Obama Deficit Commission Scurries for Votes as Crisis Looms

Wednesday, 01 Dec 2010 01:53 PM

By David A. Patten

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The president’s deficit commission released its final report today amidst growing concerns that the United States could be headed toward a European-style debt debacle, triggering a behind-the-scenes race to line up the votes needed to present the proposal to Congress.

The 65-page proposal, titled “The Moment of Truth,” offers a combination of tax increases and spending cuts that would cut the deficit by $4 trillion and balance the federal budget by 2035. However, none of the spending cuts would take effect before 2012, to avoid any risk that the austerity measures would disrupt the fragile economic recovery.

Two senators on the 18-member National Commission on Fiscal Responsibility and Reform announced that they would support the plan, outgoing Republican Sen. Judd Gregg and Democratic Sen. Kent Conrad.

Both senators said they see flaws in the plan, which is a modified version of the proposal the two co-chairmen of the panel, former GOP Sen. Alan K. Simpson and former Clinton administration chief of staff Erskine B. Bowles, submitted on Nov. 10. But both also said that sitting by and doing nothing as the nation’s fiscal hole deepens is unacceptable.

As Conrad told The New York Times, “Anyone watching the spreading debt crisis in Europe over the last few days, in Ireland, Portugal, and Spain, understands the threat we face is real. We can’t afford to wait until the crisis is upon us.”

The support of Conrad and Gregg raises to seven the number of commission members believed to have signed on to the recommendations. Under the rules President Barack Obama established when he created the group, 14 of the panel’s 18 members must vote in favor of the recommendations in order to send the report to Congress for a vote.

The vote on whether to ratify the findings has been delayed until Friday, in an effort to round up more support.

The Times reports that three Republicans — Rep. Paul Ryan of Wisconsin, Rep. Jeb Hensarling of Texas, and Rep. Jan Schakowsky, a liberal Democrat from Illinois — are expected to vote against the commission proposal.

Given that several other commission members have expressed serious doubts, it appears unlikely that the 14 votes can be secured by Friday. But there appears to be a growing recognition that the U.S. economy could be headed the way of Europe's, where leaders have rushed to head off banking crises in several countries.

In fact, in the preamble to the report it released today, the commission stated: “Over the course of our deliberations, the urgency of our mission has become all the more apparent. The contagion of debt that began in Greece and continues to sweep through Europe shows us clearly that no economy will be immune. If the U.S. does not put its house in order, the reckoning will be sure and the devastation severe.”

“I don’t know if we’re going to get two votes or five votes or 10 votes or 14 votes,” Bowles told the media Tuesday. “But one thing is certain: The problem is real. The solutions are painful. And there are no easy choices.”

Statements from leading Republicans indicate their consensus is that all forms of spending, including entitlement and defense spending, need to be on the table if America is to get its fiscal house in order.

“The first order of business, and the first message the American people sent to Washington, D.C., on November 2, is that we need to put our fiscal house in order,” Indiana GOP Rep. Mike Pence told the MSNBC "Morning Joe" crew on Wednesday. “And we need to put everything on the table — all domestic spending, entitlements, we even need to look at defense procurement, look for efficiencies there. We’ve got to put our fiscal house in order through restraint and reform.”

The question, of course, is how. One reason for the political impasse is that Democrats are protecting entitlements and discretionary spending, while Republicans on the panel insist they won’t vote for any tax increases.

Most analysts agree the spiraling national debt will require some adjustment to the retirement age. Liberal groups are dead set against that, however. One New York Times report speculates that, if Obama agrees to alter the terms of Social Security, it could even spark a primary challenge from his party’s left.

Some analysts believe the commission report could have a major impact on the belt-tightening efforts of the new, grass-roots oriented Congress taking office next month.

Chris Edwards, editor of CATO’s DownsizingGovernment.org, tells Newsmax the panel’s recommendation could be a big asset for the 112th Congress.

“I think the new members of Congress like Rand Paul and others who promised that they want to cut spending, they’ve got on a silver platter now a menu of things,” he says. “And Obama gives them political cover.

“So Senator Paul can say, ‘Look, I want to raise the retirement age for Social Security and this is one of the bipartisan recommendations.’ So I think the ultimate effect will be positive,” Edwards says.

Among the proposals the commission presented in its report:

  • Taxing capital gains and dividends at ordinary income tax rates, instead of the lower present rate of 15 percent. For the tax rate for capital gains to be made lower than the general tax rate, the commission’s formula would require higher individual income tax rates. Republicans are likely to oppose this.
  • A 15-cent-per-gallon hike in the gasoline tax, as the earlier report had proposed. The funds would go for transportation spending.
  • A three-year freeze on non-military federal pay raises, compared to the two-year Obama announced this work. The proposal would rollback spending to 2008 levels in 2013, delaying austerity measures to provide time for the economic recovery. Then a cap would be imposed on future spending through 2020, limiting it to one-half the projected inflation rate.
  • Establishment of a “disaster fund” so that the response to expensive catastrophes such as Hurricane Katrina and the BP oil spill can be accounted for honestly.
  • Adoption of “a strict, clear legal definition of emergency,” in order to stop the abuse of emergency spending.
  • Creation of a “cut and invest” committee to winnow through the federal government's "patchwork of thousands of duplicative programs.” It would shift spending from low-priority to high-priority programs.
  • 15 percent cuts for all congressional and White House budgets.
  • Three-year pay freeze for members of Congress.
  • Using attrition to reduce the size of the federal workforce. The ultimate goal would be to cut the government workforce, including defense department civilians, by 10 percent (about 200,000 workers). This would save $13.2 billion by 2015. The commission says the federal government should sell off its massive land holdings. Most voters don’t realize the federal government is the nation’s No. 1 owner of real estate. It maintains more than 1.2 million buildings, structures, and parcels of land.
  • In support of congressional Republicans who are battling on behalf of earmark reform, eliminate all congressional earmarks.
  • Cutting the 35 percent corporate tax rate to between 23 and 29 percent to remain competitive.
  • Simplifying the complicated bracket system for individual taxpayers, establishing three brackets of 12 percent, 22 percent, and 28 percent.

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