Obama fiscal commission chief eyes spending caps, entitlement reforms

The co-chairman of the White House fiscal commission laid out markers for the panel, pressing for spending caps, entitlement reforms and an overhaul of the tax code.

“I want to believe that the more specific we are, the better the chances of what we're doing really matters,” said Erskine Bowles during a public meeting Wednesday of the bipartisan group created by President Barack Obama.

His most specific idea was a cap on overall government spending and revenue of 21 percent of gross domestic product.

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The remarks marked the first time in three public meetings that Bowles or his commission co-chairman, former Sen. Alan Simpson (R-Wyo.), made policy recommendations that had a hint of specificity. The commission used earlier public meetings to hear economic experts describe the country’s daunting fiscal situation.

Obama has asked the panel to come up with a plan to cut deficits to sustainable levels by 2015. Congressional leaders have pledged to call floor votes on the commission’s proposals in December.

Bowles, former President Bill Clinton's White House chief of staff, said changes to the country’s defense, tax, spending and entitlement policies were necessary to deal with a $13 trillion debt expected to grow faster in future years.

This year’s spending is equal to 24 percent of GDP, or approximately $3.5 trillion, according to the Congressional Budget Office (CBO). Revenue for the government this year is much less — 15 percent of GDP, or $2.1 trillion. Spending and revenue levels have averaged about 18 percent, CBO said.

Bowles noted that past balanced budgets, which he helped craft with Clinton and congressional Republican leaders in the 1990s, were made possible by keeping spending and taxes close to his proposed levels.

“We are really going to have to reduce discretionary spending,” he said. “There's no way around it, and I think we ought to be very specific about how we're going to address that.”

A staunch conservative on the commission, Rep. Jeb Hensarling (R-Texas) said he was encouraged by Bowles’s call for spending limits. Hensarling, who has warned against cutting debt through more taxes, has pushed for a more stringent cap of 20 percent of GDP.

“I want to balance the budget, but my idea of fiscally responsibility is not to balance it at twice the size of government, which means that children have smaller homes and drive older cars and compete for fewer jobs and more stringent paychecks,” he told reporters after the meeting.

Bowles called on the commission to find ways to extend Social Security’s solvency and reduce health costs beyond savings from the president’s healthcare reform law.

Liberal Democrats have warned against entitlement changes that would reduce benefits, noting that the Social Security trust fund has enough money to pay out 100 percent of benefits for more than two decades. House leaders blasted House GOP leader John Boehner (Ohio) this week for proposing an increase in the retirement age and pegging benefit levels to price inflation and income.

Bowles told Democrats that the healthcare bill would help reduce debt but doesn’t go far enough. CBO projections that account for the health law’s savings still show health costs to be the key reason for large future deficits.

“I think you got all of the cost out there to get right now,” Bowles said. “I think you can be darned proud of that, but we do have to get more costs out of healthcare or it will just consume the budget.”

Bowles floated several ideas that Democrats would be more receptive to.

He took aim at defense spending. “I personally am not crazy about being the world’s policeman, nor do I think we can afford to be,” he said.

He also called for tax code reform, singling out costly tax breaks that haven't had their intended effects.

“The greatest contribution we can make to that is to work to simplify it, broaden the base and make it so that America is more competitive in a knowledge-based economy,” Bowles said.

Liberal Democrats on the commission, including Reps. Jan Schakowsky (Ill.) and Xavier Becerra (Calif.) and Sen. Dick Durbin (Ill.), have said scrutiny on tax expenditures, especially those for corporations, should precede any push to cut entitlement programs.

Fiscally conservative members of the commission praised Bowles for being willing to set difficult targets.

Sen. Kent Conrad (D-N.D.) said the “debt threat” was so large that an exceptional response was necessary.

Liberals have been more circumspect that the commission can get something done. The commission’s rules require that any final agreement receive the support of 14 of the 18 members. That means at least two GOP lawmakers must support any deal for it to move forward.

“When we get to the nitty-gritty of who’s really willing to raise some revenue and what kind of cuts we’re going to have, I’ll tell you right now, I am very skeptical,” Schakowsky said.