Deficit panel's Schakowsky wants defense cuts, higher corporate taxes

Nov. 16 (Bloomberg) -- Steven Hess, senior credit officer at Moody's Investors Service, talks about the outlook for the U.S.'s Aaa credit rating, fiscal policy and the role of the dollar. Hess speaks with Deirdre Bolton and Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
By Lori Montgomery
Washington Post Staff Writer
Tuesday, November 16, 2010; 2:22 PM

One of the most liberal members of President Obama's bipartisan deficit commission unveiled her own plan Tuesday to balance the budget: Keep Social Security benefits intact, make deep reductions at the Pentagon and raise corporate taxes to target profits and excessive pay for chief executives.

Rep. Jan Schakowsky (D-Ill.) said the plan would cut nearly $430 billion from the deficit in 2015, meeting Obama's goal of balancing federal spending and revenues, except for interest on the national debt.

Unlike the plan released last week by commission co-chairmen Erskine Bowles and Alan Simpson, Schakowsky said her proposal would reduce record deficits without punishing the poor and the middle class.

"Lower- and middle-class Americans did not cause the deficit," Schakowsky said at a Capitol Hill news conference. The Bowles-Simpson plan "would have serious consequences for lower- and middle-class Americans, and that is why I cannot support it."

The president's commission is under orders to provide a deficit-reduction plan by Dec. 1, and its members are scheduled to meet Tuesday to begin negotiating an agreement. Liberal lawmakers and interest groups have been outraged by the co-chairmen's proposal, particularly their call for an increase in the retirement age and adjustments to Social Security benefits. The emergence of a radically different plan by a commission member indicates how difficult it could be to build a consensus.

Schakowsky's proposal, which she described as hers alone, embraces the bipartisan goal of cutting spending. However, she proposes to take virtually all of the cuts from the military, slicing $110 billion from the defense budget in 2015 by reducing troop levels, cutting weapons systems and scaling back wartime spending.

Schakowsky also proposes to trim farm subsidies and to make changes that she said would reduce the cost of health care. Other domestic programs would be virtually untouched.

Meanwhile, tax collections would soar by more than $280 billion in 2015 under the plan, mainly by eliminating various corporate tax breaks, ending the Bush tax cuts for the wealthy and creating a new energy tax through the cap-and-trade system envisioned in Obama's budget request. Schakowsky would also target excessive CEO pay by removing tax breaks that permit unlimited deferred compensation.

To maintain the solvency of the Social Security program, Schakowsky's plan would omit the cap on the payroll tax for employers and lift the threshold above the current $106,800 for employees. And she would impose a "legacy tax" of as much as 4 percent on earnings above the cap.

Finally, Schakowsky's plan calls for an additional $200 billion in economic stimulus over the next two years to create jobs and combat unemployment.

"Fixing the federal deficit is not an end in itself. The goal of budget policy should be to assure long-term, widely shared economic growth," she said. "The proposals included in this plan are aimed at bringing the federal deficit under control using policies that will put Americans back to work and strengthen middle-class incomes."

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