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Details on the “Gang of Six” Plan

3 min readBy: Ryan Rosso

In March, Senator Mark Warner (D-VA), Saxby Chambliss (R-GA), Dick Durbin (D-IL), Kent Conrad (D-ND), Mike Crapo (R-ID) and Tom Coburn (R-OK) formed a group to tackle long-term budget reform; they referred to themselves the “Gang of Six.” The six were motivated by the belief that to create a bipartisan deal, everything had to be on the table. Chambliss, for instance, said, “For a Republican to put revenues on the table is significant. For a Democrat to put entitlements on the table is significant. The only way we’re going to solve this problem is to have a dialogue about all these issues, because there is no silver bullet.”

While the “Gang of Six” earned supportive statements from their colleagues and other observers, they accomplished little for some time. Furthermore, the six senators remained very tight-lipped on any details regarding their proposal, leaving the public and many in Washington curious as to whether an actual solution along their lines was possible. Others began trying their own efforts, such as Vice President Biden’s working group on the debt ceiling.

In May, when Senator Coburn announced he was dropping out of the group due to disagreements with Senator Durbin over discretionary and Medicare cuts, the whole thing appeared to be dead. Chambliss signaled that to make a deal work, “Coburn would have to be brought back into the fold,” since he was a key conservative voice. As time went on, the now “Five Guys” fell out of the media.

Just when everyone seemed to give up hope on a bipartisan proposal, on July 19, a proposal emerged from the Gang of Six. They characterized it as a 10-year, $3.7 trillion deficit-cutting plan. Senator Chambliss reportedly had stayed close to Senator Coburn, “having dinner almost every evening” talking about “whether the left-for-dead Senate gang could really work.” Coburn did indeed return to pitch the plan to his colleagues on Tuesday, exclaiming, “I’m back.”

The plan’s summary (PDF) states the following:


  • $500 billion “down payment” spending reductions
  • Shift to chained-CPI inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power. measure government-wide, starting in 2012
  • Impose statutory spending caps on discretionary spending through 2015
  • Senate Finance Committee will have to cut $300 billion in health savings, while resolving how Medicare pays doctors, and is instructed to determine how Social Security can be made solvent for the next 75 years
  • Senate committees are instructed to find $250 billion in cuts in other various departments

TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.

  • Simplify the individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. code by broadening the tax baseThe tax base is the total amount of income, property, assets, consumption, transactions, or other economic activity subject to taxation by a tax authority. A narrow tax base is non-neutral and inefficient. A broad tax base reduces tax administration costs and allows more revenue to be raised at lower rates. while reducing tax rates. The tax rates would be three brackets of between8-12 percent, 14-22 percent, and 23-29 percent, while maintaining or increasing the progressivity of the tax code. The tax base changes would reform, but not necessarily eliminate, tax deductions and credits for health, charitable giving, homeownership, and retirement
  • Retain the Earned Income Tax CreditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. (EITC) and Child Tax Credit, or provide at least the same level of support for qualified beneficiaries
  • Repeal the Alternative Minimum Tax (AMT)
  • Change, in a revenue-neutral manner, the corporate tax rate to between 23 percent and 29 percent and switch from a worldwide to a territorial system

Since the release, the senators have been pitching their plan to build up support. They have received mixed reviews, including cautious optimism, eager support, and critiques, and not all along partisan lines. Republican Paul Ryan issued a statement skeptically asking questions about further details, and the top Democrat on the House Budget Committee, Chris Van Hollen, insisted on seeing details before he supports the plan. Positive statements have been issued by a number of individuals on the Hill and in the media (see, for example, Ezra Klein and Fox News). Former Bush-43 OMB official James Capretta savaged the plan in an op-ed. President Obama has praised the debt ceiling plan, although it is ultimately up to Congress what happens with it.