Deficit panel targets Social Security and taxes
WASHINGTON (Reuters) - Leaders of a presidential commission proposed raising taxes and the retirement age among bold ideas on Wednesday for slashing the U.S. budget deficit, but faced a difficult task in winning the support of Congress.
Days after voters vented their fury over government red ink in midterm elections, commission co-chairmen Erskine Bowles and Alan Simpson floated proposals that they said would bring $4 trillion in deficit reduction through 2020.
But their ideas might not even win the support of their own commission. Fourteen of the 18 members of the panel created by President Barack Obama must approve a final report before it can go to Congress for a vote, and some are already skeptical.
On the Social Security proposal in the Bowles-Simpson package, Democratic Representative Jan Schakowsky, a commission member, told reporters: "It's not a proposal I could support."
U.S. House Speaker Nancy Pelosi, soon to step down from her post since Democrats lost control of the House (of Representatives) in last week's congressional elections, said in a statement: "This proposal is simply unacceptable."
She called for the commission's final report to be fair to senior citizens who count on Social Security and to middle class families "unable to withstand further encroachment on their economic security."
The United States is under international pressure for continuing to spend its way out of recession when other countries have moved on to austerity, an issue being raised ahead of a meeting of the Group of 20 rich and developing countries in Seoul on Thursday and Friday.
The two heads of the commission called for reducing benefits and raising the retirement age for the Social Security retirement pension program, as well as setting limits on the popular Medicare program for the elderly and disabled, cutting payments to drugmakers and giving more power to a health cost-control board.
They proposed raising the gasoline tax gradually by 15 cents beginning in 2013; limiting the mortgage interest tax deduction and charitable deductions; cutting defense spending; and reducing corporate and individual tax rates.
Capital gains and dividends would be taxed as ordinary income, while budget cuts would be phased in beginning in fiscal 2012 to prevent a shock to the economy.
"It's all there. We have harpooned every whale in the ocean and some of the minnows," said Simpson, a retired Republican senator, at a press briefing. He and Bowles, a Democrat who served as chief of staff for President Bill Clinton, were named by Obama in February to head the panel.
White House spokesman Bill Burton said the ideas from Bowles and Simpson "are only a step in the process toward coming up with a set of recommendations and the president looks forward to reviewing their final product early next month.
MARKETS DON'T REACT
Markets did not react to the proposals. Expectations about the commission and its final report due out on December 1 are generally low.
Vassili Serebriakov, currency strategist at Wells Fargo in New York said: "It's probably not a story that is going to move the dollar in the short run, but I do think that the fiscal situation in general remains a source of medium-term vulnerability for the U.S. currency."
Seeking to show that his administration was serious about deficit reduction, Obama assigned the commission to find ways to balance the federal budget, excluding interest payments on the national debt, by 2015.
Fourteen of the commission's 18 members must vote to approve a final report to be voted on by Congress. Analysts expect it will be hard to reach that kind of consensus and predict it may issue a less conclusive report.
The release of the proposals was somewhat unexpected and may reflect concern by Simpson and Bowles that the panel would not be able to garner 14 votes for a formal recommendation by early December, said Chris Krueger, an analyst at MF Global.
"Alan Simpson and Erskine Bowles who know how to drive the agenda on an issue they care deeply about," he said.
The U.S. budget deficit is presently $1.3 trillion and the national debt is more than $13.6 trillion, run up sharply in recent years by the Bush administration's tax cuts, two costly wars and emergency steps to bail out Wall Street and prevent the economy from sliding even deeper into recession.
The Bowles-Simpson proposals won wide praise for not shying away from controversy, but on the details, other commission members and senior congressional leaders were more cautious.
"It is a serious effort to try to address an incredibly difficult problem. We've got to congratulate them for putting in that effort. It's a starting point," said Republican Senator Judd Gregg, a long-time deficit hawk.
Senate Budget Committee Chairman Kent Conrad, a Democrat, said the proposals' call for eliminating all tax expenditures -- such as the mortgage interest tax deduction -- was more dramatic than he would have envisioned.
"This isn't exactly what I had in mind," Conrad said.
The proposal suggests raising the Social Security retirement age to 68 by 2050 and 69 by 2075 with a "hardship exception" for certain occupations, the draft said.
The commission is due to meet again behind closed doors, on Tuesday and Wednesday next week, to discuss the recommendations.
The commission's proposal came as a separate, private-sector panel called for a shake-up of the budget process that would set clear targets for reducing red ink and impose spending cuts and tax increases if targets were missed.
The recommendation by the Peterson-Pew Commission on Budget Reform, a balanced-budget advocacy group that has no official government role, recommended that the president and Congress be required to respect deficit-reduction targets and that serious consequences be levied for falling short.
If a budget enacted by Congress missed a target, the president could propose cuts to bring it in line, the Peterson-Pew Commission recommended.
"If the target were still missed, spending reductions and tax increases would be imposed through automatic trigger mechanisms," the Peterson-Pew Commission said.
- Vice principal of South Korea school in ferry disaster commits suicide |
- After Nevada ranch stand-off, emboldened militias ask: where next?
- All 338 Korean students, teachers rescued from sinking ferry - school official
- Retailer Michaels Stores confirms payment card data breach
- East Ukraine separatists stay put despite diplomatic deal |