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Presidential commission to address rising national debt

By Lori Montgomery
Washington Post Staff Writer
Tuesday, April 27, 2010; A10

A presidential commission will convene Tuesday at the White House to address what leaders of both parties agree is one of the greatest threats to the country's economic future: the rising national debt.

Official forecasts suggest that without sharp changes in federal spending or tax collections, the United States could enter into a downward spiral of indebtedness that by the end of this decade would erode the country's ability to educate its children, care for the elderly or mount a robust national defense.

Republicans and Democrats alike say the fiscal challenges have been too long ignored. But with the two parties feuding over health-care reform, Wall Street regulation and a host of other issues -- and the economy still uncertain after a deep recession -- there is considerable doubt that they could join hands to fend off a still-distant potential crisis.

"It would take a miracle," agreed Senate Majority Whip Richard J. Durbin (D-Ill.). "But," he said, "I believe in miracles."

Durbin is the highest-ranking lawmaker among a dozen members of Congress on the commission, which also includes six presidential appointees. The panel has until Dec. 1 to devise a plan to stop a federal borrowing binge that exploded during the recent recession and will only get worse as retiring baby boomers tap into federal retirement programs.

The gulf between the two parties is vast. No budget commission has managed to spur action since 1983. And a host of interest groups is lining up to rally the public against any solution that involves higher taxes or cuts to favored programs -- particularly Social Security, which members of both parties consider the ripest target for compromise. Even supporters of the commission are not optimistic: House Majority Leader Steny H. Hoyer (D-Md.), a vocal advocate, said the most he expects is "a good message with regard to the magnitude of the problem."

But panel members from both parties say the recent experience of Greece, deeply in debt and begging other countries to help pay its bills, provides a vivid incentive to set aside ideological differences and work together. "After stopping a terrorist with a weapon of mass destruction, this is the single most important issue we confront as a nation," said Sen. Judd Gregg (R-N.H.), a commission member.

Republican Sen. Tom Coburn (Okla.), a physician known as "Dr. No" for relentlessly blocking Democratic initiatives, already has sent fellow commission members a binder full of ideas for cutting wasteful programs -- low-hanging fruit that he said could build public trust before a debate about higher taxes. Coburn also has spoken with Andy Stern, president of the Service Employees International Union and one of the commission's most liberal members, and found "a lot of areas where we think we can work together."

"If this commission is even halfway successful, it's a big win for Obama. But I don't think anybody on the commission is going to look at it that way," Coburn said. "The problems are too big. This is about our country."

Government's role

At the very least, the Commission on Fiscal Responsibility and Reform will mark the beginning of a national conversation about the role of government in American society. Social Security, Medicare and Medicaid -- popular programs that guarantee income support and universal health coverage to people older than 65 -- are growing faster than tax revenue as medical costs rise and the population ages. In the coming decades, the three programs are forecast to dwarf all other spending and force the Treasury to borrow to keep them afloat.

That crisis seemed distant until the recession hit, causing tax collections to tank and federal spending to increase as policymakers scrambled to avert an economic collapse. The public debt is forecast to rise from less than 40 percent of the economy to more than 60 percent by the end of this year, its highest level since 1952. The debt will hit 90 percent by 2020 under President Obama's budget, according to the nonpartisan Congressional Budget Office, a level last seen in the aftermath of World War II.

Meanwhile, the CBO forecasts that interest payments will rise from less than $200 billion a year to more than $900 billion. At that level, debt service would eat up nearly 20 percent of all federal spending, according to the CBO, and more than 4.5 percent of the economy -- the highest level since the government began tracking net interest payments in 1962.

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."

Stabilizing borrowing

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."

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