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Big ideas for cutting deficit, but they'd hurt

By Andrew Taylor

Associated Press

Published: Thursday, Nov. 11 2010 12:10 p.m. MST

WASHINGTON — Voters who demanded Washington rein in the nation's spiraling debt are getting a message from President Barack Obama and leaders of his deficit commission: It'll hurt.

A proposal released Wednesday by the bipartisan leaders of the commission suggested cuts to Social Security benefits, deep reductions in federal spending and higher taxes for millions of Americans to stem the flood of red ink that they say threatens the nation's very future. The popular child tax credit and mortgage interest deduction would be eliminated.

Interest groups on the right and the left squealed, predictably, about the plan, which would cut total deficits by as much as $4 trillion over the next decade — much of it from programs long considered all but sacred.

The full commission has yet to make its recommendations, and the chairmen acknowledged their plan was so controversial that it's dead on arrival. But they said putting it forth would prompt a more realistic national debate about what it will take to solve the nation's fiscal woes.

Obama, in Seoul, South Korea, declined to discuss the specifics of the chairmen's work but said Thursday, "We're going to have to take actions that are difficult and we're going to have to tell the truth the American people." He said there has been a lot of rhetoric about the nation's debt and annual budget deficits but "a lot of the talk didn't match up with reality."

"We need to be straight with the American people," the president said. "We can't just engage in political rhetoric."

Sen. Kent Conrad, D-N.D., chairman of the Budget Committee and a member of the White House commission, said the nation faces the real possibility of becoming a "second-tier economic power" if it fails to address the trillion-dollar-plus deficit. He said simply cutting waste and fraud will not solve the problem, and insisted changes to Medicare and Social Security were needed because both programs are headed toward insolvency.

"People can say we want to keep what is. What is is not affordable," Conrad said Thursday on ABC's "Good Morning America."

Under the chairmen's proposal, Medicare spending would be curtailed. Tax breaks for many health care plans, too. And the Pentagon's budget would suffer as well in a plan that attaches $3 in spending cuts to every $1 in tax increases.

For all the pain, the deficit still would approach $400 billion in 2015 under the proposal, released by deficit panel's co-chairmen, Democrat Erskine Bowles, a former Clinton White House chief of staff, and Republican Alan Simpson, a former senator from Wyoming.

The plan arrived a week after congressional elections in which voters demanded action on the $1 trillion-plus budget deficit.

"This debt is like a cancer that will truly destroy this country from within if we don't fix it," Bowles warned.

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

The entire 18-member commission is supposed to report a deficit-cutting plan on Dec. 1, but panel members are unsure whether they'll be able to agree on anything approaching deficit cuts of the size proposed. And even if they could, any vote in Congress this year would be nonbinding, Simpson said.

During the campaign, neither political party talked of spending cuts of the magnitude offered Wednesday, with Republicans proposing $100 billion in cuts to domestic programs passed each year by Congress — but with no specifics.

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.

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