Debt commission proposals already stirring controversy

WASHINGTON–Lawmakers will tiptoe into a political minefield this week when President Barack Obama’s bipartisan debt commission releases detailed recommendations for tax increases, spending cuts, and other painful steps that could put the nation on firmer fiscal ground.

And within Connecticut’s congressional delegation, the fault lines already are emerging.

Liberals, including Reps. Rosa DeLauro and John Larson, say the preliminary recommendations from the commission’s co-chairs, such as a proposal to cut Social Security benefits, are ill-advised and “non-starters.”

But some moderate Democrats, such as Rep. Jim Himes, say it’s vital to consider every possible option when determining how to tackle the growing national debt.

“We can’t respond to proposals by drawing lines in the sand, issuing ultimatums, and signing pledges,” said Himes, D-4th District. “While there are certain things that trouble me about the [co-chairs’] proposal, I think it’s a reasonable start.”

Such division–both within and between the two parties–will come into sharper relief on Wednesday, when the full commission is scheduled to release its final recommendations for how to rein in the annual federal deficits, projected to be about $1.4 billion for 2010.

At stake is the long term is the solvency of treasured entitlement programs–Social Security, Medicare, and Medicaid–along with future U.S. economic stability. If Congress does nothing, the commission has warned that by 2020, taxpayers will spend $1 trillion annually just in interest on the national debt.

Obama created the bipartisan fiscal commission earlier this year and charged its 18 members with crafting a plan to balance the federal budget by 2015.

Its final report is due Dec. 1, but the panel already ignited a political firestorm earlier this month when its two co-chairs, ex-Republican U.S. Rep. Alan Simpson, R-Wyo., and Democrat Erskine Bowles, gave the public a sneak peek at the options.

Among other things, the co-chairs’ initial outline called for:

  • Reducing Social Security benefits by 2050 and incrementally raising the retirement age from 67 to 69 by 2075;
  • Eliminating a wide array of popular tax breaks, for individuals and corporations, in favor of lower tax rates for everyone;
  • Raising the federal gas tax by 15 cents starting in 2013;
  • Cutting $100 billion from domestic programs and $100 billion from defense spending.

Lawmakers in both parties pounced on the package. Republicans howled about the tax increases and Democrats condemned the spending cuts.

Like other Democrats, DeLauro singled out the proposed changes to Social Security, including a call to trim the annual cost-of-living adjustments (COLA) for seniors.

“Decreasing benefits while increasing the retirement age should not be central to deficit reduction efforts,” the 3rd District representative said. “Cutting their annual cost of living increases is simply unfair. We should be modernizing the Social Security Administration’s outdated COLA formula to reflect what America’s seniors are dealing with, not denying them this basic adjustment in benefits to keep pace with inflation and their actual expenses.”

At a news conference last week, Larson, a Democrat representing the 1st District, voiced similar concerns.

“I don’t want pronounce things dead on arrival until I have an opportunity to fully take a look at them and see what their value might be,” Larson said. “But where they depart from principle and try to dismantle programs that have been rock bed for this nation, then you will see a fight unfold.”

Larson added: “Anything that is going to detract from Social Security in a way that will not provide for its solvency or take into consideration the population it’s designed to serve, well, they are kind of non-starters.”

But Himes said the Social Security benefit reductions and retirement age increases should all be part of the debate.

He noted that because Americans’ longevity has increased, policymakers need to be open to raising the age at which seniors become eligible for Social Security. He added, however, that the physical toll of a workers’ job should be taken into account.

“I get to put a tie on every day to go to work, but I’ve got friends who lift heavy objects every day,” he said. “Work means very different things to different people.”

Himes said the most appealing part of the co-chairs’ proposal were the tax changes. The GOP’s Simpson and Bowles, who was ex-President Bill Clinton’s chief of staff, called for a complete overhaul of the tax code, eliminating or limiting cherished breaks, such as the earned income tax credit, the child tax credit and the mortgage interest deduction.

Instead, Simpson and Bowles call for three new, lower brackets for individuals and families (8, 14 and 23 percent) and one reduced rate for corporations (26 percent).

“That’s one of the few things here that are true win-wins,” said Himes. “There’s so much distortion in our economy right now, with people doing somersaults to get some tax credit.”

But it’s also one of the proposals most vociferously opposed by Republicans in Congress. Grover Norquist, head of Americans for Tax Reform and an influential GOP strategist in Washington, has blasted the plan as a massive $1 trillion tax hike.

“This commission is merely an excuse to raise net taxes on the American people,” ATR’s website says, warning that any lawmaker who supports such a proposal would violate the group’s anti-tax pledge.

Both Larson and Himes agreed on at least one thing: any changes to the tax code would spark a fierce lobbying battle and constituent protests, with those most affected scrambling to protect their pet provisions.

On the mortgage interest deduction, for example, Larson said, “My experience would teach me that the phones will be ringing and the letters will be flying in pretty quickly with respect to that.”

When it comes to spending cuts, there will undoubtedly be a similar outcry, with interest groups lining up to protect key federal programs.

Democrats like DeLauro have already signaled that domestic spending should be held harmless.

“I believe we can also reduce our deficits by allowing the tax cuts for the wealthiest Americans to expire and winding down the wars in Afghanistan and Iraq,” DeLauro said in her Nov. 10 statement.

DeLauro said she would only support deficit reduction measures that protect the middle class and seniors, and she said Congress needed to make continued investments that keep the U.S. “globally competitive.”

Himes said he would not favor across-the-board spending cuts, because the U.S. needs to maintain or even increase domestic investments in education, infrastructure and other key areas. But he would support slashing some programs, such as federal subsidies for corn-based ethanol, sugar, and even dairy.

“The only way we can preserve or grow those things which are effective is to be pretty hard on those things of questionable effectiveness,” Himes added. “I’m not going to support initiatives which devastate our vulnerable populations, but as a matter of process we’ve got to step back and tolerate the notion that initially everything’s on the table.”

This is just one small sliver of the debate, unfolding within a subset of the Democratic Party.

Despite an election in which concerns about Washington’s sea of red ink helped wash up many congressional incumbents, there’s still little agreement about how to tackle these questions or even where to start.

And in today’s highly-charged partisan climate, it seems unlikely that lawmakers will be able to find common ground on the commission’s anticipated recommendations. But the current fiscal situation may force some agreement, later if not sooner.

“We are absolutely having this conversation, and the question is, do we do it now of our own volition … or down the road under the gun?” Himes said. “It’s not a question of if, but of when and under what kind of pressure.”