CONGRESS OF THE UNITED STATES CONGRESSIONAL BUDGET OFFICE Options for Reducing the Deficit: 2019 to 2028 Left to right: © Syda Productions/Anatoliy Lukich/Garry L./Andriy Blokhin/Juanan Barros Moreno/lenetstan/Shutterstock.com DECEMBER 2018 Notes The estimates for the various options shown in this report were completed in November 2018. They may differ from any previous or subsequent cost estimates for legislative proposals that resemble the options presented here. Unless this report indicates otherwise, all years referred to regarding budgetary outlays and revenues are federal fiscal years, which run from October 1 to September 30 and are designated by the calendar year in which they end. The numbers in the text and tables are in nominal (current-year) dollars. Those numbers may not add up to totals because of rounding. In the tables, for changes in outlays, revenues, and the deficit, negative numbers indicate decreases, and positive numbers indicate increases. Thus, negative numbers for spending and positive numbers for revenues reduce the deficit, and positive numbers for spending and negative numbers for revenues increase it. Some of the tables in this report give values for two related concepts: budget authority and outlays. Budget authority is the authority provided by federal law to incur financial obligations that will result in immediate or future outlays of federal government funds. The budget projections used in this report come from various sources. The 10-year spending projections, in relation to which the budgetary effects of spending options are generally calculated, are those in Congressional Budget Office,An Analysis of the President’s 2019 Budget (May 2018, revised August 2018), www.cbo.gov/publication/53884. The 10-year revenue projections, in relation to which the budgetary effects of revenue options are generally calculated, are those in Congressional Budget Office, The Budget and Economic Outlook: 2018 to 2028 (April 2018), www.cbo.gov/publication/53651; the exceptions are the revenue projections shown in Chapter 1, which are those in An Analysis of the President’s 2019 Budget (May 2018, revised August 2018). The longer-term budget projections are those in Congressional Budget Office, The 2018 Long-Term Budget Outlook (June 2018), www.cbo.gov/publication/53919. Budgetary results before 2019 reflect data from the Bureau of Economic Analysis and from Department of the Treasury, Bureau of the Fiscal Service, Final Monthly Treasury Statement of Receipts and Outlays of the United States Government for Fiscal Year 2018 Through September 30, 2018, and Other Periods (October 2018), https://go.usa.gov/xPhhG (PDF, 592 KB). As referred to in this report, the Affordable Care Act comprises the Patient Protection and Affordable Care Act, the health care provisions of the Health Care and Education Reconciliation Act of 2010, and the effects of subsequent judicial decisions, statutory changes, and administrative actions. CBO’s website includes a search tool that allows users to filter options by major budget category, budget function, topic, and date (www.cbo.gov/budget-options). The website also includes previous editions of this report (https://go.usa.gov/xPdC9). www.cbo.gov/publication/54667 Contents Introduction 1 The Current Context for Decisions About the Budget 2 1 Choices for the Future 4 Caveats About This Report 4 Mandatory Spending Options 11 Trends in Mandatory Spending 11 2 Method Underlying Mandatory Spending Estimates 12 Options in This Chapter 13 Discretionary Spending Options 119 Trends in Discretionary Spending 119 3 Method Underlying Discretionary Spending Estimates 121 Options in This Chapter 122 Revenue Options 197 Trends in Revenues 197 4 Method Underlying Revenue Estimates 198 BOX 4-1. MAJOR PROVISIONS OF THE 2017 TAX ACT 200 Options in This Chapter 202 Appendix: Spending Options With Smaller Budgetary Effects 309 Mandatory Spending Options 309 Discretionary Spending Options 310 List of Tables and Figures 312 About This Document 313 II OPTIONS FOR REDUCING THE DEFICIT: 2019 TO 2028 DECEMBER 2018 Mandatory Spending Natural Resources and Environment Option 1 Limit Enrollment in the Department of Agriculture’s Conservation Programs 15 Agriculture Option 2 Eliminate Title I Agriculture Programs 17 Option 3 Reduce Subsidies in the Crop Insurance Program 19 Option 4 Limit ARC and PLC Payment Acres to 30 Percent of Base Acres 21 Housing Option 5 Raise Fannie Mae’s and Freddie Mac’s Guarantee Fees and Decrease Their Eligible Loan Limits 23 Education Option 6 Eliminate or Reduce the Add-On to Pell Grants, Which Is Funded With Mandatory Spending 26 Option 7 Limit Forgiveness of Graduate Student Loans 28 Option 8 Reduce or Eliminate Subsidized Loans for Undergraduate Students 31 Option 9 Reduce or Eliminate Public Service Loan Forgiveness 34 Option 10 Remove the Cap on Interest Rates for Student Loans 36 Health Option 11 Adopt a Voucher Plan and Slow the Growth of Federal Contributions for the Federal Employees Health Benefits Program 38 Option 12 Establish Caps on Federal Spending for Medicaid 41 Option 13 Limit States’ Taxes on Health Care Providers 52 Option 14 Reduce Federal Medicaid Matching Rates 54 Option 15 Introduce Enrollment Fees Under TRICARE for Life 57 Option 16 Introduce Minimum Out-of-Pocket Requirements Under TRICARE for Life 59 Option 17 Change the Cost-Sharing Rules for Medicare and Restrict Medigap Insurance 61 Option 18 Increase Premiums for Parts B and D of Medicare 65 Option 19 Raise the Age of Eligibility for Medicare to 67 68 Option 20 Reduce Medicare’s Coverage of Bad Debt 72 Option 21 Require Manufacturers to Pay a Minimum Rebate on Drugs Covered Under Part D of Medicare for Low-Income Beneficiaries 74 Option 22 Modify Payments to Medicare Advantage Plans for Health Risk 77 Option 23 Reduce Quality Bonus Payments to Medicare Advantage Plans 82 Option 24 Consolidate and Reduce Federal Payments for Graduate Medical Education at Teaching Hospitals 86 CONTENTS OPTIONS FOR REDUCING THE DEFICIT: 2019 TO 2028 III Mandatory Spending (Continued) Income Security Option 25 Convert Multiple Assistance Programs for Lower-Income People Into Smaller Block Grants to States 89 Option 26 Eliminate Subsidies for Certain Meals in the National School Lunch, School Breakfast, and Child and Adult Care Food Programs 92 Option 27 Reduce TANF’s State Family Assistance Grant by 10 Percent 94 Option 28 Eliminate Supplemental Security Income Benefits for Disabled Children 95 Social Security Option 29 Link Initial Social Security Benefits to Average Prices Instead of Average Earnings 97 Option 30 Make Social Security’s Benefit Structure More Progressive 99 Option 31 Raise the Full Retirement Age for Social Security 101 Option 32 Require Social Security Disability Insurance Applicants to Have Worked More in Recent Years 103 Option 33 Eliminate Eligibility for Starting Social Security Disability Benefits at Age 62 or Later 105 Veterans Option 34 Narrow Eligibility for Veterans’ Disability Compensation by Excluding Certain Disabilities Unrelated to Military Duties 107 Option 35 End VA’s Individual Unemployability Payments to Disabled Veterans at the Full Retirement Age for Social Security 109 Option 36 Reduce VA’s Disability Benefits to Veterans Who Are Older Than the Full Retirement Age for Social Security 111 Option 37 Narrow Eligibility for VA’s Disability Compensation by Excluding Veterans With Low Disability Ratings 113 Multiple Programs or Activities Option 38 Use an Alternative Measure of Inflation to Index Social Security and Other Mandatory Programs 115 Discretionary Spending Defense Option 1 Reduce the Department of Defense’s Budget 123 Option 2 Reduce DoD’s Operation and Maintenance Appropriation (Excluding Funding for the Defense Health Program) 125 Option 3 Cap Increases in Basic Pay for Military Service Members 128 Option 4 Replace Some Military Personnel With Civilian Employees 130 Option 5 Cancel Plans to Purchase Additional F-35 Joint Strike Fighters and Instead Purchase F-16s and F/A-18s 132 Option 6 Stop Building Ford Class Aircraft Carriers 134 IV OPTIONS FOR REDUCING THE DEFICIT: 2019 TO 2028 DECEMBER 2018 Discretionary Spending (Continued) Defense (Continued) Option 7 Reduce Funding for Naval Ship Construction to Historical Levels 136 Option 8 Reduce the Size of the Nuclear Triad 138 Option 9 Cancel the Long-Range Standoff Weapon 141 Option 10 Defer Development of the B-21 Bomber 143 Option 11 Modify TRICARE Enrollment Fees and Cost Sharing for Working-Age Military Retirees 145 Option 12 Reduce the Size of the Bomber Force by Retiring the B-1B 148 Option 13 Reduce the Size of the Fighter Force by Retiring the F-22 150 Option 14 Cancel the Ground-Based Midcourse Defense System 152 Option 15 Reduce the Basic Allowance for Housing to 80 Percent of Average Housing Costs 154 Option 16 Cancel Development and Production of the New Missile in the Ground-Based Strategic Deterrent Program 157 International Affairs Option 17 Reduce Funding for International Affairs Programs 159 Option 18 Reduce Appropriations for Global Health to Their Level in 2000 160 Energy, Science, and Space Option 19 Eliminate Human Space Exploration Programs 161 Option 20 Reduce Department of Energy Funding for Energy Technology Development 163 Transportation Option 21 Eliminate Funding for Amtrak and the Essential Air Service Program 165 Option 22 Limit Highway and Transit Funding to Expected Revenues 168 Option 23 Eliminate the Federal Transit Administration 171 Option 24 Increase the Passenger Fee for Aviation Security