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Deficit panel leaders upbeat

Critics on right and left assail tax, budget proposals

- The Washington Times - Wednesday, December 1, 2010

The chairmen of President Obama's deficit-reduction commission said members are halfway to securing the support they need to forward their recommendations of unpopular spending cuts and tax increases to Congress, where Democratic leaders have vowed to hold a vote before the end of the lame-duck session.

Their efforts got a boost Wednesday after the top two lawmakerson the commission - Sens. Kent Conrad, North Dakota Democrat, and Judd Gregg, New Hampshire Republican - endorsed the fiscal road map, saying that it will put the country on a path toward reducing trillion-dollar deficits, reining in the $13.860 trillion national debt and putting Social Security on solid financial footing for the next 75 years.

"We've reached a point where it is time to govern - it's that simple," Mr. Gregg said. "We either as a nation govern, or we risk losing our greatness, and this is a template for beginning that governance."

But entrenched advocacy groups pounced on the report. Grover Norquist, president of Americans for Tax Reform, labeled it a "trillion-dollar tax hike," and Richard Trumka, president of the AFL-CIO labor federation, said it "once again tells working Americans to drop dead."

Mr. Obama convened the commission earlier this year and named Erskine Bowles, a former chief of staff to President Clinton, and former Sen. Alan Simpson, Wyoming Republican, as co-chairmen. He charged the panel with proposing ways to close the long-term budget gap that both administration and congressional analysts say will overwhelm the country's finances as the population ages.

In releasing the report, Mr. Bowles and Mr. Simpson challenged the commission to push aside partisan differences and reduce military and domestic spending, to cut Medicare spending and pare down or eliminate popular tax breaks - such as the earned-income tax credit and the mortgage-interest deduction.

"These are tough times, requiring tough decisions and indeed tough votes," Mr. Simpson said.

The commission, made up of six congressional Democrats, six congressional Republicans and six members named by Mr. Obama, will hold a final vote Friday. Under Mr. Obama's February executive order establishing the commission, 14 of the 18 members must support the plan in order to adopt it and submit it to the White House and Congress.

If a report is adopted, House Speaker Nancy Pelosi, California Democrat, and Senate Majority Leader Harry Reid, Nevada Democrat, have promised to hold a vote on the plan before the end of the month.

Five of Mr. Obama's appointees are backing the plan, as are two senators - one from each party. But other lawmakers said the proposal from Mr. Bowles and Mr. Simpson fails.

"I do not believe that this sufficiently fixes the health care problem, and guess what? Our debt problem is the health care problem," said Rep. Paul D. Ryan, Wisconsin Republican and incoming chairman of the House Budget Committee.

Rep. Jan Schakowsky, Illinois Democrat, said she could not support the plan because she thinks provisions to gradually raise the age of enrollment in Social Security, to reduce domestic spending and to cut Medicare benefits will hurt the middle class, the working poor and the elderly.

"To say that we are going to reduce our deficit and debt by asking Medicare beneficiaries to pay more for their health care I think is absolutely unconscionable," she said.

However, groups critical of the nations economic future praised the plan and called on the panel to give it their full support.

"This is a credible, responsible and comprehensive plan for addressing the nation's growing debt burden, which will reach unsustainable levels if no action is taken," said Robert L. Bixby, executive director of the Concord Coalition. "It cuts through partisan rhetoric and confronts the hard trade-offs that must be made between spending, taxes and debt."

Peter G. Peterson, chairman of the Peter G. Peterson Foundation, said it "provides a strong framework for the tough choices that we will need to make as a nation."

Perhaps the most celebrated part of the entire plan is the recommendation to simplify and broaden the tax base by eliminating or scaling back $1.1 trillion in annual tax breaks to help offset the cost of lowering individual and corporate tax rates.

Under the plan, corporate tax rate drops from 35 percent to 26 percent and the six individual income tax rates (currently ranging from 10 percent to 35 percent annually) are boiled down to into three annual brackets: 8 percent up to $70,000; 14 percent up to $210,000; and 23 percent for people earning more.

"If anything, the concept that tax reform ought to be merged with budget reform is something that is incredibly important," Mr. Ryan said.

The plan also calls for capital gains and dividends to be taxed at normal tax rates, and for the employer-provided health insurance credit to be gradually phased out by 2038. To curb health care costs, the proposal would reform or repeal multiple parts of Medicare, including to the so-called "doc fix" and the Community Living Assistance Services and Supports (CLASS) Act.

As for Social Security, the plan aims to gradually make the retirement-benefit formula more progressive by reducing benefit growth, particularly for high earners, and increasing the baseline benefit for low-wage workers, making it no less than 125 percent of the poverty line in 2017.

The plan would increase benefits for the elderly and disabled, and raise the national retirement age from 67 in 2027 to 68 by 2050 and 69 by 2075. It also would gradually increase the amount of income subject to Social Security taxes from $106,000 to $190,000 by 2020.

Friday's vote ultimately will depend on the likes of Sen. Tom Coburn, the Oklahoma Republican who delivered an impassioned speech to the panel Wednesday, but played it close to his vest on whether he would back the plan.

"History says we're not going to make it," Mr. Coburn told the commission. "And the way we cheat history is for all of us to give up something. Everybody at this table give up something. And then, the way forward for America is for everybody to start sacrificing so we create a future that honors the tremendous sacrifice that came before us."

The report calls for a three-year pay freeze for members of Congress and federal workers - including the Defense Department's civilian work force.

It calls for a 200,000-person reduction in the government work force through attrition, a ban on earmarks and a 15-cent-a-gallon increase in the federal gas tax to help pay for transportation projects.

Others who supported the plan, included David Cole, chairman and chief executive of Honeywell International Inc., and Alice Rivlin, former budget director under Mr. Clinton. Ann Fudge, a former executive of Young and Rubicam, also is expected to support the plan.

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