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Obama creates bipartisan fiscal panel to tackle debt

WASHINGTON — President Barack Obama signed an executive order creating an 18-member bipartisan panel to suggest steps to reduce the federal government's record debt and deficits that he said threaten to "hobble our economy."

Obama named former Republican Sen. Alan Simpson and former Clinton White House chief of staff Erskine Bowles to lead the National Commission on Fiscal Responsibility and Reform.

"There are some on the left who believe this issue can be deferred," Obama said Thursday at the White House. "There are some on the right who won't enter into serious discussions about deficits without preconditions. But those who preach fiscal discipline have to be willing to take the hard steps necessary to achieve it."

The order creating the commission is driven in part by voter anxiety over mounting long-term debt and a projected record deficit of $1.6 trillion this year, or 10.6 percent of the economy. Such levels are unsustainable, White House budget director Peter Orszag has said.

Senate Republican leader Mitch McConnell of Kentucky said the commission should emphasize spending cuts, not tax increases.

"After trillions in new and proposed spending, 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," McConnell said in a statement.

Creation of a fiscal reform commission has been a priority of moderate "Blue Dog" Democrats, who actually wanted one with more teeth and power than Obama has created. But Rep. Jim Matheson, D-Utah, co-chairman of the Blue Dog Coalition, hailed Obama's action on Thursday.

Matheson called it "a necessary step to getting our fiscal house in order. A commission will not only identify ways to balance the budget, but also lay the groundwork for fiscally sustainable policies over the long run — something that has eluded both Republicans and Democrats in Congress for many years."

Obama is highlighting steps his administration is taking to both revive the U.S. economy and tackle the government's debt before lawmakers face voters in the November midterm elections. Democrats are vying to maintain their majorities in the House and Senate, and Republicans are using the economy and the president's fiscal policies as election issues.

"Success will require give on both sides," said Joe Minarik, who was chief of staff at the Office of Management and Budget during the administration of Democratic President Bill Clinton. "Right now, there is little apparent give in Washington. Anyone who thinks that budget failure yields partisan victory is playing with fire."

The commission's recommendations are due Dec. 1, after the congressional elections. Even then, lawmakers may be able to avoid having to take a public stand on measures such as tax increases or cuts to popular programs because Obama's executive order can't force Congress to vote on its recommendations.

Obama may have to rely on promises by House Speaker Nancy Pelosi, a California Democrat, and Senate Majority Leader Harry Reid, a Nevada Democrat, to bring the recommendations up for votes.

A Senate proposal by Budget Committee Chairman Kent Conrad, a North Dakota Democrat, and Judd Gregg, the committee's top Republican, to require lawmakers to vote on recommendations from such a commission was defeated in late January.

"This is a test of our ability to put aside politics for the good of the country," Conrad said in a statement. "With these commitments, the president's executive order is as close as we can get to establishing a statutory commission, where the votes would be guaranteed."

Obama urged lawmakers to "set politics aside to do what's right." Resolving "chronic deficits is fraught with hard choices," he said. "Nobody's been too eager to deal with it."

The goal of the Simpson-Bowles panel is to make recommendations that may require a mix of tax increases and spending cuts of hundreds of billions of dollars to bring the budget deficit down to 3 percent of the economy by 2015. That would put the budget in balance except for payments on debt.

"Everything's on the table, that's how this thing's going to work," Obama said in response to a question after his remarks.

Under current projections, the budget will show a deficit of $752 billion, accounting for 3.9 percent of the economy, in 2015.

"Erskine and I have a philosophy that's very simple: We're going to move this issue forward," Simpson said in an interview Tuesday. "We're going to say, 'You're entitled to all of your emotion and guilt and fear and whatever you want to throw into the game, but you're not entitled to your own facts.' "

Under Obama's order, Republicans and Democrats would each appoint six members to the panel, and six more would be named by the White House, including the two co-chairmen.

"I am encouraged that the Republican leadership appears to be stepping forward and will be naming members to the commission; I think that's a very positive sign," Orszag said in a Bloomberg Television interview.

McConnell, the Senate Republican leader, won't name people Thursday and will wait to consult members of his party when lawmakers return next week from a congressional recess, said Don Stewart, his spokesman.

The White House didn't say when Obama would appoint his candidates.

A. Barry Rand, chief executive of AARP, the biggest lobbying group representing senior citizens, said any steps to narrow the deficit mustn't jeopardize benefits from the government retirement and health insurance programs primarily used by those 65 years of age and older.

"AARP will remain vigilant that deficit-reduction efforts do not unfairly target the critical benefits provided by programs such as Social Security and Medicare," Rand said in a statement.

James Horney, a budget expert at the Center on Budget Policy and Priorities in Washington, said the odds are slim of getting a commission agreement to increase taxes and slow the growth of spending because of a "lack of bipartisan commitment in Congress."

"It is possible," he said, that the panel "could produce something that will help start the process of educating the public about what will have to be done to bring deficits under control."

Simpson, 78, represented Wyoming from 1979 to 1997 in the Senate, where he served in the Republican leadership and was an advocate of fiscal discipline for the government. He also served on the bipartisan Iraq Study Group, which was created by Congress to recommend revisions to U.S. policy in Iraq.

Bowles, 64, recently announced his retirement as president of the University of North Carolina system. During the administration of former President Bill Clinton, Bowles served as director of the Small Business Administration, as well as White House chief of staff.

Contributing: Lee Davidson, Deseret News