Committee for a Responsible Federal Budget

Domenici and Rivlin Testify to Senate Finance Committee

Jun 19, 2012 | Budgets & Projections

Former Director of the CBO Alice Rivlin and Former Sen. Pete Domenici testified today to the Senate Finance Committee on the long-term debt problem, the “fiscal cliff”, and the Domenici-Rivlin plan to address these challenges. Similiar to Simpson-Bowles--albeit with key policy differences--the Domenici-Rivlin plan addresses both tax reform and health care reform, arriving at a balanced solution that deals with our future fiscal troubles.

On health care, Sen. Domenici stressed the importance of "bending the blue line," or restraining health care cost growth. The Domenici-Rivlin plan uses a premium support plan that would give beneficiaries a fixed payment to purchase a private plan or traditional Medicare. Rivlin argued that the benefits of competition would be large enough to do a significant amount of cost-cutting, but as a backstop, they would limit payment growth to GDP per capita plus one percent. Both witnesses correctly noted that no fiscal plan would be successful at reigning in debt if they did not address Medicare and other health spending.

Domenici-Rivlin also reforms the tax code by lowering tax rates and broadening the tax base while raising revenue. By broadening the base through reductions in major tax expenditures, Domenici-Rivlin arrive at a tax code that is more progressive and raises more revenue with two rates at 15 percent and 28 percent.

On the need for revenue, even Domenici, a former Republican, stressed that raising more revenue compared to current policy was necessary to reduce our deficits and that spending cuts could not be the only solution. Rivlin noted that while economic recovery would likely raise revenues to their recent historical average, there will be more seniors than ever before and that demographic change will neccessitate some change in our tax code.

Both Domenici-Rivlin and Simpson-Bowles have been the major bipartisan frameworks for reducing deficits and provide a clear starting point for lawmakers. There is not a lack of fiscal plans out there, only a lack of will to enact one that can get through the political system. As a veteran of the Senate, Domenici challenged his former colleagues: 

This problem is within your jurisdiction....You are the Super Committee. It falls on you to solve the health care problem, you to solve the Medicare problem.

The full testimony from Rivlin and Domenici can be found here.