Tax increases and spending cuts both promised by President Obama’s fiscal commission

Jon Ward Contributor
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“The pig has died.”

In such memorable fashion (and no, it wasn’t a reference to “Lord of the Flies”), former Sen. Alan Simpson Tuesday kicked off the U.S. government’s effort to keep itself from drowning in debt.

Simpson’s point was that America is running out of money. Simpson, one of two co-chairs of President Obama’s fiscal commission, told the 17 other members that during his career in the Senate, his constituents often told him to “bring home the bacon.”

Tuesday’s meeting began an attempt – which some think is doomed from the start and others see merely as an exercise to justify higher taxes – to take on America’s deficit, debt and runaway entitlement spending.

“This might be the last best hope to right this listing ship of state of ours,” said Simpson, in what was both a warning and a plea.

The meeting was full of grave forecasts of disaster if nothing is done to rein in the national debt approaching $13 trillion, deficits that will add to the debt by around $10 trillion over the next decade, and unfunded entitlement spending commitments that Sen. Judd Gregg, New Hampshire Republican, said add up to $66 trillion.

“The longer we delay, the greater the risk of catastrophic economic consequences,” said Robert Reischauer, president of the Urban Institute, who gave testimony and answered questions from the commission.

Another panelist who addressed the commission, Urban Institute fellow Rudolph Penner, said “it is difficult to predict exactly when a crisis might hit the United States.”

Penner also said that if the U.S. tries to tax its way out of its current situation, America could become “the highest taxed nation on earth.”

Commission co-chair Erskine Bowles, a former White House chief of staff to President Bill Clinton, said the nation’s debt is a “cancer … that is going to destroy our country from within.”

“It’s as plain as day,” Bowles said. “What is really hard is the solution.”

And therein lies the rub.

Rep. Paul Ryan, Wisconsin Republican and ranking member on the House Budget Committee, led the charge to try and focus the commission on cutting spending and not raising taxes.

“If you look at the math of all of this, spending is the culprit. Mathematically speaking, you literally cannot tax your way out of this problem. I don’t think we should go down that path of trying to tax our way out of this problem,” Ryan said.

Sen. Mike Crapo, Idaho Republican, also said he wanted to focus on spending but allowed some wiggle room for the commission to look at raising taxes.

“A significant portion of the solution will be found on the spending side of the ledger,” he said.

Reischauer made the case flat out for higher taxes.

“To achieve fiscal sustainability we are going to have to accept higher tax burdens than we have enjoyed in the past,” he said.

Bernanke said that “the American people will have to choose among making modifications to entitlement programs such as Medicare and Social Security, restraining federal spending on everything else, accepting higher taxes, or some combination thereof.”

Liberal House Democrats Rep. Jan Schakowsky, of Illinois, and Rep. Xavier Becerra, of California, tried to pull the commission’s priorities toward preserving social spending programs.

Schakowsky said the government cannot “skimp” on its spending for education, health care, pensions, energy independence, infrastructure, medical research, and job creation.

“Bottom line, while we are committed to freeing our children and grandchildren from crippling debt, we must be just a committed to assuring that they are not ignorant, sick and unemployed,” she said.

But the fiscal and budget experts who addressed the commission were clear that both sides will have to make compromises.

“The magnitude of the required adjustments is so large that spending cuts will have to affect programs we all care about and benefit from and revenue increases will have to come from a wide swath of Americans,” Reischauer said.

“The budget is on a ruinous path and getting off that path involves far more significant policy changes than the American people are used to,” Penner said.

Bowles, for his part, sought to adjust the expectations of commission members who want to preserve full spending commitments to their causes.

He said there will be “no money” for education or jobs or infrastructure if the debt is not dealt with. But he also made clear that increasing taxes will be a significant focus of the commission, noting that working groups will be split into three focus areas: mandatory spending, discretionary spending and revenue reform.

Simpson, as usual, put it more bluntly in an interview after the meeting.

“Whatever you love in America you won’t get unless we get this under control,” he said.

One of the most important things that remained unclear at the end of the session is how the working groups will be structured.

“I honestly don’t know which working group I’m on and who is on it with me,” Ryan said in an interview afterward.

The working groups will be where the commission hashes out the most controversial aspects of the report it is required to submit by Dec. 1. The full commission will hold five more open meetings where the public and press will look to glean clues as to which direction it is headed.

But Simpson and Bowles emphasized the need for commission members not to leak to the media while their work is ongoing, and the president also said that his priority will be to keep the commission’s work a secret until the final report is ready.

“All of you, our friends in the media, will ask me and others once a week or once a day about what we’re willing to rule out or rule in,” said Obama, who promised during the presidential campaign not to raise income taxes on families making less than $250,000 a year.

“That’s an old Washington game and it’s one that has made it all but impossible in the past for people to sit down and have an honest discussion about putting our country on a more secure fiscal footing,” the president said. “We’re not playing that game. I’m not going to say what’s in. I’m not going to say what’s out. I want this commission to be free to do its work.”

At the end of the day, it is unclear how much weight the commission’s report will carry, since their recommendations are not binding on Congress and lawmakers are not even required to vote on their suggestions.

But it is expected that the president will use the report to try and push forward at least some of the ideas included.

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