Panel to Seek Solutions to Budget Woes

Published Apr 27, 2010. By Caren Bohan. In Reuters.

Obama has given the independent, 18-member National Commission on Fiscal Responsibility broad leeway to suggest remedies for the debt and deficits.

A debate already has erupted over options the panel might consider, with conservatives urging that tax increases be ruled out and liberals seeking to shield the Social Security retirement program and other entitlement program from cuts.

The commission is due to convene at a White House event with Obama at 9:30 a.m. and hold the first of several monthly meetings afterward.

Obama has given the panel until December 1 to report back on its recommendations, enabling it to deliver its report after the November congressional elections.

"I think the upside there is an opportunity to break through some political logjams," said Michael Ettlinger, vice president for economic policy at the Center for American Progress, a liberal think tank.

"The downside risk is you get some unholy compromises to get some agreement where the solution is worse than the problem," such as cutting social programs recklessly, Ettlinger said.

Tuesday's commission meeting and the others that follow it will be recorded on livestream video. Federal Reserve Chairman Ben Bernanke and White House Budget Director Peter Orszag are due to speak at the inaugural meeting.

BABY BOOM GENERATION

The U.S. deficit was $1.4 trillion in 2009, nearly 10 percent of the overall economy. It is expected to be that much again this year. Longer term, the retiring baby boom generation will strain the Social Security retirement program and the Medicare health insurance program for the elderly and disabled, putting even more pressure on government spending.

Former Republican Senator Alan Simpson, co-chairman of the panel, said on "Fox News Sunday" that the country could not grow its way out of its debt and deficit problems.

"We could have double (-digit) growth for 30 years and never grow our way out of this," he said.

Co-Chairman Erskine Bowles, a Democrat who was White House chief of staff under President Bill Clinton, said he believes the commission has "everything on the table," including possible cuts to entitlement programs.

But Barbara Kennelly, head of the National Committee to Preserve Social Security and Medicare, said such programs were the wrong place to look to solve the budget mess.

Social Security "should not be used as a piggy bank to pay our way out of the fiscal hole we find ourselves in," Kennelly said. She noted that since the mid-1980s, the program has been bringing in more money than it pays out in benefits and has thus helped mask problems elsewhere in the budget.

Other analysts said Social Security's finances will worsen in coming years as the baby boom generation begins to draw benefits.

Also sparking a debate are possible tax ideas the commission could consider.

Some conservatives are trying to head off any consideration of a European-style value-added tax, an idea that Paul Volcker, the former U.S. Federal Reserve chairman and an outside adviser to Obama, has said is worth looking at.

The White House has said Obama is not considering a VAT but also that he was not going to prejudge the commission's work.

Robert Bixby, executive director of the Concord Coalition, which advocates fiscal discipline, expressed concern about a dual mission given to the commission.

The panel has been charged with finding a way to balance the budget excluding interest payments by 2015 and then also to suggest ways to deal with long-term budget problems such as the growth of entitlement spending.

"The short-term budget goal could easily distract the commission from its long-term mission," Bixby said in a blog posting.

Bixby said it would be hard to imagine the Republicans on the commission giving Obama political cover for tough remedies to fix the near-term budget problems. He said it would be better for the commission to "spend its limited time and political will on shoring up the unsustainable long-term outlook."