subnormal Goods" Methods of Inventory Valuation	104
Require Half of Advertising Expenses to Be Amortized Over 5 or 10 Years	83 to 177
Repeal the Low-Income Housing Tax Credit	69
Increase Taxes on Alcoholic Beverages	88 to 102
Increase Excise Taxes on Tobacco Products	51
Increase Excise Taxes on Motor Fuels and Index Them for Inflation	212
Impose a 5 Percent Value-Added Tax	2,180 to 3,380
Impose a Tax on Emissions of Greenhouse Gases	645 to 919
Impose a Tax on Financial Transactions	297
Increase Certain Fees Charged by Citizenship and Immigration Services and Customs and Border Protection by 20 Percent	16
Increase Federal Civilian Employees' Contributions to the Federal Employees Retirement System	40

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Options for Reducing the Deficit: 2025 to 2034

Summary

Mandatory Spending

Discretionary Spending

Revenues

Data and Supplemental Information