Commission Votes to Put Squeeze on Middle Class and Future Retirees

Current retirees would see little change to their Social Security benefits, though future cost-of-living adjustments would be slightly smaller. But they would pay more out of pocket for Medicare — $550 for a deductible and 20 percent for coinsurance.

Future retirees would see various changes, including having more of their income taxed if they are high earners. Higher-income workers also would get less in their future Social Security checks than under current law. But seniors who live to 82 would get extra benefits because they may have used up their other assets. Workers in physically demanding jobs could retire early with less of a penalty. But a new long-term care insurance program would be revamped or eliminated.

The report needed 14 supporters on the 18-member panel to guarantee a vote on the whole package before Congress — a bar few thought they ever would reach on such a divisive issue. Strong partisan positions on fiscal issues — with Republicans resisting tax hikes and Democrats opposed to benefit cuts — helped increase the nation's debt and deficit.

Without any action from Congress, the nation's debt as a percentage of the economy is scheduled to reach the sort of high levels that have triggered crisis in Europe and eventually exceed the size of the national economy.

"There is too much at stake to make inaction an option," said outgoing U.S. Rep. John Spratt, D-S.C., who voted for the package but admitted he was relieved not to be facing voters afterward because it contains some unpopular elements.

The plan contains both tax increases and cuts to military and domestic spending. Corporate and income tax rates would actually go down, but more money would be collected by eliminating billions in special tax breaks. Homeowners, for instance, could deduct mortgage interest only for their primary residence and only up to $500,000 of the mortgage. The federal gasoline tax would double — a 15-cent hike per gallon.

Alison Acosta Fraser, director of economic policy at the Heritage Foundation, says the commission did a good job of making sure money saved from cuts to Social Security benefits were used to solve the program's long-term imbalance. That makes it more likely Social Security changes will be tackled in Congress, she says.

Although the entire package is not guaranteed a vote in Congress, co-chairman Erskine Bowles says some lawmakers have pledged to incorporate about 80 percent of the recommendations into their own legislation next year.

"This is not the end of the story," agrees Sen. Kent Conrad, D-N.D., chairman of the Senate Budget Committee. "We have provided a strong message to our colleagues and this country of what has to be done."