December 2, 2010 in Nation/World

Report divides deficit panel with make-or-break vote Friday

Half of members support findings
Michael A. Memoli Tribune Washington bureau
 
Proposal highlights

DEFICIT REDUCTION

• Cuts $3.9 trillion from deficits estimated at $8.3 trillion over 2012-2020.

• Stabilizes the national debt at 66 percent of the size of the economy, a level economists say is sustainable.

SOCIAL SECURITY

• Increases the Social Security retirement age by one month every two years after it reaches 67 under current law. It would reach 69 in 2075.

• Lowers cost-of-living increases.

• Reduces benefits further for higher-income beneficiaries and establishes a higher minimum benefit for poorer retirees.

• Gradually raises the threshold on the amount of income subject to the Social Security payroll tax.

TAXES

• Overhauls individual income taxes and corporate taxes. For individuals and families, scales back a host of popular tax credits and deductions, including the child tax credit, the mortgage interest deduction and the deduction claimed by employers who provide health insurance. Income tax rates would, in turn, be significantly lowered, with the top rate dropping from 35 percent to 28 percent and the top rate for taxpayers making up to $210,000 dropping from 28 percent to 22 percent.

• Reduces the corporate income tax rate to 28 percent from 35 percent, and stops taxing the overseas profits of U.S.-based multinational corporations.

• Increases the gas tax by 15 cents a gallon.

DOMESTIC SPENDING

• Freezes Defense Department salaries and bonuses for three years and noncombat military pay at 2011 levels for three years. Reduces overseas bases by one-third. Cuts spending for base support and integrates children in military families into local schools.

• Reduces congressional and White House budgets by 15 percent, freezes federal compensation at nondefense agencies for three years, cuts the federal work force by 10 percent, eliminates 250,000 nondefense contractors and ends money for commercial space flight.

• Eliminates noncompetitive spending bills known as earmarks.

• Cuts funding for public broadcasting.

HEALTH CARE

• Phases out by 2038 the tax-free status of employer-provided health benefits, providing incentives for people to enroll into cost-conscious insurance plans.

• Limits annual cost increases for Medicare and Medicaid to no more than 1 percent above the growth rate of the economy.

Associated Press

WASHINGTON – A proposed final report by President Barack Obama’s deficit commission warned Wednesday of a fiscal “reckoning” without major sacrifices, but may fail to spur lawmakers to action without support from most members of the bipartisan panel in an upcoming vote.

The report, ominously titled “The Moment of Truth,” immediately drew the support of half the 14 members needed to move it to Congress for its consideration. Only one member – Rep. Jan Schakowsky, D-Ill. – stated she would vote against it, while most others said they needed additional time to decide.

Pass or fail, members said they did think some of the commission’s work could reach the floor of Congress. “There’s nothing magical about the 14 votes. We must advance the debate,” said Rep. Jeb Hensarling, R-Texas.

A final vote Friday will determine whether the recommendations lead to action or collect dust along with countless other blue-ribbon committee reports.

“If we do not act soon to reassure the markets, the risk of a crisis will increase, and the options available to avert or remedy the crisis will both narrow and become more stringent,” states the document by the panel formally known as the National Commission on Fiscal Responsibility and Reform.

The final recommendations are largely the same as an initial plan issued last month: a cap on discretionary spending through 2020, an overhaul of the tax code and reforms to Social Security that include raising the retirement age. These steps would slash the federal deficit by $828 billion by 2015 and achieve $4 trillion in deficit reduction by 2020.

But some concessions were incorporated to draw greater support among the 18-member panel. A proposal to drastically limit the home mortgage interest deduction was eased. On Social Security, the focus of significant criticism weeks ago, the panel proposed a hardship exemption for workers based on factors such as physical demands of labor and lifetime earnings.

Still, the head of the AFL-CIO, the nation’s largest labor union, charged that the panel had told working Americans to “drop dead.”

Members of the commission said there was no way forward without difficult choices. Sen. Richard Durbin, D-Ill., said that raising the retirement age by one year is “hardly radical.”

“They won’t like me for saying it, but what you have suggested … is acceptable to me,” Durbin said at a meeting of the panel.

But Durbin, the No. 2 Democrat in the Senate, was not prepared yet to offer his final assessment. Neither were a majority of the other elected officials on the commission.

Only Sens. Kent Conrad, D-N.D., and Judd Gregg, R-N.H., the chairman and ranking member, respectively, of the Senate Budget Committee, immediately supported the plan.

“We risk the United States becoming a second-rate economic power,” Conrad told reporters after the nearly three-hour session. “That is what is at stake. The economic future of this country is at stake.”

Schakowsky rejected the report “for the reasons of equity.”

“We talk about shared sacrifice. I think these numbers indicate that sacrifice, in fact, has not been shared, that some people have lost and others have significantly gained over the last several years,” she said at the meeting.

Just five “no” votes would be enough to defeat the proposal, which would be nonbinding in any event.

A successful outcome – approval by 14 members – would move the package of proposals to Congress for its consideration. Senate Majority Leader Harry Reid, D-Nev., has pledged to hold a vote if it is approved.


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