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Tags: US | Obama | Deficits

Deficit Panel Can Be Candid: Budget Cuts Will Hurt

Friday, 19 February 2010 07:43 AM EST

President Barack Obama's new deficit commission might give Americans a slap in the face about the sacrifices needed to avoid bankrupting future generations — maybe working until age 70, paying higher taxes and spending more of their own money for doctors' visits and prescriptions.

Obama certainly won't be talking about that harsh medicine, nor will the lawmakers on Capitol Hill, nor the candidates trying to replace them next November.

In a poisonous election-year atmosphere, almost no one is willing to go on the record with solutions like raising the Social Security retirement age, ordering broad-based tax increases or increasing copays and deductibles for Medicare — ideas far too politically explosive for one party to take on alone.

That's where Obama's National Commission on Fiscal Responsibility and Reform — created Thursday with fanfare — comes in.

With the total federal debt next year expected to exceed $14 trillion — about $47,000 for every U.S. resident — the 18-member commission is charged with coming up with a plan by Dec. 1 to reduce the government's annual deficits to 3 percent of the national economy by 2015.

Obama announced the panel only after the Senate rejected a call by Sens. Kent Conrad, D-N.D., and Judd Gregg, R-N.H., to create by law a group that would have been similar but whose recommendations would have had considerably more weight — requiring Congress to take action accepting or rejecting them.

Reducing the deficit to 3 percent of the gross domestic product would still leave an annual deficit of almost $600 billion — compared to $1.4 trillion last year and nearly $1.6 trillion this year — but would at least keep the national debt stable relative to the size of the economy, a goal endorsed by professional economists.

Obama said continuing the red-ink trend could "hobble our economy. It will cloud our future and it will saddle every child in America with an intolerable burden."

The rising debt threatens to force up interest rates and crowd out private investment, according to economists.

And interest payments on the debt will eat up an increasingly large portion of the government's budget, squeezing programs and forcing even higher taxes.

Chairing the commission are retired GOP Sen. Alan Simpson of Wyoming and former Democratic White House staff chief Erskine Bowles.

"Whatever the results of our work, the American people are going to know about a lot more where we are headed with an honest appraisal of our situation and the courage to do something about it," Simpson said.

Bowles led successful 1997 talks with Republicans on a balanced budget bill that produced government surpluses the last three years President Bill Clinton was in office and the first year of George W. Bush's presidency.

Simpson, as the Senate's GOP whip in 1990, helped round up votes for a budget bill in which President George H.W. Bush broke his "read my lips" pledge not to raise taxes.

"Everything's on the table," said Obama, who in his Feb. 1 budget was unwilling to abandon his pledge not to raise taxes on people making less than $200,000 a year.

Republicans were quick to make it clear they're unwilling to make a bargain on raising taxes in exchange for cuts that benefit programs dear to Democrats.

That means Obama's commission — which needs several GOP votes to issue a plan — could well be doomed to gridlock.

"The American people ... want us to get a handle on spending without raising taxes," said Senate Minority Leader Mitch McConnell, R-Ky.

"Americans know our problem is not that we tax too little, but that Washington spends too much."

And while there is increasing public concern about the deficit in opinion polls, there's also lots of opposition to spending cuts.

A CBS News/New York Times poll released last week, for instance found that respondents opposed cuts to education and health care by a 2-1 margin.

Among the few lawmakers willing to put out a comprehensive deficit-cutting plan is Rep. Paul Ryan of Wisconsin, the senior Republican on the House Budget Committee, whose "Roadmap for America's Future" is a free-market treatise that would sharply curb the explosive growth of Medicare, Medicaid and Social Security.

It was immediately savaged by Democrats and the liberal blogosphere for, among other things, seeking to transform Medicare over time into a voucher program that wouldn't keep pace with rising health care costs.

The White House had sent signals for weeks that this was the year Obama was going to get serious about the country's looming debt crisis.

But his budget was mostly devoid of political pain and tough choices about taxes and the spiraling growth of federal benefit programs.

"No major reform happens in the United States without presidential leadership," said GOP economist Douglas Holtz-Eakin, a former adviser to Sen. John McCain's presidential campaign.

"There are too many Americans who believe that if we just cut foreign aid the budget balances. There is an enormous misunderstanding about the nature of the problem."

Here are the kinds of steps the panel is likely to consider as it seeks to tackle deficits that never dip below $700 billion under Obama's budget:

• Raise the retirement age for full Social Security benefits to more than 67 years old and have benefits grow at a less generous inflation rate. Expose more income to Social Security and Medicare payroll taxes.

• Require seniors to pay more Medicare costs out of their own pockets and curb payments to health care providers.

• Raise taxes on people making less than $200,000 a year, requiring Obama to break a signature campaign pledge.

"You're going to have to do all of the above," said Conrad. "You're going to have to do all of the things that people don't want to do."

Besides Bowles and Simpson, Obama will appoint four more members to the panel. Republican and Democratic leaders will each appoint six additional members.

© Copyright 2023 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

President Barack Obama's new deficit commission might give Americans a slap in the face about the sacrifices needed to avoid bankrupting future generations maybe working until age 70, paying higher taxes and spending more of their own money for doctors' visits and...
Friday, 19 February 2010 07:43 AM
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