Obama panel won't rule out higher taxes to reduce deficit

WASHINGTON — The Democratic co-chairman of the bipartisan deficit-reduction commission that President Obama created Thursday said "everything is on the table" — including raising taxes and cutting Medicare and Social Security — but declined to discuss his preferences or predict what proposals will prevail.

"Everything is everything," Erskine Bowles said. "I don't think you're going to be able to get there if you take anything off the table. We've got to look at good ideas, bad ideas and think about all of them."

Bowles, 64, is a former White House chief of staff under President Clinton and currently president of the University of North Carolina system.

Obama also used the phrase "everything is on the table" as he signed an executive order to create the National Commission on Fiscal Responsibility and Reform.

With the total federal debt next year expected to exceed $14 trillion — about $47,000 for every American — the 18-member commission is to make nonbinding recommendations to Congress by Dec. 1 on how to reduce the government's annual deficits to 3 percent of the national economy by 2015.

The deficit was $1.4 trillion last year and is expected to reach $1.56 trillion this year. Medicare insolvency is projected in seven years. By 2020, Obama projects the national debt will have grown to more than 77 percent of the the gross domestic product (GDP) — the market value of all goods and services produced in the country. That would mark the highest level since 1950 and would be enough to threaten future economic growth and erode U.S. living standards.

Reducing the deficit to 3 percent of GDP still would leave an annual deficit of almost $600 billion but would at least keep the national debt stable relative to the size of the economy, a goal endorsed by economists.

Republican congressional leaders reacted warily to Obama's commission, even as they prepared to appoint representatives to it, predicting its Democratic majority would try to use it to raise taxes.

"Americans know our problem is not that we tax too little, but that Washington spends too much — that should be the focus of this commission," Senate Minority Leader Mitch McConnell, R-Ky., said in a statement.

Ten of the commission's 18 members are expected to be Democrats, but at least 14 members must approve the final report for it to be forwarded to Congress.

The deficit-reduction commission's Republican co-chairman will be retired Wyoming Sen. Alan Simpson. Obama described Simpson, 78, as "a flinty Wyoming truth-teller."

Grover Norquist, president of Americans for Tax Reform, an anti-tax group, said that, as a senator, Simpson twice helped broker major deficit-reduction deals that included tax increases. Norquist predicted that Democrats expect Simpson to do the same in this new role.

The full panel has yet to be named. Six members, including Simpson and Bowles, are to be chosen by the president, with no more than four Democrats. Three members will be chosen by Democratic and Republican leaders in each chamber of Congress, for a total of 12 congressional appointees.

Obama said the commission could give Congress political cover to enact deficit-containment measures for which voters otherwise might punish lawmakers.

"The politics of dealing with chronic deficits is fraught with hard choices, and, therefore, it's treacherous to officeholders here in Washington," Obama said. "As a consequence, nobody has been too eager to deal with it."

The commission is structured similarly to one proposed by Sens. Kent Conrad, D-N.D., and Judd Gregg, R-N.H., which last month failed to pass the Senate; seven Republican co-sponsors voted against it.

Obama's commission is significantly weaker; while the Conrad-Gregg plan would have required Congress to vote on proposals up or down, Congress could amend any recommendations from Obama's commission, filibuster them or ignore them altogether.

"We already have a commission to confront our debt. It's called the United States Congress," said Sen. Tom Coburn, R-Okla. "If members of Congress aren't up to that task, we don't need a new commission; we need a new Congress."

Conrad, however, said an executive commission is "the next best thing" to Congress, given lawmakers' unwillingness to act or even form a panel to guide them.

The president implored lawmakers to "step away from the partisan bickering and join this effort to serve the national interests.

"Without action," Obama said, "the accumulated weight of that structural deficit, of ever-increasing debt, will hobble our economy, it will cloud our future, and it will saddle every child in America with an intolerable burden."

Information from The Associated Press and The Washington Post is included in this report.