Debt panel: Taxes, spending -- 'everything's on the table'

By Jeanne Sahadi, senior writer


NEW YORK (CNNMoney.com) -- An 18-member team created by executive order by President Obama will start trying to crack the nation's biggest money problems on Tuesday.

Goal 1: Get the deficit down to 3% of GDP by 2015. That's a first step in making sure the growth rate in the country's debt is "sustainable" -- meaning the growth in debt won't outpace economic growth every year.

Currently the deficit is on track to be 6% of GDP by that year. If the White House budget proposed earlier this year is enacted, it would be roughly 4%.

Goal 2: Put the federal budget on a more sustainable course long-term. That means tackling Medicare, Medicaid and Social Security. Those three programs plus interest on the nation's debt are on track to consume 93% of all federal tax dollars collected by 2020, according to estimates from the Government Accountability Office.

By 2030, interest payments alone will top 8% of GDP -- making it the largest single expenditure in the federal budget.

To prevent that from happening, "everything is on the table," said the president and the commission's co-chairmen -- former Sen. Alan Simpson (R-Wyo.) and Democrat Erskine Bowles, who served as President Clinton's chief of staff.

But while the Commission is made up of lawmakers from both parties and experts with wide-ranging ideologies, truly getting everything on the table won't be easy. Nor will getting the ultimate proposals into law.

After all, politicians have been tripping over themselves lately to declare what they want off the table, like a value-added tax or cuts to Social Security.

And almost no lawmaker is willing to let the 2001 and 2003 tax cuts expire for low- and middle-income families. The cost of making the tax cuts permanent for most Americans tops $2.5 trillion over 10 years. And lawmakers are not planning to pay for that cost with other changes to the budget.

To meet its goals, the commission will need to find hundreds of billions of dollars per year in either new tax revenue or spending cuts. The most palatable solution, experts say, is to come up with a combination of the two. But even that won't be easy.

And the commission won't have much time. The panel is supposed to produce a report for the president by Dec. 1.

In order for the group to make official recommendations to Congress, 14 of the 18 members must approve them. (The makeup of the panel includes six presidential appointees plus a dozen lawmakers -- evenly divided between parties -- from the House and Senate.)

Experts aren't optimistic the votes will be there.

"It seems very unlikely that the group will agree on a package of recommendations. That said, they could be helpful in defining the magnitude of the problem and the realistic trade-offs that must be made in finding solutions," said Robert Bixby, executive director of The Concord Coalition, a grassroots deficit watchdog group.

And, Bixby added, the commission very well could influence what President Obama proposes in his 2012 budget. "For example, if the six presidential appointees all agree on a set of recommendations these ideas could -- should -- be incorporated into the president's budget next February."

Deficit experts also hope the fiscal commission will embark on a public education campaign. That would help build public understanding, making it easier for lawmakers to make the tough budget decisions required.

If the commission defies expectation and manages to cull 14 votes for its recommendations, Congress will be under no obligation to accept them or even consider them.

However, Senate Majority Leader Harry Reid, D-Nev., and House Speaker Nancy Pelosi, D-Calif., have given their assurances -- in writing -- that they will bring the group's recommendations to the floor for procedural votes before the end of the year. The House would only take them up, however, if they pass the Senate first. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,827.75 12.81 0.07%
Nasdaq 4,787.32 29.07 0.61%
S&P 500 2,072.83 5.80 0.28%
Treasuries 2.23 -0.03 -1.15%
Data as of 8:32am ET
Company Price Change % Change
Kinder Morgan Inc 42.32 0.00 0.00%
Apple Inc 119.00 0.00 0.00%
Pfizer Inc 31.10 0.00 0.00%
Bank of America Corp... 17.11 0.00 0.00%
Microsoft Corp 47.75 0.00 0.00%
Data as of Nov 26

Sections

Shoppers aren't the only ones searching for deals. Here's how to find relatively cheap offers in the stock market. More

India's economic growth slowed last quarter, raising the stakes for Prime Minister Narendra Modi as he seeks to push through long-overdue reforms. More

Two pilots encountered drones while flying over college football games and another pilot saw one while flying over the Hollywood sign. More

Natalie's Cakes and More has raised $84,000 through GoFundMe after protests trash store. More

Retailers are promising big deals this Black Friday, but are the savings actually worth the shopping mayhem? Test your deal-sniffing skills. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.