Deficit panel offers 'painful' program for U.S.

Deficit panel offers 'painful' program for U.S.

'America cannot be great if we go broke,' says the 50-page draft proposal from the chairmen of President Obama's bipartisan deficit commission. Among the five basic recommendations: 'tough discretionary spending caps,' tax reform, and changes to Social Security.

By Michael A. Memoli, Tribune Washington Bureau
12:19 PM PST, November 10, 2010

WASHINGTON — The chairmen of President Obama's bipartisan deficit commission on Wednesday outlined stark recommendations they say are necessary to secure the nation's fiscal standing, including reforms of the tax code and entitlement programs that would likely spark opposition from lawmakers and interest groups.

Anticipating resistance, the draft proposal from Democrat Erskine Bowles and Republican Alan Simpson acknowledges that the suggestions are "painful," but warns that "there's no easy way out."

"America cannot be great if we go broke," the 50-page plan says in a statement of principles. "Our economy will not grow and our country will not be able to compete without a plan to get this crushing debt burden off our back."

The document makes five basic recommendations: First, to "enact tough discretionary spending caps" and find $200 billion in savings by 2015. Second: tax reform "that dramatically reduces rates, simplifies the code, broadens the base and reduces the deficit." The third step addresses reforms of the health system. Fourth: mandatory savings from farm subsidies and civilian and military retirement costs. And fifth: reforms to Social Security to ensure its solvency "while reducing poverty among seniors."

The chairmen say these steps could reduce the deficit to 2.2% of gross domestic product by 2015, and achieve $4 trillion in deficit reduction by 2020.

"A sensible, real plan requires shared sacrifice — and Washington should lead the way and tighten its belt," the chairmen state.

Proposed changes to Social Security — the so-called "third rail" of American politics — may be particularly challenging to enact. The draft proposal suggests raising the retirement age, altering the formula for cost-of-living increases, and raising the payroll tax threshold. The normal retirement age would rise to 68 by 2050, and 69 by 2075.

Bowles, a White House chief of staff under Bill Clinton, and Simpson, a former senator from Wyoming, developed their recommendations after months of meetings with an 18-member panel. The commission was created by executive order in February after Congress failed to agree on creating its own panel, which may have had more legislative might.

The White House responded with a statement emphasizing the preliminary nature of the draft, calling it "only a step in the process."

"The president will wait until the bipartisan fiscal commission finishes its work before commenting," spokesman Bill Burton said. "[He] looks forward to reviewing their final product early next month."

It's unclear whether these recommendations will go beyond the drawing board, particularly if the members of Congress who occupy a majority of seats fail to agree on core recommendations. The structure of the panel requires 14 of 18 members to support the draft for it to move to Congress for consideration.

"The proposal laid out today by Commission Co-Chairs Bowles and Simpsons is a starting point for the conversation about how to rein in the deficit and control spending here in Washington," said Illinois Sen. Dick Durbin, the majority whip. "This draft proposal has some painful cuts, some things that inspire me and some things that I hate like the devil hates holy water. I'll continue to work on making some changes to this draft, but it is an interesting starting point for future conversations."

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, called the recommendations "truly remarkable."

"This plan does it all — allows time for the economy to strengthen, brings down future deficits and debt, protects the most disadvantaged, makes government more effective and efficient, and promotes economic growth and competiveness," she said in a statement.

Also Wednesday, the Treasury Department announced that the federal government began its fiscal year with a deficit of $140.4 billion in October, the third-highest on record.