Senate says 'no' to federal debt commission Obama endorsed

McClatchy NewspapersJanuary 26, 2010 

WASHINGTON — The Senate on Tuesday rejected a plan to create a powerful commission that would recommend ways to slash future federal budget deficits, but the close vote underscored that tackling the problem is an increasingly urgent priority.

The Senate voted 53-46 to approve the commission plan, but under Senate rules, 60 votes were needed for passage.

"We are on an utterly unsustainable course, "said Senate Budget Committee Chairman Kent Conrad, D-N.D. "Trying what we've been doing is a proven failure."

The majority — which included a rare bipartisan coalition of 36 Democrats, 16 Republicans and an independent — favoring the plan championed by Conrad and Sen. Judd Gregg, R-N.H., sent a signal that lawmakers from both parties want to curb deficits even if that requires some unpopular steps, such as cutting spending on popular programs or raising taxes.

President Barack Obama, who supported the commission, is considering creating a deficit-cutting panel by executive order, and Democratic congressional leaders are discussing setting up a less powerful version of the Conrad-Gregg commission.

Tuesday's vote came about two hours after the nonpartisan Congressional Budget Office starkly described the fiscal stakes the country faces.

Without dramatic changes in policy, the CBO said, the fiscal 2010 deficit should reach $1.35 trillion, slightly less than last year, but still the second biggest deficit since World War II as a share of the economy.

It estimated that the national debt — the total of annual federal budget deficits — should reach $8.8 trillion this year, or 60 percent of the gross domestic product, the annual value of the nation's goods and services. That figure should climb to 67 percent by the end of the decade, as deficits average $600 billion annually, the CBO projected. History shows that such massive government debt typically slows a nation's economic growth, retarding the advance of living standards.

The close Senate vote, and the spirited debate that preceded it, sent a strong signal that fiscal issues may dominate Washington's agenda this year.

Obama is expected to announce steps Wednesday in his State of the Union address aimed at paring the deficit, including a three-year freeze on non-defense discretionary spending, the spending that lawmakers set annually. He plans to unveil his fiscal 2011 budget on Monday.

The proposal the Senate rejected Tuesday would have created an 18-member commission that comprised 10 Democrats and eight Republicans. It would have proposed funding changes for the politically sensitive programs that Congress and the White House traditionally are reluctant to change — notably cuts to Social Security and Medicare — and higher taxes.

If 14 of the 18 panel members agreed on a plan in a vote after the Nov. 2 midterm elections, the plan would have been submitted to Congress, which then would have been required to vote on it by Dec. 23. A three-fifths majority of each house of Congress would have been needed for passage.

Congressional leaders were skittish about approving an independent commission: They didn't want the legislature's power diluted, and they didn't want to be forced into making difficult choices about cutting popular retirement and health care programs or raising taxes.

"Two things most define a senator. Senators can amend legislation, even with different subjects, and senators can debate legislation, sometimes at length. The Conrad-Gregg proposal curtails both of those defining powers," said Senate Finance Committee Chairman Max Baucus, D-Mont.

Spurred by Baucus, the Senate voted 97-0 to exempt Social Security from an expedited decision-making process, which would make it more difficult for any deficit-reduction task force to overhaul federal budgets.

Baucus' plea just before the vote illustrated why it's so hard to cut the program: He cited "hardworking Americans" who rely on it for survival. "Why in the world would we cut Social Security?" Baucus asked. "Show American seniors we're taking action to protect them."

Conrad wasn't buying it.

"All of us know the way the game is played," he said, arguing that Baucus' idea would lead to amendments that would allow lawmakers to avoid the tougher decisions.

Still, congressional leaders said they got the message.

"If Democrats didn't share America's economic urgency, we would deserve to lose more seats," said House Majority Leader Steny Hoyer, D-Md.

The CBO's dire picture was just the latest in a series of fiscal alarms. Medicare's trustees warned last year that its hospital trust fund will be exhausted by 2017. Social Security, according to its trustees, is expected to begin paying out more than it collects in 2016, and its disability fund is likely to run out of money by 2020.

The CBO said Tuesday that while the debt as a share of the GDP should shrink starting in 2011, that assumes that Bush administration tax cuts that are set to expire at the end of this year won't be continued, a risky assumption.

Even if current policies remain intact — which is unlikely, since Obama is expected to seek more money for the Afghanistan war as well as a jobs creation bill soon — the CBO still sees the national debt growing to $15 trillion by 2020. As a result, net interest payments on that debt, projected at $207 billion this year, should more than triple by the end of the decade.

The CBO also doesn't see much help from the economy.

"Economic growth in the next few years will probably be muted in the aftermath of the financial and economic turmoil," CBO Director Douglas Elmendorf said. "Experience in the United States and in other countries suggests that recovery from recessions triggered by financial crises and large declines in asset prices tends to be protracted."

ON THE WEB

December labor report

December consumer confidence survey

Committee for a Responsible Federal Budget analysis of 2010 spending

Congressionall Budget Office economic and budget outlook

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