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$4 Trillion Package of Spending Cuts and New Taxes Proposed

Commission calls this a "moment of truth"

With a collective call for sacrifice and quick action, President Obama's fiscal commission released a sweeping $4 trillion package of spending cuts and tax changes to dig the nation out of debt.

The report was titled "The Moment of Truth." Members of the 18-person commission say the country can't keep spending more than it takes in, or it could face the sort of fiscal crisis some European countries are dealing with now.

But the actual moment of truth for the commission — voting on the controversial package — won't come until Friday, Dec. 3. The backing of 14 members would send the package to Congress for a vote — but that seems unlikely.

About seven members vowed during a Wednesday meeting to support the package. Others said they need to read it thoroughly first. But strong partisans on the panel criticized it — Republicans for cutting tax breaks and not repealing Obama's health care reform, Democrats for cutting Social Security and trimming other programs.

The report's preamble tells politicians it is time to "put up or shut up."

"The American people are a long way ahead of the political system in recognizing that now is the time to act," says the report from what's officially known as the National Commission on Fiscal Responsibility and Reform. "We believe that far from penalizing their leaders for making the tough choices, Americans will punish politicians for backing down — and well they should."

The panel, led by former GOP senator Alan Simpson of Wyoming and Democrat Erskine Bowles, a former White House chief of staff to President Clinton, would put the nation's budget in primary balance by 2015, would hold the debt down as a percentage of the economy, and would cut both spending programs and special tax breaks. Both defense and non-defense programs would be cut. Some of the savings would go into lowering corporate and individual income tax rates. Overall, it would cut the deficit by $3.89 trillion between 2012 and 2020.

Older Americans would be affected by many of the proposals. The plan raises the retirement age to 68 in 2050 and 69 in 2075. It lowers Social Security benefits for higher-paid workers when they retire and raises them for long-time minimum wage workers. It requires Medicare patients to pay more out of pocket. And it doubles the federal gasoline tax — a 15-cent-per-gallon hike. Current retirees' benefits are largely untouched, though the proposal slightly shaves the amount of cost-of-living increases they will get in the future.

"The combined effect would be to dramatically lower the standard of living of future retirees," says John Rother, executive vice president of policy at AARP.

The panel picked up the derisive moniker "The Cat Food Commission" among critics unhappy about the impact on older Americans, implying they might be reduced to eating cat food.

Some groups representing seniors reacted angrily to the proposal. Barbara Kennelly, head of the National Committee to Preserve Social Security and Medicare, urged panel members to oppose the report. "Social Security never had a legitimate place in any deficit reduction discussion. Yet this fiscal commission report relies heavily on benefit cuts impacting working Americans to pay the price of failed economic policies of the past."

Committee members say they are ready for an onslaught of opposition from special-interest groups.

"They are going to rip this thing to shreds," Simpson says. He was criticized earlier in the week for a comment to a Wyoming paper that opponents of the benefit cuts are the "greediest generation."

"We are not balancing the books of America on the backs of poor Social Security recipients. That's babble," Simpson says.

Seniors also would be affected by the plan's proposal to kill off or scale back a new federal long-term care insurance program called CLASS. And future retirees earning a medium income — about $43,000 today — would get smaller benefit checks, compared with current law. But seniors in physically demanding jobs would be able to retire earlier with less of a penalty.

Medicare recipients would face a new $550-a-year deductible and 20 percent coinsurance that they would have to pay out of their own pockets. Supplemental insurance would not be able to cover all those costs, as a way to discourage overuse of medical services.

Sen. Dick Durbin, D-Ill., a member of the panel, says he can't say whether he will vote for the package on Friday, but he does support the higher retirement age for Social Security benefits even though it is anathema to liberals. He likens serving on the panel to volunteering for a root canal.

Even the panel members who promised to vote for the measure said Wednesday they were pained by parts of the massive plan. Simpson, for instance, said cutting some of the $1.1 trillion in annual tax breaks was difficult for him. The tax breaks cited for cuts include farm subsidies, interest on mortgages of more than $500,000 or those for second homes, and employer-sponsored health benefits.

Bowles says they chose to stick with a broad plan to solve the nation's fiscal crisis instead of a smaller package that might garner the 14 votes needed to force a vote in Congress. "We are not interested in 14 votes for a whitewash," Bowles says.

Rep. Paul Ryan of Wisconsin, who will chair the Budget Committee when Republicans take control of the House in January, rattled off a list of items he opposes in the plan but said he will propose some of the provisions in Congress next year himself. Ryan favors repeal of the Obama health care overhaul and says he is disappointed the panel did not tackle the topic because growing health care costs are adding to the deficit: "If health care is not on the table, you are not fixing the problem."

Beginning in 2020, the panel would limit the federal government's increase in health care spending — for all programs including Medicare and Medicaid — to just 1 percent more than the rate of economic growth. In recent years, medical costs have skyrocketed.

While many interest groups — from the AFL-CIO to the Heritage Foundation — objected to the proposal, it won praise from the budget-balancing group Concord Coalition, led by Robert L. Bixby.

"If everyone holds out for their own version of perfection, we will never be able to get beyond partisan gridlock," Bixby said. "The deficit and debt will grow, public frustration will build and future generations will get stuck with the bill."

Tamara Lytle is a Washington-based reporter.