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Revised Deficit Plan Seeks Deeper Cuts, Softens Social Security Changes

Wednesday, 01 Dec 2010 10:40 AM

A presidential panel on balancing the U.S. budget on Wednesday revised its fiscal-austerity plan with deeper spending cuts and a more flexible tax-code overhaul, hoping to draw broader political support.

The 18-member commission, established in February by President Barack Obama, discussed its revised plan at a public meeting on Capitol Hill. The panel is due to vote on it on Friday, two days later than originally scheduled.

The plan envisages reducing the budget deficit to 2.3 percent of gross domestic product by 2015, from 8.9 percent in the last fiscal year as the United States, along with other major powers, struggles to right its economy after the world financial crisis and deep recession.

Republican Senator Judd Gregg and Democratic Senator Kent Conrad, both veterans of Washington's budget wars, voiced support for the plan at the commission meeting.

"I am prepared to support this plan and support it strongly," said Conrad, who is chairman of the Senate Budget Committee.

The plan still faced an uphill struggle in winning the support of 14 commission members, a threshold that would fulfill the commission's mandate and trigger a congressional vote on it.

DEEP DIVISIONS

Facing deep divisions among the 12 members of Congress on the panel, commission co-chairmen Erskine Bowles and Alan Simpson vowed that they will push for their tough plan.

"Al and I are not going to wimp out. For us, it's go big or go home ... We're not interested in 14 votes for a whitewash," said Bowles, who was chief of staff for Democratic President Bill Clinton. Simpson is a former Republican senator.

The plan came as Obama and Congress debated the fate of Bush-era tax cuts that played a key role, along with two costly wars and a financial crisis, in boosting the deficit to its present level near the highs set during World War II.

Extending those tax cuts would drive the deficit higher, and Obama has argued for letting them lapse for families earning more than $250,000 a year.

Republicans, who take control of the House of Representatives in January after November's Democratic election defeats, say letting any of them lapse would harm the economy.

The commission's revised plan in many ways resembles an original Nov. 10 draft released by Bowles and Simpson, but it cuts discretionary spending more aggressively, offers more alternatives to reforming the tax code, and softens proposed changes in Social Security pensions.

It represents an effort to build more support among Democratic and Republican lawmakers on the panel, who are divided over a range of tax and spending questions.

CAPITAL GAINS TAXES

The plan recommends capital gains and dividends be taxed at ordinary income tax rates — instead of the lower present rate of 15 percent — or taxed at a lower rate if paid for by higher rates of ordinary income tax.

As in the original draft, which was widely criticized, the revised version recommends lower corporate tax rates and calls for a 15-cent per gallon increase in the gasoline tax, with revenues to be devoted to transportation spending.

In a symbolic gesture, it calls for cutting the budgets of the White House and Congress by 15 percent and immediately freezing the salaries of members of Congress, along with a three-year freeze on non-military federal worker pay.

© 2017 Thomson/Reuters. All rights reserved.

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A presidential panel on balancing the U.S. budget on Wednesday revised its fiscal-austerity plan with deeper spending cuts and a more flexible tax-code overhaul, hoping to draw broader political support. The 18-member commission, established in February by President Barack...
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