Obama’s Fiscal Panel Weighs Politically Toxic Deficit Fixes

April 27, 2010 - 4:29 AM
The commission begins work Tuesday with orders to produce a deficit no bigger than $550 billion by 2015, about 3 percent of the total U.S. economy. The most obvious solutions are higher taxes or fewer government benefits.
Washington (AP) - Even members of President Barack Obama's bipartisan fiscal commission admit the near impossibility of their task: finding a consensus by next fall for reducing federal deficits that threaten to erode Americans' standard of living.
 
The most obvious solutions, higher taxes or fewer government benefits, are the most toxic -- one reason the 18-member panel has instructions to deliver its recommendations after the November election.
 
The commission begins work Tuesday with a charge to produce a deficit no bigger than $550 billion by 2015, an amount equal to about 3 percent of the total U.S. economy. That would require deficit savings in the range of $250 billion or more.
 
"This is a suicide mission," the panel's co-chairman, former Sen. Alan Simpson, R-Wyo., said on "Fox News Sunday."
 
The deficit has turned alarmingly worse since the recession that started at the end of 2007. The red ink totaled $1.4 trillion last year. Many projections show it never dipping below 4 percent of the economy over the next decade. Deficits that size are unsustainable, economists say. They would put upward pressure on interest rates, crowd out private investment and ultimately erode living standards.
 
But the options for curbing the deficit -- cutting spending on popular entitlement programs and broad-based tax increases -- are so politically toxic that the only way Obama and his Democratic allies controlling Congress are willing to take them on during this midterm election year is through the commission.
 
The panel is structured so bipartisanship is required if it is to deliver a plan for a vote during a postelection, lame-duck session of Congress in December. Fourteen of 18 members are required to produce a plan, which means at least half of the commission's eight Republicans would have to endorse it.
 
The hope is that the commission can insulate itself from politics and that the requirement for bipartisanship would give both sides political cover. With few exceptions, most successful deficit reduction efforts have been bipartisan.
 
"Let's see if we can persuade people to trust each other, come together, and really take some of these tough stands to bring down spending," the panel's other co-chairman, Erskine Bowles, said on "Fox News Sunday." "Everything has to be on the table, whether it's revenue or spending. I personally would like to go after spending first."
 
Bowles, who was former President Bill Clinton's White House chief of staff, and Simpson are pragmatists, but most of the Republican lawmakers named to the panel are die-hard anti-tax conservatives, such as Sen. Mike Crapo, R-Idaho, and Rep. Jeb Hensarling, R-Texas.
 
Republicans haven't supported a tax increase since President George H.W. Bush broke his "Read my lips: No new taxes" pledge in 1990 -- a move that painfully divided the party. The GOP has moved steadily to the right since, and is wooing the support of anti-tax tea party activists in the fall election.
 
The commission's Democratic members are a mix of deficit hawks, such as former Clinton White House budget director Alice Rivlin and Sen. Kent Conrad of North Dakota, and liberals such as Rep. Jan Schakowsky of Illinois and Andy Stern, outgoing president of the Service Employees International Union.
 
Already, interest groups on the left are weighing in, urging Democrats to avoid cutting spending on popular benefit programs like Social Security and Medicare.
 
"Simply put, Social Security has not contributed one thin dime to the current deficit. It should not be used as a piggy bank to pay our way out of the fiscal hole we find ourselves in," said Barbara Kennelly, president of the National Committee to Preserve Social Security and Medicare.
 
There hasn't been a significant deficit-cutting effort since 1997, when a GOP-led Congress and newly re-elected Clinton came together to produce a balanced budget plan combining a relatively painless set of spending cuts with tax cuts sought by Republicans and a new children's health plan embraced by both parties. That deal was greatly helped by improving deficit projections.
 
But the fiscal gap confronting the commission is considerably more daunting. Executive Director Bruce Reed says the debt panel will try to close the 2015 budget deficit from the $793 billion projected by the Congressional Budget Office for Obama's budget down to $520 billion or so.
 
Obama will meet privately with the panel for 20 minutes or so and make brief remarks afterward. Federal Reserve Board Chairman Ben Bernanke will also address the panel.