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Commission Votes to Put Squeeze on Middle Class and Future Retirees

Plan would raise Medicare premiums, retirement age

En español| A comprehensive plan to cut $4 trillion in deficit spending drew the votes of more than 60 percent of a presidential deficit panel, bridging the sharply partisan differences that have helped put the nation's balance sheet in the red.

Even the supporters of the sweeping measure said they were unhappy with parts of it, including some who opposed tax increases or major changes to Social Security and Medicare.

The plan would raise the retirement age to 69 in 2075. It would lower Social Security benefits for higher-paid workers when they retire and raise them for longtime minimum wage workers. It would also require Medicare patients to pay more out of pocket.

Sen. Dick Durbin, D-Ill., said he has been swamped with calls from fellow progressives since he announced he would back the plan despite the Social Security changes he didn't like.

"I believe politicians on the left and the right … have to acknowledge the deficit crisis our nation faces," Durbin said. "This is a report meant to kick-start an adult debate."

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."

AARP Executive Vice President John Rother says the proposals will be more like a menu for lawmakers to choose from, even though they won't vote on the total package. The fact that the report got support from both parties, he says, "would seem to indicate these are not simply going to be dismissed, but that these ideas would be taken seriously."

Democrats control the Senate and White House while Republicans will take the majority in the House in January. Former Sen. Alan Simpson, a Wyoming Republican and co-chairman of the panel, warned people to hold on tight next year when a wave of Republican freshmen dedicated to shrinking government get to town. Simpson said their strong feelings will make for some interesting votes on issues like raising the nation's debt limit.

Edward Coyle, executive director of the Alliance for Retired Americans, says the new GOP majority will push for portions of the deficit plan like raising the Social Security age and lowering overall income tax rates. "Some of it has a much easier shot at getting passed than the whole package," says Coyle, who opposes the changes to Social Security. "We need to be vigilant."

AARP CEO A. Barry Rand said he'd like to see changes to the package as it is weighed.

"Our members are very concerned about the retirement prospects for their children and grandchildren, and believe that lowering Social Security income and increasing health and long-term care costs are the wrong approach, one that would lower the standard of living in retirement for future generations," Rand said.

Tamara Lytle is an award-winning Washington-based journalist.