Debt reduction proposal angers left, gets noncommittal White House response

Jon Ward Contributor
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A plan to cut the federal deficit and reduce the debt that was released Wednesday by the co-chairs of President Obama’s debt commission was blasted by the left, with labor unions leading the way in decrying its cuts, and received only a noncommittal response from the White House.

The draft proposal, which is not the final set of recommendations from the commission and has not been voted on by its 18 members, also drew fire from tax groups on the right.

**Read the full report here**

Framed as a “starting point” for the commission’s final report to be issued in December, the plan recommended a broad and deep set of spending cuts, angering liberals who see the government’s problem as a lack of revenue, and not out of control spending.

“The chairmen of the Deficit Commission just told working Americans to ‘Drop Dead,’” said Richard Trumka, president of the AFL-CIO, referring to proposed changes in how Social Security is administered. “Some people are saying this is plan is just a ‘starting point.’ Let me be clear, it is not.”

House Speaker Nancy Pelosi, California Democrat, called the proposal “simply unacceptable.”

The White House itself did not praise or criticize the plan, released by deficit commission co-chairs Erskine Bowles, former White House chief of staff to President Bill Clinton, and Alan Simpson, a former Republican senator from Wyoming.

“The President will wait until the bipartisan fiscal commission finishes its work before commenting,” said White House deputy press secretary Bill Burton.

Obama, said Burton, “respects the challenging task that the Co-Chairs and the Commissioners are undertaking and wants to give them space to work on it.”

“These ideas, however, are only a step in the process towards coming up with a set of recommendations and the President looks forward to reviewing their final product early next month,” Burton said.

Even if the commission settles upon a final plan that gets approval from 14 or more members, its report will not be binding on Congress. So the recommendations are only a baseline for possible legislation.

The plan makes changes to Social Security: a move toward greater indexing for income, a raising of the retirement age to 68 by 2050, and a “more accurate” annual cost of living adjustment for payments, which would rein in the size of the increases.

As part of $200 billion in “illustrative” spending cuts, there are also proposed 15 percent cuts to the budgets for the White House and for Congress, the elimination of all earmarks by members of Congress, and a three-year pay freeze for all non-defense federal employees.

And there is a recommendation to overhaul and simplify the tax code, focusing on moving to three brackets, a lowering of the corporate tax rate, and the elimination of tax exemptions and loopholes, except for perhaps the child tax credit.

The proposal lays out three possible tax reform plans, one of them based on a bipartisan proposal from Sen. Ron Wyden, Oregon Democrat, and Sen. Judd Gregg, New Hampshire Republican.

The plan would raise the gas tax by 15 cents, phasing in the hike over a few years, to pay for transportation projects.

Liberal think tanks pushed the White House to move the deficit commission in a different direction or to condemn it.

“It’s time for the Obama administration to become more engaged in the bipartisan commission it established, or to make it clear that the commission does not represent their viewpoint on these issues,” said John Irons, research and policy director at the Economic Policy Institute, a labor-backed group.

Irons, with EPI, criticized the plan for proposing a 10 percent cut in government jobs over the next ten years, cutting funding for national parks, airports, the Smithsonian, and the Corporation for Public Broadcasting.

However, Americans for Tax Reform, a conservative anti-tax group, was also not pleased with the plan.

“It confirms what everyone has known—this commission is merely an excuse to raise net taxes on the American people,” ATR said. “The report calls for an automatic tax increase in any year that the budget is out of balance.”

“The report deceptively calls their net tax hikes ‘spending in the tax code,’” ATR also said, targeting the elimination of tax loopholes and exemptions. “There is no such thing, unless you assume the government has a right to all your money, and when they cut your taxes this is the same thing as ‘spending money on you.”

ATR said the plan, for all its fiscal austerity, still was proposing to allow the size of government to remain larger than its historical average: “The stated goal of the report is to raise the long-standing historical level of federal revenues from its average of 18 percent of GDP to 21 percent of GDP.”

One centrist think tank with fairly conservative attitudes on spending, however, was effusive in congratulating Bowles, a Democrat, and Simpson, a Republican.

“It is truly a remarkable plan,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “This plan does it all — allows time for the economy to strengthen, brings down future deficits and debt, protects the most disadvantaged, makes government more effective and efficient, and promotes economic growth and competiveness.”

“The Co-Chairs’ proposal would cut the deficit to 2.2 percent of GDP by 2015, bring debt down to 60 percent by 2024, and balance the budget by 2037 – saving nearly $4 trillion this decade alone,” she said.

Both Republican and Democratic lawmakers on the commission were mixed in their reactions.

“This draft proposal has some painful cuts, some things that inspire me and some things that I hate like the devil hates holy water,” said Senate Majority Whip Dick Durbin. “I’ll continue to work on making some changes to this draft, but it is an interesting starting point for future conversations.”

Three House Republicans on the committee – Dave Camp of Michigan, Paul Ryan of Wisconsin, and Jeb Hensarling of Texas – responded similarly.

“This is a provocative proposal, and while we have concerns with some of their specifics, we commend the co-chairs for advancing the debate,” they said.

Sen. Tom Coburn, the Oklahoma Republican known for his fiscal hawkishness, said the report “describes some of the tough choices facing Congress and the nation.”

“I would encourage taxpayers to view with great suspicion the beltway interest group culture that often prefers demagoguery over honest debate. In the real world, no family facing tough economic times has the luxury of treating portions of their budget as sacrosanct. Neither should Congress,” Coburn said. “The fact is if our country is going to survive for another generation Congress has to make the tough choices now that will put us on a sustainable path.”

But the social security cuts, in particular, riled liberals, who see the program as a touchstone of left wing political governance.

Eric Kingson, co-chair of the union-backed group Strengthening Social Security, called the proposal an “equal opportunity disaster.”

“The president and every member of Congress should declare the Social Security benefit cuts dead on arrival,” Kingson said.

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