Deficit panel proposes raising retirement age to 69, cutting benefits

2010-11-11T00:00:00Z Deficit panel proposes raising retirement age to 69, cutting benefitsThe Associated Press The Associated Press
November 11, 2010 12:00 am  • 

WASHINGTON - The leaders of President Obama's bipartisan deficit commission launched a daring assault on mushrooming federal deficits on Wednesday, proposing reducing annual cost-of-living increases for Social Security, gradually raising the retirement age to 69 and taking aim at popular tax breaks such as the mortgage-interest deduction.

As part of a proposal to wrestle $1-trillion-plus deficits under control, their plan would also curb the growth of Medicare. It came a week after voters put Republicans back in charge of the House and told Washington the government is too big.

However, the plan by Chairman Erskine Bowles and former Sen. Alan Simpson, the co-chairmen, doesn't look like it can win the support from 14 commission members that is needed to force a debate in Congress. Bowles is a Democrat and was former President Bill Clinton's White House chief of staff. Simpson is a Wyoming Republican.

The two were among the first to acknowledge their plan's unpopularity - and to suggest it would be a nonstarter in Congress.

"We'll both be in a witness-protection program when this is all over, so look us up," Simpson quipped to reporters.

Bowles said: "We're not asking anybody to vote for this plan. This is a starting point."

The White House reserved judgment.

"The president will wait until the bipartisan fiscal commission finishes its work before commenting," said White House spokesman Bill Burton.

Burton called the proposals "only a step in the process." He said Obama respects the panel's challenging assignment, "and he wants to give them space to work on it."

The proposals were floated as the Treasury Department reported that the federal government began the new budget year with a deficit in October that totaled $140.4 billion - down 20 percent from a year ago but still the third-highest October shortfall on record. Even with the improvement, last month's red ink set the stage for what is expected to be a third consecutive year of $1-trillion-plus deficits.

The Social Security proposal would change the inflation measurement used to calculate cost-of-living adjustments for program benefits, reducing annual increases. It will almost certainly draw opposition from advocates for seniors, who are already upset that there will be no increase for 2011, the second straight year without a raise.

The 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 Obama's goal of cutting the deficit to about 3 percent of the size of the gross domestic product.

Building the needed support of 14 of its 18 members will be difficult. Cuts to Social Security and Medicare are making some liberals on the panel recoil. And conservative Republicans are having difficulty with the options suggested for raising taxes. The plan also calls for cuts in farm subsidies, foreign aid and the Pentagon's budget.

"This is not a proposal I could support," said panel member Rep. Jan Schakowsky, D-Ill. "On Medicare and Social Security in particular, there are proposals that I could not support."

The release of the proposal comes just a week after midterm elections that gave Republicans the House majority and increased their numbers in the Senate.

During the campaign, neither political party talked of spending cuts of the magnitude proposed by Bowles, with Republicans simply proposing $100 million in cuts to domestic programs passed each year by Congress.

"It's a very provocative proposal," said a Republican panel member, Rep. Jeb Hensarling of Texas. "Some of it I like. Some of it disturbs me. And some of it I've got to study."

But member Sen. Judd Gregg, R-N.H., called the proposal "an aggressive and comprehensive plan for getting federal spending, deficits and the debt under control. … This will not be the final proposal, but it is a significant step down the path of establishing fiscal responsibility."

Despite its slim chances of survival, the Bowles-Simpson proposal illustrates the painful choices involved in tackling a deficit that presently requires the government to borrow 37 cents out of every dollar it spends.

Even with the dramatic proposals, the Bowles-Simpson plan would leave deficits of about $300 billion in 2015, the year by which Obama tasked the group with balancing the federal budget, except for interest payments on a national debt that now stands at $13.7 trillion. If the changes to Social Security are dropped, the deficit would be about $400 billion in 2015.

At a glance

Highlights of proposals by leaders of President Obama's bipartisan deficit commission:

SOCIAL SECURITY

• Increase the Social Security retirement age by one month every two years after it reaches 67 under current law. It would reach 68 around 2050 and 69 around 2075.

• Gradually increase the payroll tax to capture 90 percent of wages by 2050.

• Give retirees the choice of collecting half their benefits early and the other half at a later age.

TAXES

• Overhaul individual income taxes and corporate taxes. For individuals and families, eliminate a host of popular tax credits and deductions, including the child tax credit and the mortgage-interest deduction. Significantly reduce income tax rates, with the top rate dropping to 23 percent from 35 percent.

• Reduce the corporate income tax rate to 26 percent from 35 percent, and stop taxing the overseas profits of U.S.-based multinational corporations.

• Increase the gas tax by 15 cents a gallon to fund transportation programs.

DOMESTIC SPENDING

• Freeze Defense Department salaries and bonuses for three years, and noncombat military pay at 2011 levels for three years. Double Defense Secretary Robert Gates' proposed cuts in defense contracting. Reduce overseas bases by one-third, cut spending for base support and integrate children in military families into local schools.

• Reduce congressional and White House budgets by 15 percent, freeze federal compensation at non-defense agencies for three years, cut the federal work force by 10 percent, eliminate 250,000 non-defense contractors and end money for commercial space flight.

• Eliminate noncompetitive spending bills known as "earmarks."

• End grants to large and medium-size hub airports; require airports to fund a larger portion of the cost of aviation security.

• Cut funding for public broadcasting.

HEALTH CARE

• Ask doctors and other health-care providers, lawyers and individuals to take responsibility for slowing growth of health-care costs.

• Reduce government payments to doctors and lawyers and adopt legislation to end frivolous medical-malpractice lawsuits.

• Set a target for total federal health expenditures after 2020 and review costs every two years. If costs grow faster than targets, require the president to submit, and Congress to consider, measures to lower spending.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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