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United States News Title: Debt Panel Report Due Dec 1 The bipartisan debt-reduction commission that President Obama created eight months ago will begin meeting privately soon after Tuesday’s elections, with just three weeks to try to agree on cutbacks to Americans’ favorite tax breaks and benefit programs. Amid that partisan backdrop, people in both parties say they have been surprised that the 18-member National Commission on Fiscal Responsibility and Reform reached an early consensus to put all three major budget parts on the table: taxes, annual spending for domestic and military programs, and the entitlement benefit programs Social Security, Medicare and Medicaid. Still, given Republicans’ opposition to tax increases and Democrats’ to changes in benefits, expectations are low that any plan can get the 14-vote supermajority required to send it to Congress for a vote in December. Advocates’ best hope seems to be that the co-chairmen — Erskine B. Bowles, president of the University of North Carolina system and a former chief of staff to President Bill Clinton, and Alan K. Simpson, a former Senate Republican leader from Wyoming — can negotiate a package that attracts a sizable minority of the 10 Democrats and 8 Republicans and provides a framework for future bipartisan action. “We’re going to put a very serious proposal out there that lots of people will find areas to pick at,” Mr. Bowles said. “But in total it will address this deficit problem that we face, and will lay a predicate out there for what the country has to do to get its fiscal house in order.” Mr. Obama’s executive order establishing the commission set medium and long-term goals. He called for balancing the budget in the 2015 fiscal year, excluding interest payments for the national debt. That would require reducing that year’s nearly $800 billion deficit by more than $250 billion, based on current projections. Because the economy remains fragile, Mr. Bowles said no spending cuts or revenue increases should take effect before 2012. Commission members say they are more focused on their other charge to “meaningfully improve the long-run fiscal outlook,” by limiting the growth of entitlement programs and closing the gap between spending and taxes. A long-range focus “means you can phase things in much more effectively and you won’t impact this recovery,” said Senator Judd Gregg of New Hampshire, a Republican member. Mr. Bowles has suggested that perhaps two-thirds of total deficit reduction come from spending and the rest from new revenues. The panel is not considering higher income tax rates given Republicans’ resistance. It is exploring ways to shave the roughly $1.2 trillion annual cost of “tax expenditures,” the tax breaks for individuals and businesses. Representative Dave Camp, Republican of Michigan, who could become chairman of the tax-writing Ways and Means Committee if Republicans regain a House majority, is working with Senator Kent Conrad, Democrat of North Dakota, the Senate Budget Committee chairman, on ideas for overhauling the tax system. Some members say that reducing tax breaks could raise revenues and allow lower income tax rates for corporations and individuals, much like legislation that Mr. Gregg has sponsored. “There’s no question that there’s tax credit spending that is wasteful just like there’s spending that’s wasteful,” said Senator Tom Coburn, Republican of Oklahoma. Mr. Coburn cited a tax incentive for corn-based ethanol, calling it “a stupid idea” that inflates food costs and wastes energy. But it, like others, has protectors in Congress — including anyone considering entering Iowa’s presidential caucuses someday. Four of the most expensive tax expenditures also are the most popular. Those are deductions for mortgage interest, state and local taxes, and charitable giving and the exclusion from income taxes of the cost of employer-provided health insurance. One option would be to keep such breaks but reduce them or phase them out, supporters say. The Committee for a Responsible Federal Budget, a bipartisan group of policy experts, has proposed changes to save $1.7 trillion over a decade. Yet powerful lobbies for the housing industry, unions, charities and more stand guard. Their opposition stopped cold Mr. Obama’s proposal to raise $300 billion over a decade by limiting deductions to 28 percent for high-income individuals in the 33 percent and 35 percent brackets. Spending for the entitlement programs Medicare, Medicaid and Social Security is nearly half the federal budget and increasing. While the health programs are growing fastest, the dozen members of Congress on the commission do not want to reopen debate on them so soon after the battle over Mr. Obama’s health insurance overhaul. “There is health care fatigue,” said Alice M. Rivlin, a former vice chairman of the Federal Reserve and budget director for Congress and President Clinton. While Mr. Bowles and Mr. Simpson will propose health policy changes for the commission’s deliberations, Social Security is getting more of the members’ attention. Republicans are more inclined to scale back future retirees’ benefits than are Democrats, especially since liberal groups have mobilized in opposition. Especially controversial is the idea of raising the retirement age for full benefits; currently it is being increased gradually to 67 under a 1983 law. Other options include less generous formulas for both initial benefits and annual cost-of-living increases for retirees in future decades. Democrats say any compromise to assure Social Security’s solvency for the next 75 years would have to include increased payroll tax revenues as well as changes in benefits. The likeliest revenue option would raise the cap on wages subject to payroll taxes, now $106,800. Both sides agree that they cannot make enough cuts in all other federal spending — the “discretionary” spending that Congress decides annually — to make a big dent in projected deficits. That category is smaller than entitlement programs as a share of the federal budget, is growing more slowly and yet covers the full range of government operations from education to warfare. To Democrats’ surprise, some Republicans are taking aim at military spending. David M. Cote, the chief executive of Honeywell International and a Republican commission member, noted in a recent speech that military spending increased 87 percent over the past decade, 145 percent if war costs are included. And Mr. Coburn has been as critical of Pentagon excesses as Representative Jan Schakowsky of Illinois, a liberal Democrat.
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