Deficit Plan Proves Offensive to All, Leaders Admit, but Plan Gets Some Support

Updated at 2 p.m. ET

The leaders of President Obama's bipartisan deficit commission released a stark and far-reaching plan for reducing the deficit today that includes suggestions that could offend anyone -- some dramatic reductions in tax rates paired with some other tax increases, cuts in Medicare and a cap on government revenues, to name a few.

Yet as many as seven of the 18 commission members have already signed on to support the new plan, given what they say is the urgency of the matter. If 14 members support the plan, it will go to the Senate for a vote. If the Senate votes favorably, it will then go to the House for adoption.

Retiring Republican Sen. Judd Gregg said that despite his reservations, he will support the plan.

"There are no easy fixes here, so while I do not agree with all parts of the cochairmen's final proposal, I will support it because it represents a step forward that we urgently need," he said. "Inaction on our debt crisis is not an option at this point."

But at least one commission member said the plan does not deserve support.

Democratic Rep. Jan Schakowsky of Illinois, the deficit commission's most outspoken critic of the plan put forward by the commission leaders, said today that she will have to vote against the plan because it fails to address America's other fiscal crisis -- the growing disparity in income.

"I don't feel that this proposal addresses these dual problems of debt and inequality in the proper way," she said.

Key Points from the Deficit Panel Report
Deficit Panel Chair: Debt is "Like a Cancer"
Deficit Panel Leaders Unveil "Moment of Truth" Plan (Full Text)

Commission co-chairs Alan Simpson and Erskine Bowles said they worked to address some of the most pressing concerns their critics have aired, regarding scaling back Social Security benefits and undermining other valuable social programs.

"We don't want to do anything that disrupts a fragile economic recovery," Bowles said today at a meeting of the commission. "We want to protect the truly disadvantaged. We want to keep America safe and secure. We don't want to hollow out this country while we fix our balance sheet. We're going to have to continue to make sure we make smart investments in education and infrastructure."

Earlier this month, Schakowsky released her own "liberal" deficit reduction plan, which will be included as an appendix to the official report.

Calling Schakowsky his "canary in the coal mine," Simpson acknowledged that the plan may not get the 14 votes of approval he and Bowles are seeking from the 18-member commission. Yet he said the time has come to make hard decisions to cut the deficit -- and those decisions will be made, whether or not this plan is approved.

"Whether we get 2 votes or 18, this baby ain't going away," Simpson told his fellow commissioners. "When the votes for the budget and to extend the debt limit arrive... this cadaver will rise from the crypt."

The commission co-chairs named their plan "The Moment of Truth" to underscore that message.

The plan cuts the deficit in half by 2015 and three quarters by 2020. It also takes the deficit to about 2.2 percent of Gross Domestic Product by 2015. The plan proposes $200 billion in specific spending cuts, provisions $11 billion for annual disaster spending, reduces tax rates across the board so that the top rate does not exceed 29 percent, and it eliminates some tax deductions. It also cuts agriculture subsidies, eliminates certain targeted tax breaks, reduces the federal workforce by 200,000 people, and makes a number of other proposals.

With respect to Social Security, the chairmen call for "progressive" payouts, a slight increase in benefits for older Americans between 82 and 86 years old, and an increase in the retirement age. Currently, the Social Security retirement age is slated to increase to 67 in 2027, and this plan takes it to 68 by 2050. The plan also proposes a hardship exemption for those with physically demanding jobs who are compelled to retire earlier.

Democratic Sen. Richard Durbin of Illinois said he found the Social Security proposals acceptable. "To raise [the retirement age] one year over 40 years is hardly radical," he said.

Durbin said he only received the final version of the plan this morning and is thus not ready to say whether he will vote in favor of it on Friday. He said that as a progressive, he would judge the plan by seeing "where the most vulnerable in America -- the elderly, the poor, children -- how they fare."

The senator said he was "struggling to understand" the proposals to reduce the tax rates when "we've had times of great economic expansion in this country where our tax rates were substantially higher."

Schakowsky emphasized that the economy over the last several years has mostly benefited people already at the top. She pointed out that the top 10 percent of America controls 70 percent of the nation's total net worth.

"These numbers indicate that sacrifice has not been shared," she said. "We have more than 37 million Americans including 13 million children living in poverty, and most of those people have jobs... To say that we're going to reduce our deficit and our debt by asking Medicare beneficiaries to pay more for health care, I think it is absolutely unconscionable."

Durbin also warned against the proposals on health care, which along with cuts to Medicare included a proposal to limit deductions for health care premiums. The plan also calls for eliminating the CLASS Act -- a major portion of the Democratic health care overhaul, which would create a vast new government fund, financed through payroll deductions with opt-out enrollment, to insure people in the event they become disabled.

Durbin said the health care proposals are "hastening the day" when the only option is a public option. "The question is whether the private sector will reduce costs," he said. "This calls for a change in the private sector which they have not demonstrated they are willing to make."

While the other commissioners largely agreed that there were both appealing and unappealing parts of the plan, they generally praised it as a serious effort at deficit reduction.

Democratic Sen. Kent Conrad of North Dakota said there were parts of the plan that he disliked "intensely" but other parts were "grand slam home runs."

He said he would support the plan. "Whether or not we get 14 votes, I think this is going to provide a guide post for decisions that must be made," he said.

Acknowledging the controversial nature of his plan, Simpson asked his fellow commissioners, "Tell us why you don't like it and voted 'no', and tell us why you don't like it and voted 'yes.'"

Several liberal groups today put out statements decrying the deficit commission's report, including the AFL-CIO labor union organization. "With this report the Deficit Commission once again tells working Americans to 'Drop Dead,'" AFL-CIO president Richard Trumka said.

The liberal grassroots group MoveOn.org sent an e-mail to its millions of supporters today urging them to call their congressmen to ask them to reject the plan. "The commission's report... focuses on making those who are struggling the most pay for a deficit that they didn't create -- while furnishing corporations and the super-rich with more tax breaks," the e-mail reads.

The "Citizens' Commission on Jobs, Deficits and America's Economic Future," one of a few liberal groups to release a counter-proposal, called the deficit commission's report "fundamentally misguided."

At least one left-leaning organization, the moderate group Third Way, praised the report, calling it "a major step toward stabilizing the nation's finances."

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Stephanie Condon is a political reporter for CBSNews.com. You can read more of her posts here. Follow Hotsheet on Facebook and Twitter.

[hiddenlevers10]

Unemployment tied to Budget Deficit? http://******/enFhek

[westerly1]

I don't see any comments on what Sarah Palin & the T Partyers think of the plan. It seems to me one of their dominant messages was to balance the budget. Well, this is a plan to bring income & spending in line. Even if we can't agree on specifics, the targets of how to reduce the budget deficits are realistic. I think the proposals deserve serious consideration.

[RealiteBites]

These two guys are basically Repubs, right. I think it's a common tactic of the right to deliberately omit qualifications of their position with concerns or warnings that could possibly undercut support.

For example Saddam had wmd's. Only he didn't.

And one day the fundamentals of the economy are strong, two weeks later those same guys are saying "banks will fail", "markets will collapse" ...

I genuinely believe these two gentlemen believe in what they're doing and that it's right. But nevertheless they ARE omitting full disclosure of the risks involved in such drastic cut-backs so that people can make up their own minds of the cost-benefits, apparently in an attempt to garner support for their plan. And they're catastrophizing without mentioning that it could actually be just as bad if people DO follow their plan, just like the invasion of Iraq wasn't the walk in the park people envisioned, and just like how the stock market STILL collapsed even though TARP was passed.

So ...

[RealiteBites]

From the article:

"We don't want to do anything that disrupts a fragile economic recovery," Bowles said today at a meeting of the commission. "We want to protect the truly disadvantaged. We want to keep America safe and secure. We don't want to hollow out this country while we fix our balance sheet. We're going to have to continue to make sure we make smart investments in education and infrastructure."

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So they DO understand that decreasing government consumption and investment, and raising taxes which tend to lower private consumption and investment will lower GDP. The government portion is actually measurable, so to cut the deficit down by like 2% of GDP, like people will know in advance whether it would cause a recession.

I think they need to be more explicit about the risks involved in cutting down the budget during such a precarious time, because it might be counterintuitive to think that cutting spending would actually be bad for the economy rather than good, and people trust them when they say that cutting is necessarily good because they've assumed the economy's going to get better (when there's no evidence it will for sure).

[RealiteBites]

PS Also, I read in their report that debt is 8% of GDP. And GDP right now is like 2% or 3% right? So that means if the Government budget were actually balanced, the economy would be growing at a rate of -5%? ie It'd be contracting in a massive way, we'd be in a serious recession, unemployment would be what like 15%, and tax and social security revenues would be substantially less.

That's why the Government does it ... runs a debt. To avoid a total collapse of a totally sickly, dysfunctional, gutted economy.

For every piece of thought somebody puts into whether or not they want to continue working towards the development of the next generation of fighter plane, perhaps it might be equally important for people to put some thought into how the country can also go about actually generating a profit-making venture ...

I think it would behoove Simpson-Bowles, and those two RepubliWonks Jeb Hensarling and Paul Ryan cultivate that sort of mindset, seeing as they're Repubs. I mean like I've already suggested efficacy audits of all trade agreements enacted and implemented over the last decade to check for reciprocity and mutual benefit. What are their ideas? They can't say tax cuts if they're also signing onto this plan which raises taxes.

[RealiteBites]

That should read -5% up above ... ie the economy wouldn't be growing negatively, it'd be contracting in a massive way if the budget were balanced ...

[skeezix06]

And by the way, was there anything in there about raising money to fight the deficit by taxing churches now that they're getting all that government money?

Yeah. Right. "Nuff said.

[skeezix06]

What they basically said was that in real terms/real life they are canceling the social security and medicare programs by

1. pushing the age for retirement back so far that almost no one will be able to retire.

2. cutting medicare out by raising the co-pay on those least able to pay the co-pay due to limited or no income.

3. telling health care providers that if the patient is unable to pay their share that medicare payments for the rest of the visit will no longer be paid and that they will have to either collect the money from those who have no money or they will have to write it off as a loss. It doesn't take a genius to see what that provision is going to do to doctors and hospitals and patients.

The other thing they basically said was that baby boomers had best die and die quickly.

Obama appointed them. He's not going to be able to duck responsibility on this. As far as I'm concerned the GOP can go ahead and make the next two years of his life "h_ll".

[skeezix06]

I should add that the medicare "provision" should be quite effective in cutting down on the number of people who actually live long enough to attempt to collect on their social security.

[web6242a]

David Stockman ( A Lifelong Republican, and Reagan's Budget Director) has castigated both parties as not being realistic, in regard to the fiscal State of the Union. He says the Dems need to cut spending - and the Republican's need to drop the, "tax cuts fixes everything' philosophical lie. In his mind, we need both spending cuts, and raised taxes. Neither the left ,nor the right, are taking the Country's fiscal health to account. We currently have the lowest taxes in 70 years(according to the IRS) ---- If tax cuts spur growth, one must ask the GOP why, after 8 years of the Bush tax cuts, the Country is flirting with insolvency? ---Tax cuts paid for with borrowed Chinese money is a prescription for disaster!!!! The truth is, we need both spending cuts and more Revenue. The upper 2% during WW2 were taxed at a 94% margin. Today's American whiners balk at 35%. The fact is -- Income tax is a bad, politically divisive, inequitable income source. It feeds the two party Gridlock--- I say --- Repeal/Replace income tax with a National Sales Tax -- Exempting Food and Medicine, with a Tax Credit/ Stipend for the Poor and Elderly, and a 10% Credit on domestic product purchases. A National Sales Tax would allow us to tax Imports, without breaking the lousy trade agreements both parties have signed. This would put some of our tax burden on Foreign entities. I say Repeal/ Replace Income tax for a real solution!!!

[hhandyman]

require all political donations that were not spent in the election to be doneated to the federal budget to eliminate as much of the national debt as it can cover remove all warchest finds from future elections. that way those in congress will pay for the debt they caused to happen by thier votes for the expences they created in ledislation.
do not allow any political donations untill 3 months prior to the primary for a particular office regardless of the office saught. That should curb the ablity for lobbyists to alter election results with cash.
Require all government employees to go to the va hospital for all medical service if paid for from a governmental medical plan if done in a private facility require it be paid by personal health insurance not subsidised by the federal budget or out of pocket by the official requring health care. move all government retirement including past presidents to the standard social security rate of retirement funds, equle to the same that an average citizen recieves for his employment at the same base wage that the official recieves his lasst 10 years of work ( when they leave or are not elected to return they get thier retirement at the same age as public is allowd reduce all congressional officees to 1 secretary and require all laws to be written by the elected official personally and not to deligate it out to any secondary source. Require the person elected to do his job not passs it on to others. require all congress learn to be computer literate to email his constituants diectly and drop all but 2 letters per citizen franking privledge per senataer (no more newsletters that are actualy political lobbying for office) let the post office attempt to be self supporting and not a politiacal arm of those in office.
Reqire all lighting in congress to be converted to LED lights to cut operational costs and reduce the power level needed to operate dayly. just a few of the cost effective movements that should happen to cut goverment waste. true it will raise unemployment but the people that are filler need to be self employed and paying taxes not costing us all for lavish retirement plans that are better than the average citizen can recieve for equle labor.

[slycow42]

Grow up! For the past 50 years we have been told what we want to hear by both Republicans & Democrats. We got what we voted for, now it's time to pay up! The economic financial train is already going down the track at 80 mph, but we're running out of track. The good news is we are living longer; the bad news is we cannot afford it (so let's put off the payment to our children!). We have too many "entitlements", but want someone else to pay for them. Those who have not been prudent financially or frugal want those who have saved to pay for their misdeeds. Coming from a line of "poor dirt farmers" you soon learn you get what you sew. If you don't plant in spring, there are no crops during the fall. If you don't set aside some grain during good times, there is none during bad times. I am 68 and receive both Social Security and Medicare. Those of us recipients need to receive less Social Security, and pay more for Medicare. The recently passed Obamacare is merely pouring gasoline on a raging fire. Thanks to all who voted for it. Doing nothing will not prevent the train from running off the tracks sometime in the future. Have a safe landing! Robin Hood government is putting us at risk. At least panhandlers have the dignity and my respect for standing on the street begging for money. Those "entitled" want the government to take it by taxation from those creating wealth. Remember, every parasite needs a willing or complacent host. May God have mercy on us, but I think he is disgusted by now.

[watkinsjr2000]

Since the Reagan Administration, Americans have been conditioned to believe that everybody can have everything they want & that this won't cost anybody anything.This is a myth that has cost us dearly already. Getting the federal debt under control will take across-the-board sacrifice from all of us. Spending will have to be cut, taxes will have to be raised, and that's just the hard reality.The longer this is put off, the more painful the fix becomes. Those who choose to ignore these obvious realities are living in a fantasy world.Inaction on this will have tragic results.Why so few people seem to get this is a mystery to me!