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Deficit targets: Social Security, mortgage breaks

By Andrew Taylor

Associated Press

Published: Wednesday, Nov. 10 2010 4:30 p.m. MST

WASHINGTON — In a politically incendiary plan, the bipartisan leaders of President Barack Obama's deficit commission proposed curbs in Social Security benefits, deep reductions in federal spending and higher taxes for millions of Americans Wednesday to stem a flood of red ink that they said threatens the nation's very future.

The White House responded coolly, some leading lawmakers less so to proposals that target government programs long considered all but sacred. Besides Social Security, Medicare spending would be curtailed. Tax breaks for many health care plans, too. And the Pentagon's budget, as well, in a plan designed to cut total deficits by as much as $4 trillion over the next decade.

The plan arrived exactly one week after elections that featured strong voter demands for economic change in Washington. But criticism was immediate from advocacy groups on the left and, to some extent, the right at the start of the post-election debate on painful steps necessary to rein in out-of-control deficits.

The plan would gradually increase the retirement age for full Social Security benefits — to 69 by 2075 — and current recipients would receive smaller-than-anticipated annual increases. Equally controversial, it would eliminate the current tax deduction that homeowners receive for the interest they pay on their mortgages.

No one is expecting quick action on any of the plan's pieces. Proposed cuts to Social Security and Medicare are making liberals recoil. And conservative Republicans are having difficulty with options suggested for raising taxes. The plan also calls for cuts in farm subsidies, foreign aid and the Pentagon's budget.

The document was released by former Democrat Erskine Bowles, a former Clinton White House chief of staff, and Republican Alan Simpson, a former senator from Wyoming.

Acknowledging the controversy involved, Simpson quipped to reporters: "We'll both be in a witness protection program when this is all over, so look us up." Said Bowles: "This is a starting point."

Controversial or not, Bowles said serious action was demanded. He declared, "This debt is like a cancer that will truly destroy this country from within if we don't fix it."

The government reported separately Wednesday that the deficit for last month alone was $140.4 billion — and that was 20 percent lower than a year earlier. The red ink for all of the past fiscal year was $1.29 trillion, second highest on record, and this year is headed for the third straight total above $1 trillion.

Current deficits require the government to borrow 37 cents out of every dollar it spends.

Still, the plan was rejected as "simply unacceptable" by House Speaker Nancy Pelosi, D-Calif., a top Obama ally.

The White House held its fire. Said spokesman Bill Burton, "The president will wait until the bipartisan fiscal commission finishes its work before commenting." He called the ideas "only a step in the process."

The Social Security proposal would change the inflation measurement used to calculate cost-of-living adjustments for benefits, reducing annual increases. It immediately drew a withering assault from advocates for seniors, who are already upset that there will be no inflation increase for 2011, the second straight year.

The plan would also raise the regular Social Security retirement age to 68 by about 2050 and to 69 in 2075. The full retirement age for those retiring now is 66. For those born in 1960 or after, the full retirement age is now 67.

Better-off beneficiaries would receive smaller Social Security payments than those in lower earning brackets under the proposal, and the amount of income subject to Social Security taxes would be increased.

"The chairmen of the Deficit Commission just told working Americans to 'Drop Dead,'" AFL-CIO President Richard Trumka said in a statement.

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