Congressional Sources: Republicans and Democrats Reach Tentative Debt Deal

July 30, 2011 10:39 PM

ABC News' Jonathan Karl (@JonKarl) reports:

Democratic and Republican Congressional sources involved in the negotiations tell ABC News that a tentative agreement has been reached on the framework of a deal that would give the President a debt ceiling increase of up to $2.4 trillion and guarantee an equal amount of deficit reduction over the next 10 years.

The details are still being worked out, and a senior White House aide tells ABC News, "talks continue but there is no deal to report." 

Congressional leaders plan to brief their members on the framework tomorrow.  The reaction from both parties' rank-and-file will determine whether this tentative deal becomes a final deal.

Here, according to Democratic and Republican sources, are the key elements:

• A debt ceiling increase of up to $2.1 to $2.4 trillion (depending on the size of the spending cuts agreed to in the final deal).
• They have now agreed to spending cuts of roughly $1.2 trillion over 10 years.
• The formation of a special Congressional committee to recommend further deficit reduction of up to $1.6 trillion (whatever it takes to add up to the total of the debt ceiling increase).  This deficit reduction could take the form of spending cuts, tax increases or both.
• The special committee must make recommendations by late November (before Congress' Thanksgiving recess).
• If Congress does not approve those cuts by December 23, automatic across-the-board cuts go into effect, including cuts to Defense and Medicare. This "trigger" is designed to force action on the deficit reduction committee's recommendations by making the alternative painful to both Democrats and Republicans.
• A vote, in both the House and Senate, on a balanced budget amendment.

Democrats won't like the fact that Medicare could be exposed to automatic cuts, but the size of the Medicare cuts is limited and they are designed to be taken from Medicare providers, not beneficiaries.

Two sources briefed on the framework say the automatic cuts would hit Defense spending harder than Medicare.  A Republican briefed on the framework says this will be unacceptable to many Republicans because it could force them to face a choice between accepting tax increases (if that is what the committee recommends) or automatic cuts that would gut the Pentagon's budget.

The Confederate we still don't know

SUNDAY, JUL 31, 2011 09:01 ET

150 years after Robert E. Lee took command of the South's army, his descendants are intent on keeping his secrets

BY GLENN W. LAFANTASIE

National Archives

Robert E. Lee

On July 31, 1861, exactly 150 years ago Sunday, the Richmond Examiner reported that Gen. Robert E. Lee, who at that time was serving as a confidential military adviser to President Jefferson Davis, was on his way to western Virginia (now West Virginia) to consult with other Confederate generals there about campaign plans. His "inspection" tour, as the newspaper called it, became Lee’s first experience as a field general, and things did not go well from there. Confederate forces, operating in mountainous terrain that proved nearly impossible to defend, suffered defeat at the battle of Cheat Mountain, which took place over several days during the second week of September. Humiliated by the defeat, Lee wrote to his wife, Mary Anna Randolph Custis Lee, in a letter dated Sept. 17, 1861: "I cannot tell you my regret and mortification at the untoward events that caused the failure of the plan."

What’s interesting about Lee’s letter to his wife is that it was published, in truncated form, in a book "Recollections and Letters of Robert E. Lee," compiled by his son, Robert E. Lee Jr., in 1904. The younger Lee excised the final lines of the original letter, now located at the Virginia Historical Society (VHS) in Richmond, and indicated the deletion with ellipses. From the son’s perspective, the omitted lines had no inherent importance. They read:

"Custis [Lee’s eldest son] writes the girls [Lee’s daughters] have gone to Carter’s. They did not get your letter in time. I hope I may be able to get there before you leave. I may have to go to the Kanawha & if so will write you from Lewisburg. Fitzhugh [another son] is very well. Charlotte [Fitzhugh’s wife] writes the baby is better. Love to Daughter [Mary Custis Lee, his eldest daughter]."

Below his signature, Lee added a postscript:

"I am much obliged to you for your offer of socks. I should like to have ½ dozen good thick cotton socks if you could get them knit & have the cotton."

If you’re primarily interested in Lee’s role as a Confederate general, the final sentences of this letter probably seem irrelevant, with their references to family members and cotton socks. But if you want to understand Lee not only as a military leader, but also as a man, the last lines of his letter are revealing, if only because they do mention such mundane matters. But historians have been repeatedly stymied in their efforts to humanize Lee -- socks and all -- by the descendants of the general, who, like his son, have worked assiduously to keep Lee the man hidden from view.

Since Lee’s death in 1870, the Lee family has chosen to perpetuate the general as a "marble man" -- a phrase that his fellow West Point cadets used and later biographers have employed to describe Lee’s reluctance to express his feelings openly. But getting to know Lee better, as a man and a general, has been difficult for historians not only because the general kept many of his personal feelings bottled up, but because historians have not been allowed full access to the documentary record pertaining to Lee, particularly his personal papers.

Why should this matter? Civil War historians have long been concerned that there is no modern edition of Lee’s papers, such as the splendid printed volumes of Ulysses S. Grant’s papers -- Lee’s most famous adversary -- compiled and published between the early 1960s and the present. The Grant Papers were expertly edited by the late John Y. Simon and are now under the able direction of John F. Marszalek at Mississippi State University. The Grant Papers project resembles many other historical editing endeavors, including the Thomas Jefferson Papers at Princeton, the George Washington Papers at the University of Virginia, the Adams Family Papers at the Massachusetts Historical Society, the Jefferson Davis Papers at Rice University and the Freedmen and Southern Society Papers at the University of Maryland, to name just a few.

Most of these projects publish their subjects’ papers not only in old-fashioned books with covers on them, but many of them also make the documents available online, which, when it comes to studying the Civil War in depth, is one of the great features of, for example, the Grant Papers (full disclosure: John Simon told me decades ago that the Grant family prohibited the publication of some of Grant’s Mexican War letters; he described them as being only a handful of documents). The availability of these historical records has enabled scholars and students to see their subjects whole, warts and all. The Lee descendants, however, don’t want historians or the public to see their ancestor’s flaws. Like many families, they’ve sought to keep their skeletons in the closet and to protect Lee’s historical reputation, perpetuating the image of him as not only a brilliant general but as a nearly perfect man -- a man of marble rather than of flesh and blood. In fact, the Lee descendants have steadfastly served as the Vatican Guard of their famous progenitor.

It was during the late 1980s that I first encountered how protective the Lee descendants are about their great ancestor. Having gained some previous experience on some historical editing projects, I gave a great deal of thought to the possibility of initiating a Lee Papers project. In those days, I was working in Washington, D.C., and I learned that Lee’s granddaughter, Mary Custis Lee deButts, lived in Upperville, a tony little village in Virginia horse country, not far from the nation’s capital. So I wrote her a lengthy letter spelling out my plans and asking only for her endorsement of my efforts. A couple of weeks went by with no answer, and then those weeks turned into more than a month. I decided to call her, but that phone call proved to be one of the most bizarre I’ve ever had as a historian.

To the best of my recollection, the telephone conversation went something like this: She answered the phone, I explained who I was and mentioned my letter, and she said abruptly, "We are never, I repeat, never, going to let those papers out of the family. They are safe in a bank vault. I don’t even have them here. No one is ever going to see them." She was polite enough not to hang up on me, but the conversation did not last more than a couple of minutes. It was, of course, the first clue I had that the Lee descendants were in possession of documents relating to Robert E. Lee that no one outside the family knew about.

As it turned out, my plans for a Lee Papers project never got off the ground. Since then, other historians have also attempted to launch such a project and, for various reasons, have failed. When deButts died in 1994, at the age of 94, I figured that the letters in the vault had been passed on to a trustworthy next-of-kin -- someone who would also take the Lee family secrets to the grave.

Fast forward to 2002, eight years after deButts’s death. On Nov. 27, the Washington Post reported that after more than 80 years following the death of Robert E. Lee’s daughter, Mary Custis Lee, two steamer trunks full of her papers had been "found" in a bank vault in Alexandria, Va. The trunks "came to light" after E. Hunt Burke, the vice chairman of the Burke & and Herbert Bank & Trust Company discovered them in the silver vault of the bank’s Alexandria branch. Five years later, six Lee descendants, including Robert E.L. deButts and Robert E. Lee IV, formally deposited the trunks at VHS; two years later, two of the descendants, according to a VHS archivist, "donated a quarter share of the title to this collection to the Virginia Historical Society."

A review of the VHS online catalog, however, reveals that "a few items in this collection are currently held under the terms of restricted access and are not available for viewing." Actually several entire sections of the Mary Custis Lee Papers are fully closed to researchers, although a VHS archivist told me in an email that letters in Robert E. Lee’s "hand are open to research but not to copying or reproduction." The travel diaries and letters of Mary Custis Lee dating from the 1870s are entirely closed to researchers. The restricted documents, explains the archivist, actually constitute "a comparatively small portion of the overall [Mary Custis Lee] collection," yet he admits that "it is also a bit difficult to estimate just how much material is currently restricted" or entirely closed. In all, the Mary Custis Lee collection -- only one of several Lee collections at VHS -- consists of 6,495 items.

The restrictions on the use of Lee documents at VHS have been put in place by the Lee descendants. But VHS is not the only repository that restricts access to Lee documents. Another example is the deButts/Ely collection at the Library of Congress (LC), where photostatic copies of Lee family documents have been deposited. In 1933 and 1934, two Lee descendants -- Mary Custis Lee deButts and Ann Carter Ely, who were sisters -- deposited the collection, which then consisted of original documents. In 1956, deButts wrote a letter to LC on behalf of herself and her sister asking that the reminiscences of Mary Anna Randolph Custis Lee, Robert E. Lee’s wife, be restricted to researchers because of the virulent nature of some of her sentiments expressed in the document. Then, in 1960, the collection was withdrawn by the Lee descendants from LC, this time permanently, although the depositors did allow the library to make the photostats that are now, for the most part, available to researchers. The original documents withdrawn from LC found a new home at VHS.

But something strange later happened concerning the photostats at LC. In 1977, Thomas L. Connelly, who had already established himself as a historian with little good to say about Robert E. Lee, published his book, "The Marble Man: Robert E. Lee and His Image in American Society." Connelly argued that Lee’s public image had been largely shaped after the Civil War by a "Lee cult" that worshipped the general like a god and rewrote history according to a Southern interpretation of the Lost Cause. In making his case, Connelly quoted the Civil War reminiscences of Mary Anna Randolph Custis Lee that revealed her sharp bitterness toward Lincoln and the Northerners who had defeated her husband. Through some administrative error at LC, Connelly had been allowed to see the reminiscences despite the restriction on the document’s use. According to LC records, after the publication of Connelly’s book, Mary Custis Lee deButts wrote again to LC and reiterated her intention and that of her sister that Mary Anna Randolph Custis Lee’s reminiscences should be off-limits to researchers. In 1981, LC placed the document in a separate, restricted container, where it has remained ever since.

A decade ago Mary Anna Randolph Custis Lee’s reminiscences surfaced once again, but this time under the auspices of the Lee Vatican Guard. In 2001, Robert E.L. deButts, a New York attorney and the great-great grandson of Robert E. Lee (and the grandson of Mary Custis Lee deButts), edited and published Mrs. Lee’s "My Reminiscences of the Civil War" in the Virginia Magazine of History and Biography (VMHB), a quarterly journal published by VHS. To his credit, Robert E.L. deButts seems to have followed accepted scholarly editing practices in transcribing and annotating Mrs. Lee’s reminiscences. In a postscript to the reminiscences, he attempts to explain why her opinions of Northerners and the outcome of the war were so bitter. His discussion is fair and balanced, so far as anyone outside of the Lee family -- i.e., historians who have been denied access to many of the family’s papers -- can discern. He does not explain why the Lee descendants tried to keep the document from public view for so long, nor does he cite the fact that Thomas Connelly quoted some key passages from the reminiscences in his 1977 book. Not surprisingly, he doesn’t mention that his grandmother made sure no one could see the document at LC after Connelly quoted from it.

The article edited by deButts raised the prospects of giving scholars a wider glimpse into the Lee family papers. Equally encouraging was the publication in 2007 of Robert E. Lee’s courtship letters, also edited and annotated by Robert E.L. deButts and published in VMHB. But for all his apparent desire to make the courtship letters accessible to the public, deButts, as a member of the Lee Vatican Guard, held back several letters that he, without further explanation, apparently decided were not worthy for others to see. Out of the existing 21 letters that comprise the courtship correspondence between Lee and Mary Anna Randolph Custis before their marriage, deButts published only 13 written by Lee and two written by Mary. Why he chose not to publish the other six letters written by Lee is a mystery.

So far as I can tell, the publication of these 15 selected letters was the first instance in which any portion of the Mary Custis Lee Papers found in the bank vault trunks was made available to scholars and the public. At about the same time, the Lee descendants, including Robert E.L. deButts, also granted access to some of the restricted Mary Custis Lee Papers to Elizabeth Brown Pryor, the author of the recent, award-winning book "Reading the Man: A Portrait of Robert E. Lee Through His Private Letters" (2007). In her book’s acknowledgments, Pryor says she has "marveled at the Lee family’s generous encouragement of new scholarship." Although Pryor is rather testy when it comes to talking about her work or her relationship with the Lee descendants (she insisted on seeing a copy of this article in advance of publication before making any comments for the record; I agreed to her terms), she forcefully asserted in an email that "my experience with many members of the Lee family over several decades" belies the restrictive handling of Robert E. Lee’s papers that many other historians -- including myself -- have experienced. She added: "The Lee family has always been extremely generous in allowing me use these collections. I was not restricted in any way ... The only request was that I consult about quotations from documents being used by Mr. deButts and Dr. [Susan Carter] Vogel, both of whom are working on upcoming publications. This seemed to me to be a normal scholarly courtesy."

Actually, she’s wrong about this -- it is not "a normal scholarly courtesy." Whether or not Lee descendants are working on their own publications (deButts is now engaged in editing Lee’s family letters and Vogel, another Lee descendant, is editing Mary Custis Lee’s travel letters and journals for publication) should not restrict other scholars from using and quoting documents deposited in a historical repository. Unless, that is, the family wants to control what scholars are quoting from those documents. Pryor states firmly, however, that "I have never been refused access to anything I have asked to see."

Despite Pryor’s sensationally pleasant dealings with the Lee descendants, researchers cannot simply walk into the VHS reading rooms and ask to see any Lee document they want. The Lee family persists in maintaining its control over the Lee papers, abetted in that effort by the ready cooperation of VHS, which has accepted deposits of the family papers (with a portion of the title remaining in the family’s legal hands) rather than outright donation of them (in which VHS would hold full title). VHS is not to be condemned for this policy, since its philosophy is probably a good one -- better to get physical possession of the papers for conservation and preservation, not matter what restrictive terms the family may insist on.

What’s so bad, then, about the Lee descendants’ monopoly, especially considering the fact that some family members seem to be publishing Lee documents in a responsible manner, i.e., according to scholarly textual standards? The problem is that as family members, the Lee descendants cannot possibly be objective in their work. Who’s to say what they might silently suppress or misconstrue if, as Lee’s descendants, a particular document makes them (rather than us) feel uncomfortable? Whatever the Lee family is hiding, they think it’s important enough, as in Robert E.L. deButts’s case, to skip publishing six courtship letters without explanation. It would have been far better for the two Lee descendants to have allowed independent historians -- those free of family bias or those not beholden to the family in any way -- to edit all of the Lee family papers for publication. (I’m not nominating myself for the job, by the way. I’ve lost any earlier interest I had in editing Robert E. Lee’s papers, and, as it stands, my research interests fall rather far afield of Lee at the moment.)

Still, it would nice to know more about the man who decided to violate his solemn oath to protect and defend the Constitution by taking up arms against the United States -- the nation his idol George Washington and his father Light-Horse Harry Lee fought to sustain in the American Revolution. Robert E. Lee is important historically because he devoted himself to a cause that was, at its core, anti-American; yet he -- among countless other Confederates -- was convinced that he acted only as a paragon of patriotism. It’s the essential delusion of every traitor. The truth is, though, that we will never really know Robert E. Lee until his family allows researchers to have complete access to his papers.

My Very Own Captain America

By CHARLES M. BLOW

Published: July 29, 2011

My grandfather spoke to me this week. That would’ve been unremarkable if not for the fact that he died four years ago.

Department of Defense, 1944

Fred Rhodes, right, a wounded war hero, kept his accomplishments to himself.

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Damon Winter/The New York Times

Charles M. Blow

I had ducked into a movie theater to escape the maddening debt-limit debacle. I chose “Captain America: The First Avenger.” Surely that would reset the patriotic optimism.

But as I watched the scenes of a fictitious integrated American Army fighting in Europe at the end of World War II, I became unsettled. Yes, I know that racial revisionism has become so common in film that it’s almost customary, so much so that moviegoers rarely balk or even blink. And even I try not to think too deeply about shallow fare. Escapism by its nature must bend away from reality. But this time I was forced to bend it back. It was personal.

The only black fighting forces on the ground in Europe during World War II were segregated, including the 92nd Infantry Division: The now famous “Buffalo Soldiers.” My grandfather, Fred D. Rhodes, was one of those soldiers.

The division was activated late in the war, more out of acquiescence to black leaders than the desire of white policy makers in the war department who doubted the battle worthiness of black soldiers. It was considered to be an experiment, one that the writer of the department’s recommendation to re-establish it would later describe as “programmed to fail from the inception.”

For one, as the historian Daniel K. Gibran has documented, the soldiers were placed under the command of a known racist who questioned their “moral attitude toward battle,” “mental toughness” and “trustworthiness,” and who remained a military segregationist until the day he died. In 1959, the commander commented in a study: “It is absurd to contend that the characteristics demonstrated by the Negroes” will not “undermine and deteriorate the white army unit into which the Negro is integrated.”

Yet they did show great toughness and character, including my grandfather. This is how his 1944 Silver Star citation recounts his bravery:

“On 16 November, while proceeding towards the front at night, Sergeant Rhodes’s motorized patrol was advanced upon near a village by a lone enemy soldier. Sergeant Rhodes jumped from the truck and as a group of enemy soldiers suddenly appeared, intent upon capturing the truck and patrol intact, he opened fire from his exposed position on the road. His fire forced the enemy to scatter while the patrol dismounted and took cover with light casualties. Sergeant Rhodes then moved toward a nearby building where, still exposed, his fire on the enemy was responsible for the successful evacuation of the wounded patrol members by newly arrived medical personnel.  Sergeant Rhodes was then hit by enemy shell fragments, but in spite of his wounds he exhausted his own supply of ammunition then, obtaining an enemy automatic weapon, exhausted its supply inflicting three certain casualties on the enemy.  He spent the rest of the night in a nearby field and returned, unaided, to his unit the next afternoon.”

Awesome!

Astonishingly, his and others’ efforts were not fully recognized.

My grandfather’s actions were the first among the Buffalo Soldiers to be recommended for a Distinguished Service Cross, according to surviving records. That recommendation was declined. In fact, only four enlisted soldiers from the 92nd were recommended for the service cross. They were all denied. It was given to just two black members of the unit, both officers, and only one of those officers received it during the war. The other received it nearly four decades after the war was over because of the investigative efforts of another historian.

As the 1997 study “The Exclusion of Black Soldiers from the Medal of Honor in World War II” pointed out, by mid-1947 the U.S. Army had awarded 4,750 Distinguished Service Crosses and only eight, less than 0.2 percent, had gone to black soldiers and not a single black soldier had been recommended for a Medal of Honor. (Roughly 1.2 million blacks served in World War II and about 50,000 were engaged in combat.) Until 1997, World War II was the only American war in which no black soldiers had received a Medal of Honor. President Bill Clinton changed that that year by awarding Medals of Honor to seven of the men who had been awarded the Distinguished Service Crosses, the only ones whose cases were reviewed for the upgrade. Just one of them, Joseph Vernon Baker, a lieutenant in my grandfather’s regiment, was alive to receive it.

Even when this news of the Buffalo Soldiers was making headlines in the ’90s, my grandfather never said a word. There’s no way to know why. Maybe it was the pain of risking his life abroad for a freedom that he couldn’t fully enjoy at home. Maybe it was the misery of languishing in a military hospital for many months and being discharged with a limp that would follow him to the grave. Or maybe it was simply the act of a brave soldier living out the motto of his division: “Deeds Not Words.”

Who knows? But it wasn’t until after he died that I learned of his contributions. My mother came across his discharge papers while sorting through his things and sent me a copy. On a whim, I Googled his name and division, and there he was, staring out at me from a picture I’d never seen and being extolled in books I’d never read. My heart swelled, and my skin went cold. I wanted to tell him how proud I was, but that window had closed.

It illustrates just how quickly things can fade into the fog of history if not vigilantly and accurately kept alive in the telling.

That is why the racial history of this country is not a thing to be toyed with by Hollywood. There are too many bodies at the bottom of that swamp to skim across it with such indifference. Attention must be shown. Respect must be paid.

So as “Captain America” ended and the credits began to roll, I managed a bit of a smile, the kind that turns up on the corners with a tinge of sadness. I smiled not for what I’d seen, but for what had not been shown, knowing that I would commit it to a column so that my grandfather and the many men like him would not be lost to the sanitized vision of America’s darker years.

This is my deed through words, for you, Grandpa. You’ll never be forgotten.

•

I invite you to join me on Facebook and follow me on Twitter, or e-mail me atchblow@nytimes.com.

This article has been revised to reflect the following correction:

Correction: July 30, 2011

A previous version of this article incorrectly stated that the only black fight force on the ground in Europe during World War II was the 92nd Division.  There were also some black units attached to other divisions.

Budgeting for Growth and Prosperity

A Long-term Plan to Balance the Budget, Grow the Economy, and Strengthen the Middle Class

SOURCE: iStockphoto/Uyenle

Federal budget deficits must be brought under control to keep credit markets strong and interest payments to foreign creditors low. But a balanced federal budget is far from all that is needed.

By Michael Ettlinger, Michael Linden, Seth Hanlon | May 25, 2011

Watch Michael Ettlinger discuss CAP's budget plan at the Peterson Foundation's 2011 Fiscal Summit (YouTube)

This plan was developed as part of the Solutions Initiative and funded by the Peter G. Peterson Foundation.

The Peterson Foundation convened organizations with a variety of perspectives to develop plans addressing our nation’s fiscal challenges. The American Enterprise Institute, Bipartisan Policy Center, Center for American Progress, Economic Policy Institute, The Heritage Foundation, and Roosevelt Institute Campus Network each received grants. All organizations had discretion and independence to develop their own goals and propose comprehensive solutions. The Peterson Foundation’s involvement with this project does not represent endorsement of any plan. The final plans developed by all six organizations were presented as part of the Peterson Foundation’s second annual Fiscal Summit in May 2011.

Read the full report (pdf)

Download the introduction and summary (pdf)

Read the full report in your web browser

The purpose of the Center for American Progress plan for long-term deficit reduction is to build a strong American economy that provides the best opportunities for personal success of any country in the world, strengthens and builds a thriving middle class, and secures the position of the United States as the leading nation of the 21st century. To achieve these goals, federal budget deficits must be brought under control to keep credit markets strong and interest payments to foreign creditors low. But a balanced federal budget is far from all that is needed.

America must also invest in its economic future to achieve the economy we envision. Most of America’s investments are made by businesses and individuals, but the federal government plays critical roles as a direct investor in areas such as education, basic science, technology, and infrastructure, and as a catalyst for private investment. Without it effectively playing these roles U.S. economic growth will be weak, America will no longer be the global leader it is today, and all Americans will lose.

Central to our strategy is investing in the middle class. The America we know was built by middle-class workers and consumers, innovators, and entrepreneurs. The fortunes of the Forbes 400 have their roots in the opportunities our country has offered those in the middle class. Policies that invest in the middle class are investments in a successful American economy.

The public sector’s contribution to the economy we envision, however, goes beyond balanced budgets and investments. An economy must have a basic set of rules and protections that ensure trust and confidence in the marketplace. This role ranges from policing insider trading on Wall Street, to enforcing contracts, to ensuring that our food and medicine are safe. Certainly there is such a thing as too much regulation. But, as the recent financial market disaster painfully reminds us, there is also such a thing as too little.

Our economic success also depends on the effective and efficient provision of the public services on which the nation relies. Finally, the tax system’s incentives and disincentives should enhance economic growth and address the growing inequality that undermines our national prosperity.

While the central motivation for the reforms we propose is the long-term success of the American economy, our plan also achieves several objectives motivated by other values. There are national responsibilities that simply must be honored whatever their economic payoff, among them:

• National security
• Public safety and health
• Preventing destitution
• Honoring valued national commitments, including those to the elderly and disabled

Achieving all of these objectives requires a numerical balancing, but it also requires an extremely challenging political balancing. The honest public debate over spending cuts and tax increases is in its infancy, with a long road ahead before there will be sufficient political space for the compromises that must be made in order to achieve a fully balanced federal budget. There is, at this point, no legislative path forward without broader agreement than is now possible. While some deficit reduction plans circulating in Washington appear to reach very low deficit levels quickly, the paths they offer are simply unrealistic. Our plan is designed with an eye on the political journey our nation will have to take and deliberately allows time for the building of a consensus for the major reforms that will be necessary.

We also must allow time for our economy to fully recover before administering the strongest deficit-slashing medicine. Deficit reduction that is too big, too fast would be counterproductive—stalling growth and worsening our fiscal problems. Our most important national objective in the near term is to create jobs and get the economy back on track.

For these reasons our plan is implemented in two distinct stages. The first stage hits a meaningful, but achievable, interim budget target of “primary balance” in 2015—with revenues equal to spending except for interest payments on the debt. Starting in 2017 our plan enters a second phase aimed at achieving full balance while making needed investments.

Projections using nonpartisan Congressional Budget Office-based methodologies reviewed by independent analysts show our plan fully balancing the budget by 2030. (see Figures 1 and 2) It is our belief that the economic growth gained in the early years through deficit reduction, investments, and other measures will, in fact, lead to a balanced budget earlier than that year. Outlined below are the spending and revenue polices we use to achieve our objectives.

Spending

The federal government makes investments that are important to our economy, provides services to the public, and carries out a variety of activities necessary to a well-functioning society. Our spending plan is designed to do those things well, do them efficiently, and do them at the appropriate level of public expenditure. The CAP spending plan:

• Makes significant new investments in key areas such as education, infrastructure, science, technology, and energy research, as well as areas that strengthen our middle class
• Reduces spending while making it more efficient, maintaining public services that businesses and the public rely on, and ensuring our national defense through a reconfigured national security budget
• Strengthens the social safety net where needed
• Brings under control the most substantial spending challenge facing the country: health care

The plan reduces spending from about 27 percent of gross domestic product in 2030 in the extended Congressional Budget Office baseline—the official, nonpartisan projection of our fiscal future—to under 24 percent of GDP. By 2035 spending is down to about 23 percent of GDP.

Investing to promote economic growth and a strong middle class

Starting in 2017 the CAP plan makes significant new investments in scientific research, all levels of education, clean energy technologies, and transportation and infrastructure— areas where nations around the world are making substantial commitments. Our plan makes major investments in strengthening the American middle class. All of these investments are necessities if the United States wants to avoid being surpassed as the country with the greatest opportunities, the best jobs, and the most powerful economy. They are essential if we want our nation to continue to be where the great ideas and the most innovation comes from, and remain a nation where entrepreneurs thrive and build successful businesses, large and small.

Investments such as these are the foundation of a strong 21st century economy. The country that leads in basic scientific research obviously has a huge advantage in innovation and technology. The country that can rely on domestically produced renewable energy isn’t exposed to the risks associated with relying on imports, keeps funds at home that would otherwise go abroad, and gets a leg up on what will be one of the most important industries of this century. And the country that invests in its middle class produces educated, productive, and creative workers; a strong domestic market; a motivated workforce; and a population from which the greatest innovators and entrepreneurs emerge.

The investments we make include a doubling of spending on science, technology research, and renewable energy; large boosts in K-12 education, pre-K, and Pell grants; and a 20 percent hike in transportation and infrastructure spending.

Responsibly restraining discretionary spending

The CAP plan includes separate spending limits on a unified security budget and on nonsecurity discretionary spending. Our unified security budget includes the distinct budgets of defense, homeland security, and international affairs—the budget areas that comprise the means by which we implement our national security policy.

Beginning in 2016, we set the limit on the unified security budget at about $700 billion. This is approximately the same overall level, adjusted for inflation, as it was in 1986 at the height of the Cold War. From there, the cap rises at the rate of inflation plus 1 percentage point.

Our limits on nonsecurity discretionary spending are set at specific levels designed to adequately fund the public services on which the public and businesses rely, assuming they are provided more efficiently than in the past, and to make the investments described above. Overall, discretionary spending will make up about 6 percent of GDP in 2035, compared to 6.2 percent of GDP in the CBO baseline.

Shifting nonhealth mandatory spending

The CAP plan reduces agricultural subsidies and constrains the growth in many other programs while allowing room for investments and patching holes in the social safety net. The safety-net steps include increasing participation in the Supplemental Nutrition Assistance Program to 85 percent of eligible people, increasing the Supplemental Security Income benefit, increasing housing assistance by 20 percent, and boosting funding for children’s programs.

These steps plus our investments in education will reduce the poverty rate to below 7 percent from its current level of over 14 percent. Preventing destitution is a moral obligation but pulling people off the economic sidelines into the mainstream serves national economic goals as well.

CAP has previously released a Social Security plan in our report, “Building It Up, Not Tearing It Down: A Progressive Approach to Strengthening Social Security,” which has a number of benefit adjustments that net to a reduction in outlays in 2030 from 6.0 percent of GDP to 5.8 percent.

Containing health care cost growth

Rising costs and an aging population make health care a major driver of our long-term deficits. Therefore, a key challenge in any deficit reduction plan is to lower these costs without sacrificing care for the millions of Americans who rely on public programs. Any approach that relies solely on savings from Medicare and other public programs without addressing rising health care costs economywide will only shift costs onto individuals and families, hurt the quality of care, or both. Co-pays will go up while providers leave the programs or make up lost revenue by raising private market rates on businesses and families.

To avoid that outcome, our plan brings down the costs of health care for everyone, not just those of the federal government. In this effort the Affordable Care Act, passed last year, is our most valuable tool. The new health care law has dozens of mechanisms, reforms, and pilot programs designed to bring down the costs of care, while improving the quality. The law also encourages the private sector to follow the public sector’s lead, and incentivizes public-private partnerships that bring down costs broadly. Backstopping all of this is the Independent Payment Advisory Board, whose mission it is to ensure that target savings are realized.

In our plan, aggressive implementation of the new health reform law, along with some enhancements to its existing cost-control mechanisms, will result in dramatically lower health expenditures, both for the federal government and overall. But predicting the exact effect of the myriad test programs and reforms in the new health law is fraught with uncertainty. Thus we also include a failsafe mechanism that would ensure significant savings.

Our failsafe would be triggered if, starting in 2020, total economywide health care expenditures grow at a rate faster than the economy. Should that happen then we would empower the Independent Payment Advisory Board to extend successful reforms in Medicare and other public programs to insurance plans offered in the health care exchanges and then potentially to all health care plans, such that the target is met. This will ensure that costs are constrained across the health care sector, preventing cost-shifting and maintaining access for all.

The effect of these reforms, along with our failsafe, will be to hold federal health spending to 7.8 percent of GDP in 2035, compared to 9.8 percent in the CBO baseline. As importantly, they will lower the overall cost of health care thus ensuring that reductions in Medicare do not result in providers leaving the program and costs aren’t shifted from the public to the private sector.

Revenue

In the spending part of our plan we have constrained the areas of greatest growth, cut unneeded spending, and increased spending that is necessary to the future of our economy. Overall, our plan cuts spending by more than $13 trillion below current projections over the next 25 years. But even after all our spending cuts, without some revenue enhancement, there would still be more spending than revenue. Compared to the CBO baseline we would still have a average deficit of 3.0 percent of GDP between 2017 and 2030.

When the economy is running well and we are at peace, running deficits unnecessarily weakens our nation. Thus, our plan raises additional revenue to balance the budget. It does so, however, in a way that simplifies a grotesquely complicated tax system. Our plan closes loopholes, eliminates special tax breaks that create unfair disparities among taxpayers, realigns the incentives of the tax system to better serve our economy and planet, cuts income taxes for middle-income taxpayers, and takes steps to address the inequality that undermines our national prosperity.

Individual income tax

Our plan makes the individual income tax simpler and fairer. It introduces a flat 15 percent rate for couples with incomes under $100,000. Many loopholes, deductions, and exemptions are eliminated, but the ones middle-class families most rely on are replaced by better-targeted credits. Thus, while taxpayers will no longer have the option of “deductions” from income such as for mortgage interest and charitable contributions, they will be able to instead receive a direct reduction in their taxes through a credit equal to 15 percent of these costs.

In addition, there will be a large flat “alternative credit” that taxpayers can choose instead of the itemized credits. This alternative credit works similarly to the current standard deduction. For 90 percent of Americans, choosing the alternative credit instead of the itemized credits will both lower their overall tax bill, and make filing simple and easy.

Most middle-class and lower-income taxpayers will pay lower income taxes under our proposal. These tax reductions will, on average, more than offset any higher taxes resulting from our new energy taxes described below. Tax rates are lower at most levels of taxable income. Overall, factoring in all the changes to the personal income tax in our plan, only those in the top 5 percent of the income spectrum will, on average, pay higher taxes. All other income groups, on average, will pay less or the same.

For the wealthy, loopholes are closed and the top tax rate is restored to the level it was at under President Clinton during the 1990s economic expansion. A temporary surtax of 5 percent is added for ordinary income over $1 million. The surtax expires once the federal budget is balanced. The top rate will still be lower than during most of the postwar period, including the country’s greatest period of economic growth. The top tax rate for capital gains income (income from selling investments) is set at the level signed into law by President Reagan. The reforms make taxes simpler for the rich as well as the middle class by obviating the need for the alternative minimum tax and various high-income phase-outs.

After years of successive tax cuts and rapidly increasing income (even as the income of typical Americans has stagnated or fallen) the wealthiest Americans can afford to pay more. Under our plan, the average after-tax income of the richest 1 percent of Americans will still be over 40 percent higher than it was in 2001. The richest 5 percent will still have over 30 percent higher income.

Finally, once our plan achieves budget surpluses in excess of 1 percent of GDP, the alternative credit is raised substantially to simplify tax filing for still more people and further reduce middle-income taxpayers’ tax bills—while maintaining a federal budget in balance or small surplus. This is projected to occur in 2033.

Reducing greenhouse gas emissions and reliance on foreign oil by pricing carbon pollution and levying an oil-import fee

Our plan addresses the risks and economic damage from our heavy reliance on foreign oil and the dangers of climate change by establishing a price on emissions of carbon dioxide and other greenhouse gases, and introducing an oil-import fee of $5 per barrel. Under our plan, greenhouse gas emissions will be reduced by 42 percent of 2005 levels by 2030, and 83 percent of 2005 levels by 2050. For low- and middle-income taxpayers, any resulting rises in energy prices are offset by the benefits of reduced income taxes. And, in the case of those who do not owe personal income tax, often the elderly, a rebate program accounted for in our spending proposals provides an offset.

Financial transactions tax

Our plan imposes a modest fee on financial transactions, including trading in stocks, bonds, and derivatives. The tax is applied at a very low rate—less than two-tenths of a percent on stock trades. We believe the purpose of Wall Street is to raise capital for the productive sectors of the economy and that excessive financial speculation is counterproductive toward this purpose and harmful to stable growth in general. A financial transactions tax discourages unnecessary rapid turnaround speculation and improves incentives for long-term investment while raising revenue. Our proposal is modest compared to financial transactions taxes imposed in other financial centers, including the United Kingdom and Singapore.

Other revenue reforms

There are a number of other tax changes in the CAP plan. Among them:

• Remove the cap on the employer side of the payroll tax as described in the CAP Social Security plan. Currently the payroll tax to fund Social Security is only applied to earned income up to $106,800. Our proposal removes that cap but only on the part of the Social Security tax paid by the employer not the part paid by the employee.
• Restore the estate tax to approximately pre-Bush tax-cut levels, but indexed for inflation.
• Adopt several revenue proposals in President Obama’s 2011 and 2012 budgets.
• Eliminate some industry-specific tax expenditures that are effectively government spending administered through the tax system, including those for the oil industry.
• Other revenue measures including an Internet gambling tax and Superfund excise tax.

Overall, our plan raises revenues in 2030 by less than 2 percent of GDP compared to the baseline. Total revenue drops to 23.8 percent of GDP by 2035, just half a percentage point above the baseline.

Conclusion

The plan described in this report will boost the economy and meet societal obligations while balancing the budget. It is also a realistic plan. That isn’t to say that it could pass Congress and be signed by a president today. No effective plan for long-term fiscal responsibility could at this point in the debate. That should not give us too much worry. There are many steps we can make now toward a responsible fiscal future with a strong economy and a healthy society. We have offered recommendations for such steps in other reports. Our goal in producing this vision for the long term is to offer a final destination that ensures our nation is as successful as it has ever been while fulfilling all of its responsibilities.

We believe our plan is not only a good one but also one that is not far off from where the country will go. In the end, the country will neither tolerate extreme spending cuts nor the most of dramatic tax increases. In the end, the country will seek a balance—and that is what we offer here—a combination of spending and revenue reforms to see our way to a balanced budget by 2030 and beyond.

In the pages that follow we will present in greater detail the spending and revenue reforms we outlined in this introduction and summary. As we’ll demonstrate, our plan is a fair, effective, and efficient way to restore our federal budget to balance by 2030 while ensuring our nation remains the most competitive, innovative, and prosperous in the world.

Michael Ettlinger is Vice President for Economic Policy, Michael Linden is Director of Tax and Budget Policy, and Seth Hanlon is Director of Fiscal Policy for the Doing What Works project at American Progress.

Watch Michael Ettlinger discuss CAP's budget plan at the Peterson Foundation's 2011 Fiscal Summit (YouTube)

Read the full report (pdf)

Download the introduction and summary (pdf)

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