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Presidential commission to address rising national debt
Research by economists Carmen M. Reinhart of the University of Maryland and Kenneth Rogoff of Harvard has found that public debt in excess of 90 percent of the economy is often the tipping point at which nations lose the confidence of their creditors and tumble into crisis.
"We're facing a situation that is far worse than we've ever seen in the past," said Charles Konigsberg, director of a separate debt-reduction task force at the Bipartisan Policy Center. "The last time the debt was this high was at the end of World War II. But then we owed the debt to ourselves. Now those interest payments are flowing out of the country" to China and other foreign investors.
"Greece is sinking on debt and deficit. Spain's next, Portugal's next. How'd you like to be the United States of America when China pulls the tin cup and says, 'We don't want T-bills, we want money'?" commission co-chairman Alan K. Simpson, a former GOP senator from Wyoming, said on "Fox News Sunday." "Now, that's where we are. This is serious business."
Alarmed by the forecast but unwilling to act without Republican cooperation, Obama formed the commission to stabilize borrowing by 2015. If 14 of 18 members sign on to a plan, congressional leaders have pledged to put it to a vote.
To succeed, the commission must overcome deep skepticism among members of both parties. Republicans view the panel both as a delaying tactic to postpone action on the budget until after this fall's midterm elections, and as a stalking horse for higher taxes, particularly a European-style value-added tax. Commission members such as Reps. Paul D. Ryan (R-Wis.) and Jeb Hensarling (R-Tex.) argue that taxes should be kept low and that Medicare and Social Security should be radically restructured, exposing the elderly to greater financial risk.
Liberal Democrats, on the other hand, fear the panel will endorse spending cuts to avoid raising taxes far above the historical U.S. average. Commission members such as Reps. Xavier Becerra (D-Calif.) and Jan Schakowsky (D-Ill.) argue that Democrats should not sacrifice the social safety net on the altar of deficit reduction.
Becerra was particularly dismissive of Coburn's suggested cuts, which include job-training and education programs. "It's easy to say you're going to reduce the deficit by killing programs that have raised up the middle class," Becerra said, "but that doesn't mean you solve the problem for America."
The panelists said they are willing to consider spending cuts and tax increases, however, which budget experts agree is the only responsible solution. At the commission's first meeting, prominent economists from both parties, including Federal Reserve Chairman Ben S. Bernanke, will underscore that message.
The White House also hopes to sell that message to the public. In that regard, the commission has gotten off to a slow start. As of Monday, it had no Web site, no plans for public participation in its monthly meetings and no budget for outreach.
Executive Director Bruce Reed, who is on leave from the Democratic Leadership Council, said the commission will partner with other groups to get the word out, including the Peter G. Peterson Foundation, which will hold a fiscal summit Wednesday featuring former president Bill Clinton. And in June, commission members plan to participate in a 20-city electronic town hall meeting on the budget organized by the nonprofit America Speaks.
But success or failure ultimately lies with the lawmakers. Asked whether the parties can work together, Gregg said: "Who knows?"
He added: "We have to wait until we get around the table and start talking to see if it can happen."