Worthy News: US deficit panel urges steep cuts

Wednesday 1 December 2010

US deficit panel urges steep cuts

Panel co-chairmen Alan Simpson and Erskine Bowles devised the recommendations

A presidential panel set up to help trim the US budget deficit has called for steep spending cuts and tax hikes.

The proposal would trim defence, social security, and other spending, slashing $4 trillion (£2.6tn) from the budget deficit by 2020.

But analysts say the panel is unlikely to ratify the plan with a vote, calling into question whether the US Congress will act on its recommendations.

"The solution will be painful," the plan reads. "There is no easy way out."

The US budget deficit, which now approaches $1.3tn a year, has emerged one of the top issues facing the US government.

President Barack Obama established the commission in February. Its members include current and former members of Congress and labour and business leaders.

The report - Wednesday's was the second version - was devised by panel co-chairmen Alan Simpson, a former Republican senator from Wyoming, and Erskine Bowles, a former White House aide to President Bill Clinton.

Among its recommendations:

Reduce social security retirement payments to wealthier Americans, while gradually increasing the retirement age and the amount of wage income subject to the social security taxReduce the budgets of the White House and Congress by 15%Increase the petrol tax by 15 cents a gallon, dedicating the new revenue to spending on transportLimit annual cost increases for Medicare and Medicaid, the federal healthcare programmes, to 1% of economic growth rateTrim government payrolls by replacing fewer who leaveEliminate corporate subsidies in the US tax systemLimit medical malpractice lawsuits, a long time Republican goal

The deficit has been driven largely by the wars in Iraq and Afghanistan, massive outlays for Medicare, the financial crisis and two large tax cuts pushed through by President George W Bush and the Republicans in 2001 and 2003.

The commission's report comes as Mr Obama and Republicans in Congress debate whether and how to extend those tax cuts, one of the top issues facing the current Congress as it nears its end.

With the Bush tax cuts set to expire at the end of the year, Mr Obama and the Democrats favour extending them for middle class Americans while letting them lapse for households making more than $250,000.

But the Republicans want them extended them for all Americans.

The commission members, including current and former congressmen and senators and presidential aides, are set to vote on the report on Friday. If they ratify it, Congress will be expected then to vote on the commission's recommendations.

But the panel's chairman, former White House aide Erskine Bowles, has said that at minimum the panel's work has got America engaged in substantive debate on the deficit issue.

"The era of debt denial and the denial of its consequences is over," he said. "We have started an adult conversation that will dominate the debate until the elected leadership in Washington does something real."

Soon after the report was released on Wednesday morning, a Democrat and a Republican senator endorsed the findings.

"There are no easy fixes here, so while I do not agree with all parts of the co-chairmen's final proposal, I will support it because it represents a step forward that we urgently need," said Republican Senator Judd Gregg said in a statement.

"Inaction on our debt crisis is not an option at this point."

This article is from the BBC News website. � British Broadcasting Corporation, The BBC is not responsible for the content of external internet sites.