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WASHINGTON (Reuters) - President Barack Obama will sign an executive order on Thursday setting up a bipartisan commission to propose ways to tackle the ballooning U.S. deficit, a senior administration official said on Tuesday.
Obama will name Erskine Bowles, former chief of staff to President Bill Clinton, and former Republican Senator Alan Simpson to serve as co-chairs of the body, the official said.
Obama, a Democrat, has said he would establish the commission to study options on spending and taxes after lawmakers failed to create a congressional panel on the issue.
The deficit, which the White House forecasts will hit a record $1.56 trillion in the fiscal year that ends on September 30, has become a political hot potato ahead of elections in November that could change the balance of power in Congress.
Leading Republicans initially supported the idea of a congressional panel but backed off over fears it could give bipartisan cover to potential efforts to raise taxes.
Democrats, with majorities in the House of Representatives and the Senate, accused the Republicans of playing politics. Obama, fighting an economic crisis and two wars he inherited from his Republican predecessor George W. Bush, said he would order the commission established on his own.
"On Thursday, President Obama will sign an executive order establishing the bipartisan National Commission on Fiscal Responsibility and Reform," the official said.
As White House chief of staff from 1996-1998, Bowles "brokered the last significant bipartisan budget agreement, the Balanced Budget Act of 1997, with the Republican leadership in Congress -- helping to generate the first balanced budget in nearly 30 years," the official said.
Simpson was a senator from Wyoming from 1979-1997.
"During his career in the Senate, Simpson was often a strong voice for fiscal balance -- for example, voting in favor (of) the bipartisan 1990 deficit-reduction agreement," the official said.
Obama's choices drew an initial positive response from at least one lawmaker.
"Those are distinguished choices," said Senate Budget Committee Chairman Kent Conrad, a Democrat. "They're both widely respected."
Conrad, who had pushed unsuccessfully for Congress to set up a similar proposal, said Simpson in particular would help bring Republicans on board because he had been one of the party's leaders.
A spokesman for House Minority Leader John Boehner said he was still waiting for a response from Obama on Republican proposals to cut U.S. spending right away.
Senator Evan Bayh, a Democrat, cited the Senate's recent rejection of a measure to create a bipartisan commission to tackle deficits when he announced he would not run for re-election. Bayh said he was fed up with partisan bickering in Washington.
The White House forecasts the deficit will more than halve as a share of the economy by the end of Obama's term in January 2013.
Doubts about U.S. sincerity in controlling the deficit and capping debts could hit the dollar and drive borrowing costs higher, with investors demanding a bigger return to keep buying bonds issued by the U.S. government.
Obama's latest budget proposal forecast public debt rising by 2020 to almost 80 percent of the economy, measured by gross domestic product, from 64 percent this year.
Additional reporting by Andy Sullivan; Editing by John O'Callaghan