Latest Debt Plan Targets Social Security, Medicare

En español | A bipartisan deficit-cutting plan known as the "Gang of Six" proposal would trim future Social Security checks, end a new program for long-term care insurance and shake half a trillion dollars out of the Medicare and Medicaid systems.

See also: Social Security: Lower COLAs on the table.

Speaker John Boehner and President Barack Obama discuss the nation's debt. — Pablo Martinez Monsivais/AP

As Congress and the White House race against the clock to agree on how to tackle the deficit and raise the ceiling on the national debt before Aug. 2, the Gang of Six plan has gathered support from both parties, something many other proposals have failed to do.

The plan, which is the work of three Republican and three Democratic senators, is so sweeping and complicated that almost everyone agrees it can't be passed before the nation runs out of borrowing authority on Aug. 2. But it has created momentum for a large deal to address the country's long-term debt problems. And it has laid out ideas that might be part of whatever solution Congress finds after weeks of high-stakes negotiating.

That doesn't mean all those ideas are easy or popular.

Social Security COLA could rise more slowly

"This is a proposal that is unfair to Social Security and Medicare beneficiaries," says Max Richtman, head of the National Committee to Preserve Social Security and Medicare.

The plan, which is strikingly similar to one proposed by President Obama's fiscal commission, would save $3.7 trillion or more over the next 10 years, depending on how you measure current spending. The first wave of the plan would cut $500 billion in red ink.

Part of that money comes from changing the way cost-of-living adjustments are figured for Social Security and other programs. David Certner, AARP legislative policy director, says the COLA would rise less quickly than under the current law, and each year that difference would be larger. "It's important for people as they grow older — the COLA is falling farther and farther behind," he says.

And Social Security could be subject to more changes in the second round of cuts under the Gang of Six plan. Those cuts, along with tax law changes, would be set by congressional committee. The Senate "gang," led by Republican Saxby Chambliss of Georgia and Democrat Mark Warner of Virginia, would lower overall income and corporate tax rates in exchange for reducing various tax breaks, like those for home mortgage interest, retirement accounts and charitable donations. But the details would be decided later.

"We refer to it around here as the 'promises, promises' bill," says Alison Fraser, head of the Heritage Foundation Thomas A. Roe Institute of Economic Policy Studies. "The problem I have with the Gang of Six plan is you don't really know what's in it."

But advocates for seniors say they have seen enough to be worried.

Next: Taxes are a key point in debt plan. >>