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 17,131.97 100.83 0.59%
Nasdaq 4,552.76 33.86 0.75%
S&P 500 1,998.98 14.85 0.75%
Treasuries 2.59 -0.00 -0.08%
Data as of 1:57am ET
Company Price Change % Change
Apple Inc 100.86 -0.77 -0.76%
Bank of America Corp... 16.71 -0.03 -0.18%
Yahoo! Inc 42.71 0.16 0.38%
Alcoa Inc 16.16 -0.23 -1.40%
Facebook Inc 76.08 1.50 2.01%
Data as of Sep 16

Sections

Scotland's independence vote is too close to call but those who want to keep Britain united won this year's campaign funding race by some distance. More

The FBI's new facial recognition system lets local police easily identify you. It will one day spot you from your iris, voice and the way you walk. More

Y Combinator president Sam Altman is teaching a startup class at Stanford with Silicon Valley heavy hitters as guest lecturers. Bonus: All the videos will be available for free online. More

Occupy Wall Street offshoot Strike Debt says it has abolished nearly $4 million in private student loan debt for students who attended Everest College, part of Corinthian Colleges. More

Market indexes 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. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.