Debt Panel Chairmen Take on Critics of Budget-Cutting Proposal

The leaders of a presidential commission defended their proposal to cut almost $4 trillion from the federal budget against criticism by Pentagon leaders, proponents of tax breaks and opponents of Social Security cuts.

“Admiral Mullen says that our debt’s our greatest national security problem and yet Secretary Gates doesn’t like our $100 billion in real cuts” in defense spending, panel co-chairman Erskine Bowles told reporters today in Washington. “You can’t have your cake and eat it too.”

Admiral Mike Mullen is chairman of the Joint Chiefs of Staff. Defense Secretary Robert Gates has said the panel’s proposed cuts would be “catastrophic” and that “we are not the problem.”

Bowles and commission co-chairman Alan Simpson on Nov. 10 outlined a deficit-cutting plan that would trim Social Security and Medicare, reduce income-tax rates, eliminate hundreds of special tax breaks and slash defense spending. The 18-member commission appointed by President Barack Obama is trying to develop a compromise plan by a Dec. 1 deadline.

Bowles said the Social Security benefits currently promised for future decades are a “joke” and predicted they will be reduced regardless of whether the recommendations are adopted. He also defended the proposal to eliminate hundreds of tax breaks, including the one allowing homeowners to write off mortgage interest, calling them “earmarks” that disproportionately benefit the wealthy.

Photographer: Joshua Roberts/Bloomberg

Erskine Bowles, co-chairman of President Obama's deficit commission. Close

Erskine Bowles, co-chairman of President Obama's deficit commission.

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Photographer: Joshua Roberts/Bloomberg

Erskine Bowles, co-chairman of President Obama's deficit commission.

Tax to Pay for War

Simpson called for a new tax to pay for the Iraq and Afghanistan wars. Those conflicts are rare instances in U.S. history of wars in which taxes were not raised to finance them, he said.

“If you’re going to fight a war, much less two of them, you ought to have a tax to support it to let the American people know there is sacrifice involved other than the people who are fighting it,” Simpson said.

The commission held three days of closed-door meetings this week to debate the chairmen’s proposal. Any plan would have to win the support of at least 14 members to be forwarded to Congress for a vote. Bowles was former President Bill Clinton’s chief of staff and Simpson is a Republican former senator from Wyoming.

Bowles said he couldn’t predict whether the panel will be able to reach agreement though he said “there’s probably more middle ground than you think.”

He said his strategy has been to figure out “what they really want and what they really, really don’t like, and then what is that area they don’t really care about. That way you have a chance to find the middle ground and you’re going to be surprised” that “there is common ground there.”

‘Drives Me Nuts’

“What drives me nuts,” Bowles said, are critics who compare the panel’s proposed Social Security cuts with the benefits scheduled under law rather than what the government is projected to be able to afford.

By law, the Social Security program isn’t allowed to pay scheduled benefits if their cost would exceed the money available in the trust fund. Beginning in 2039, according to the Congressional Budget Office, benefits would have to be slashed to equal available revenue. That would mean a 21 percent cut in 2039, according to CBO.

“Scheduled is a joke,” said Bowles. “Don’t make promises you can’t keep -- we can’t meet the schedule.”

Bowles said tax credits, exclusions and deductions should be considered the same as budget “earmarks,” financing lawmakers’ pet projects that voters often criticize. Republicans in the House and Senate decided this week to impose a moratorium on budget earmarks that Bowles said would total $16 billion a year.

“There are $1.1 trillion of annual earmarks in the tax bills,” Bowles said. “It’s one of the reasons why our tax rates are so high.”

To contact the reporter on this story: Brian Faler in Washington at bfaler@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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