President Obama's Deficit Commission Delivers Its 'Moment Of Truth'

The National Commission on Fiscal Responsibility and Reform proposed Wednesday perhaps the most sweeping spending cuts in U.S. history to prevent the federal budget from careening off a fiscal cliff into never-ending debt. The commission co-chairs Republican Alan Simpson and Democrat Erskine Bowles (pictured left to right) have called their proposal the "Moment of Truth."

Members of President Obama's 18-strong bipartisan commission agree -- as does practically everyone -- that the U.S. debt crisis must be addressed, although they disagree vehemently over how. A majority of the commission needs to approve the recommendations for them to be presented to Congress. Whether that's going to happen remains unclear. The commission is due to vote on the report on Friday.

Commission members walked a tightrope in trying to restore America's finances without snuffing out the nascent economic recovery. The 59-pages of recommendations will likely please very few people. They include across-the-board spending cuts that would leave little of the American economy untouched.

"End Redundant, Wasteful and Ineffective" Spending

Tax revenues would be increased by $80 billion in 2015 by broadening the tax base, although rates would be lowered. The report argues that the U.S. has few choices but to go down the same path of austerity that has lead to civil unrest throughout Europe.

"Economic activity will improve the deficit situation in the short-run because revenues will rise as people go back to work. . . . But even after the economy recovers, federal spending is expected to increase faster than revenues, so the government will have to continue borrowing money to spend," the report says. "We need a comprehensive plan now to reduce debt over the long term. We must end redundant, wasteful and ineffective federal spending, wherever we find it."

As the commission notes, federal spending was 24% of gross domestic product in 2010 -- the highest rate since World War II. Tax revenue was 15% of GDP, the lowest since 1950. Interest on the debt could reach $1 trillion by 2020, as increasing numbers of baby boomers begin tapping Social Security. Public debt will equal as much as 135% of GDP by 2035.

The committee co-chairs, as the The Wall Street Journal pointed out, "have taken particular aim at the country's tax code, especially the $1.1 trillion in tax breaks that many use to lower their taxable income, such as deductions for interest on mortgages."

Among the highlights of the recommendations:
  • Institute a payroll tax holiday in 2011
  • Raise the retirement age to 68 by 2050 and 69 by 2075
  • Reduce tax rates but broaden tax brackets and eliminate special subsidies
  • Increase the gasoline tax by 15 cents between 2013 and 2015
  • Cap discretionary spending in 2012 to a level equal to or lower than levels in 2011, and return spending to precrisis 2008 levels in real terms in 2013
  • Achieve nearly $4 trillion in deficit reduction through 2020
  • Reduce White House and congressional budgets by 15%, which would save $800 million by 2015
  • Freeze pay for members of Congress for three years
  • Cut the government work force by 10% through attrition, a savings of $13.2 billion in 2015
  • Sell excess federal property and eliminate congressional earmarks
These ideas have all been discussed before and rejected for one reason or another. Whether they'll see the light of day this time around remains a huge question.

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Too Big to Fail???---NO---Too Small to Help!!! get ready class warfare is coming.

December 02 2010 at 12:19 AM Report abuse -1 rate up rate down Reply

How about ending mortgage interest deduction?? It could phase out slowly. It is an indirect wealth transfer from tax payers to the bankers. Entire population is in debt to the bankers in America, in Europe, in Japan. And people still do not see the interest scheme that these bankers are running! Folks, when we borrow, banks do not lend existing money. They create money and give it to us! Here is how banks create money: This new money inflates the money supply and punishes the savers. This is the cause of inflation we had for many decades. As inflation pushed prices higher, more people felt the need to borrow, thus the ponzi scheme feeds itself! More people become slaves to pay interest for money that was created out of nothing! Here the problem is that any new money should belong to the society, not the bankers. Thus, the right to charge interest should belong to the society, since borrowers are diluting the money supply and reducing the value of the dollar. But the bankers made the laws so that it works the opposite way! If you borrow, you pay less tax due to mortgage interest deduction. Double whammy. If banks are creating money out of thin air, then we can do it ourselves too! Since new money dilutes the money supply, interest should be paid to the people, not the bankers! This is opposite of what we have today. The true cause of the economic collapse is debt based monetary system and interest based fractional reserve banking. Debt free monetary system is the way to go:

December 01 2010 at 10:09 PM Report abuse rate up rate down Reply

i am retired and live on a fair income what i am concernd about is these people who have only unemploment or social sucurety as ther only income if they cut these programs they will have nothing to live on did you guys ever think about this very bad move?///////??????

December 01 2010 at 7:55 PM Report abuse +1 rate up rate down Reply

Don't anything, let future generations figure it out, the last generation did that to us, it's a tradition we can live with because we will be dead of old age. The youngins will have to cope with it, sorry guys.

December 01 2010 at 7:26 PM Report abuse rate up rate down Reply

Strange, I don't see any cutbacks in war costs or a reductionn of the Pentagon budget. Also strange, I don't see any reduction in billions paid to foreign countries, i.e. Israel which has universal health coverage for its people and has a fast growing economy. I only see a pay freeze for members of Congress when in fact their pay should be reduced to set an example, and since they get money from lobbyists. To increase the revenue the tax rates should rise for those making over $500,000 and the hedge funds should be paying the same tax rates as everyone else and not the capital gains rate of approx 15%. And since over 50% of businesses pay no federal income tax, their tax deductions should be curtailed. Instead, they are targeting the elderly and the middle class with the gas tax and reductions in SS benefits. The people should be outraged, as am I.

December 01 2010 at 5:15 PM Report abuse +5 rate up rate down Reply

I wish I could see what all the yowling and howling is about. All the recomendations of the commission seem completely logical. If we don't do these things we'll run out of money. When that happens all those many people who depend on government checks will be unable to cash them, and all the rioting in the world will not help because it will not put more money into the government accounts. It's either cut now, before the riots, or cut later, during the riots. It looks to me like a no-brainer.

December 01 2010 at 5:10 PM Report abuse +1 rate up rate down Reply
1 reply to richard's comment

as long as there is a treasury dept and printing presses, we will never run out of money

December 01 2010 at 7:28 PM Report abuse rate up rate down Reply

I didn't see any reductions or eliminations of giving billions to other countries and reductions in getting involved in other wars like South Korea. Perhaps the President could do like workers, use our technology and do teleworking with other countries instead of making the billion dollar trips like he just finished. Perhaps the health care plan that will smother this nation like a wet blanket could be repealed and business could go ahead with plans if they knew the certainty of not having that burden. How about making sure the Bush tax cuts are for everyone to encourage more businesses to invest and create jobs. How about letting people work where they can instead of making rules that won't allow them to work for years at their profession. How about treating everyone the same and not giving special perks to the unions and others. It is not a crime to make money and be wealthy. It is the American dream and only those that have not achieved it are complaining about it. Why do polititions think that they have the right to throw away the hard earned money the we all send to Washington on foolish things and act like it is their duty to do so. The first thing that any politition thinks of when talking about debt reduction is attacking Social Security and Medicare. For years forward thinking Presidents have been trying to allow workers to invest in other types of investments than what the government is doing with the money. The government has used the money for other things and that is why there is a crisis. These things are peanuts compared to the waste that is really going on in Washington.

December 01 2010 at 4:14 PM Report abuse +3 rate up rate down Reply

2 very BIG itmes NOT addressed that could save B$$$$$'s--politicians don't want to touch these though: 1)pensions at federal and state levels--no one else really gets them except gvmt workers, and they can often start collecting in early 50s 2)illegal immigrants--they cost state and federal gvmt $111B/yr based on latest study. politicians won't touch this because they see votes.

December 01 2010 at 4:08 PM Report abuse +7 rate up rate down Reply
1 reply to tkustkt's comment

You are right, my wife can retire in 1 1/2 years at age 55. She only will have worked for social security for 36 years at that point. To want to stael money from her that has been in her contract for over 30 years would make sense to me. How about you give up your retirement as well while you are being generous with others money.

December 01 2010 at 10:18 PM Report abuse rate up rate down Reply

Hey here's an idea, quit worrying about coming up with some new steps, and GET BACK TO THE ADVICE OF THE CONSTITUTION AND JEFFERSON! 1) NO FIAT MONEY - GET BACK ON THE GOLD STANDARD, YOU MORONS! 2) GOVERNMENT ISSUED MONEY! - KILL THE FEDERAL RESERVE! The constitution specifically demands that ONLY the Federal Government can coin and issue money. HOW DID WILSON GET AWAY WITH CREATING THE FEDERAL RESERVE, which is currently printing up money to finance our wars against Islamic Countries, while being run by 100% Jewish folks. ISNT THIS A BIT SUSPICIOUS? Doesnt this ring anyone eles's bell? The Federal Reserve must be killed and killed NOW! It is an outlaw bunch of bankers that literally can print up their own money, and charge us interest!

December 01 2010 at 3:52 PM Report abuse -1 rate up rate down Reply

I agree with the commisssion,the debt is crippling.The problem is the commission has no leverage to implement these changes.The left will moan and cry and demonstrate in the street and mis characterize the intent of the commission.

December 01 2010 at 3:33 PM Report abuse +3 rate up rate down Reply
1 reply to BooBoo!'s comment

BooBoo - Hello? It was the right's George Dimwit Bush who created this debt. He took over a country with 0 debt, and ran it up to 11 Trillion dollars. They had to add another digit to the Times Square Debt Clock during GEORGE W BUSH's horror show. His wars are still costing us $1 Billion every two days! Clinton (A lefty) balanced the budget for the first time in decades. Quit trying to pass the blame to the liberals when it was your conservative moron Bush who created it!

December 01 2010 at 3:55 PM Report abuse +1 rate up rate down Reply