By ANDREW TAYLOR
WASHINGTON (AP) — Voters who demanded Washington rein in the nation’s
spiraling debt are getting a message from President Barack Obama and leaders
of his deficit commission: It’ll hurt.
A proposal released Wednesday by the bipartisan leaders of the commission
suggested cuts to Social Security benefits, deep reductions in federal
spending and higher taxes for millions of Americans to stem the flood of red
ink that they say threatens the nation’s very future. The popular child tax
credit and mortgage interest deduction would be eliminated.
Interest groups on the right and the left squealed, predictably, about the
plan, which would cut total deficits by as much as $4 trillion over the next
decade — much of it from programs long considered all but sacred.
The full commission has yet to make recommendations, and the chairmen
acknowledged their plan was dead on arrival — but said it would prompt a
more realistic national debate about what it’ll take to solve the nation’s
Obama, in Seoul, South Korea, declined to discuss the specifics of the
chairmen’s work but said Thursday, “We’re going to have to take actions that
are difficult and we’re going to have to tell the truth the American
people.” He said there has been a lot of rhetoric about the nation’s debt
and annual budget deficits but “a lot of the talk didn’t match up with
“We need to be straight with the American people,” the president said. “We
can’t just engage in political rhetoric.”
Sen. Kent Conrad, D-N.D., chairman of the Budget Committee and a member of
the White House commission, said the nation faces the real possibility of
becoming a “second-tier economic power” if it fails to address the
trillion-dollar-plus deficit. He said simply cutting waste and fraud will
not solve the problem, and insisted changes to Medicare and Social Security
were needed because both programs are headed toward insolvency.
“People can say we want to keep what is. What is is not affordable,” Conrad
said Thursday on ABC’s “Good Morning America.”
Under the chairmen’s proposal, Medicare spending would be curtailed. Tax
breaks for many health care plans, too. And the Pentagon’s budget would
suffer as well in a plan that attaches $3 in spending cuts to every $1 in
For all the pain, the deficit still would approach $400 billion in 2015
under the proposal, released by deficit panel’s co-chairmen, Democrat
Erskine Bowles, a former Clinton White House chief of staff, and Republican
Alan Simpson, a former senator from Wyoming.
The plan arrived a week after congressional elections in which voters
demanded action on the $1 trillion-plus budget deficit.
“This debt is like a cancer that will truly destroy this country from within
if we don’t fix it,” Bowles warned.
Current deficits require the government to borrow 37 cents out of every
dollar it spends.
The entire 18-member commission is supposed to report a deficit-cutting plan
on Dec. 1, but panel members are unsure whether they’ll be able to agree on
anything approaching deficit cuts of the size proposed. And even if they
could, any vote in Congress this year would be nonbinding, Simpson said.
During the campaign, neither political party talked of spending cuts of the
magnitude offered Wednesday, with Republicans proposing $100 billion in cuts
to domestic programs passed each year by Congress — but with no specifics.
The plan would gradually increase the retirement age for full Social
Security benefits — to 69 by 2075 — and current recipients would receive
smaller-than-anticipated annual increases.
Equally controversial, it would eliminate the current tax deduction that
homeowners receive for the interest they pay on their mortgages and impose a
15 cent-a-gallon tax on gasoline.
It would impose a three-year freeze in the pay of most federal employees and
a 10 percent cut in the federal work force. Congressional pet spending
projects, known as “earmarks,” would be eliminated.
No one is expecting quick action on any of the pieces of the plan. Proposed
cuts to Social Security and Medicare are making liberals recoil. And
conservative Republicans are having difficulty with options suggested for
raising taxes. The plan also calls for cuts in farm subsidies, foreign aid
and the Pentagon’s budget.
It was rejected as “simply unacceptable” by House Speaker Nancy Pelosi, D-Calif.,
a top Obama ally.
The Social Security proposal would change the inflation measurement used to
calculate cost-of-living adjustments for benefits, reducing annual
The plan also would raise the regular Social Security retirement age to 68
by about 2050 and to 69 in 2075. The full retirement age for those retiring
now is 66. For those born in 1960 or after, the full retirement age is now
Better-off beneficiaries would receive smaller Social Security payments than
those in lower-earning brackets under the proposal, and the amount of income
subject to Social Security taxes would be increased.
“The chairmen of the deficit commission just told working Americans to ’drop
dead,”’ AFL-CIO President Richard Trumka said in a statement.
From the right, anti-tax activist Grover Norquist, whose opinions carry
great weight among Republicans, blasted the plan for its $1 trillion in tax
increases over the coming decade. But Bowles and Simpson say eliminating
costly tax deductions could allow income tax rates to be brought way down.
The proposal would leave Obama’s new health care overhaul in place while
greatly strengthening its cost-control provisions, including a board with
the power to make cuts in Medicare payments to providers.
For most Americans with job-based health coverage, the biggest change would
be to limit or eliminate altogether the tax-free status of employer-provided
health benefits, which would provide a stiff nudge to force people into
cost-conscious insurance plans.
The plan also calls for a major overhaul of both the individual income tax
and the corporate tax systems, with the idea of lowering overall tax rates,
simplifying the tax code and broadening the taxpayer base. The top income
tax rate would drop from 35 percent to 23 percent.