As deficit commission meets, Obama doesn't rule out new taxes

By Lori Montgomery
Washington Post Staff Writer
Wednesday, April 28, 2010

President Obama said Tuesday that "everything has to be on the table" for a new commission examining the federal deficit, a position that raises the possibility that he could revisit the most expensive provisions of his new health-care law or backtrack on his pledge not to raise taxes for the middle class.

Speaking to reporters before the first meeting of the bipartisan commission, Obama warned that he would not answer questions about specific recommendations the panel might make.

"I'm not going to say what's in. I'm not going to say what's out. I want this commission to be free to do its work," he said.

In recent interviews, Obama and other administration officials have left the door open to tax increases, even for those earning less than $250,000 a year. The president has also explicitly agreed to consider changes to the hard-fought health-care law, said Alan K. Simpson, a former Republican senator from Wyoming who is serving as co-chair of the 18-member panel of lawmakers and presidential appointees.

"When you say the new bill is on the table, that is disturbing to some. But the new bill is on the table," Simpson said. "The president has been very open with us, or I wouldn't go this far."

Obama created the commission in February after more-routine proposals for reducing deficits -- including a three-year freeze on non-defense spending -- did little to improve fiscal forecasts.

The annual gap between spending and revenue hit $1.4 trillion last year, a post-World War II record at nearly 10 percent of the economy, and is expected to be about as big this year. While deficits are projected to dwindle as the economy recovers from recession, they are forecast to rise inexorably after 2015 as baby boomers tap into federal retirement programs. That would fuel a borrowing binge that would drive the national debt to 90 percent of the economy by 2020, according to the nonpartisan Congressional Budget Office, and send interest payments on the debt soaring.

Testifying before the commission Tuesday, Federal Reserve Chairman Ben S. Bernanke warned that postponing action to right the nation's finances "would ultimately do great damage to our economy." In addition to reexamining the big entitlement programs for the elderly and the poor that are forecast to drive up federal spending, Bernanke urged the commission to review the tax code, saying that "a broad consensus exists that the U.S. tax code . . . is in need of reform."

He added: "The reality is that the Congress, the administration and the American people will have to choose among making modifications to entitlement programs such as Medicare and Social Security, restraining federal spending on everything else, accepting higher taxes, or some combination thereof."

White House budget director Peter Orszag and two former CBO directors echoed that view, causing Sen. Michael D. Crapo (R-Idaho) to note the "eerie" consistency in the "advice of our witnesses." And while some commission members signaled that they remain reluctant to raise taxes or cut spending, Simpson's co-chair, former Clinton White House chief of staff Erskine Bowles, said any effective deficit-reduction plan will have to address entitlements, the military, discretionary spending and revenue -- "and we have to face up to that."

Obama has asked the commission to make recommendations by Dec. 1, shortly after the midterm elections. He signaled Tuesday that he will back its strategy, whatever it is.

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