Obama studies deficit reduction proposals to ‘correct our fiscal course’ 

12/6/2010 

President Barack Obama said he was reviewing the recommendations of his deficit reduction commission in a search to “correct our fiscal course.”

The 18-member panel drawn from Congress, business leaders and academia wrapped up its work Dec. 3 when the recommendations of its co-chairmen, former Sen. Alan Simpson, a Wyoming Republican, and Erskine Bowles, a former chief of staff for President Bill Clinton, were endorsed by 11 commissioners and rejected by seven. Five Democrats, Five Republicans and one independent voted for the proposal.

To move forward for congressional consideration, however, a supermajority of 14 was needed.

In his statement, Obama said, “The commission’s majority report includes a number of specific proposals that I – along with my economic team – will study closely in the coming weeks as we develop our budget” due to Congress around Feb. 1.

Obama formed the bipartisan commission in early 2010 to cut $4 trillion from projected deficits in the coming decade through spending cuts in discretionary programs – including $100 billion from the Defense Department, and changes in entitlement programs such as Social Security and Medicare, as well as tax increases – eliminating the mortgage interest deduction.

Although the commission did not reach the supermajority threshold, Sen. Mitch McConnell, R-Ky., minority leader, said in a statement “It is my hope that this effort will serve as a catalyst for achieving the spending and entitlement reform that our country so desperately needs.”

Sen. Kent Conrad, D-N.D., chairman of the Budget Committee and a member of the commission, said the panel provided “a strong message to our colleagues and to the country of what has to be done.”

“There are some ideas in here that I think are worth copying, borrowing and putting in this year’s budget, which I fully intend to do,” Rep. Paul Ryan, R-Wis., a commission member who voted no, told the Wall Street Journal.

When Simpson and Bowles held a press conference Nov. 10 announcing their proposals, Simpson said jokingly: “We have harpooned every whale in the ocean and some of the minnows.” Adding, “No one has ever done that before.”

Commission officials said in November that if the five-step plan was adopted as proposed, the deficit would be cut to 2.2 percent of gross domestic product by 2015.  The deficit was 8.9 percent of the GDP at the end of the last fiscal year.

Sen. Judd Gregg, the senior Republican on the Budget Committee and commission member, said the goal is reduce federal spending and revenue to 21 percent of GDP. Last fiscal year federal spending was 23 percent of the budget and revenue 18 percent.

Defense spending at $700 billion this fiscal year is the largest section of discretionary spending in the federal budget. In addition to terminating weapons’ programs such as the Army’s Ground Combat Vehicle, the co-chairmen’s proposals include raising co-pays and fees in the TRICARE health program.  TRICARE spending in this fiscal year was about $50 billion.

Their proposal also calls for cutting by about one-third the number of American service members permanently stationed overseas.

In May, Defense Secretary Robert Gates unveiled his plans to save more than $100 billion in defense spending and apply those savings to more needed modernization programs.

For federal civilian employees, the proposal called for a three-year pay freeze and freezes on bonuses and other compensation to achieve a $20.4 billion savings by 2015.  To reduce the federal workforce the proposal calls for hiring two new employees for every three that leave or retire.

Noncombat military pay would also be frozen for three years under the co-chairmen’s proposal.

Obama announced a two-year freeze on federal civilian pay in late November but did not freeze military pay.