Not unexpectedly, the preliminary proposal of President's Obama's bipartisan Commission on Fiscal Responsibility and Reform has met with mixed reviews, from unacceptable to most encouraging.
The commission, created by the President earlier this year to study the long-term effects of past and current deficit-increasing policies and programs and recommend solutions, released a proposal this week that could save the government nearly $4 trillion from 2012 to 2020.
Over $1.4 trillion of the savings would come from discretionary spending, over $700 billion from mandatory spending, over $700 billion from tax reforms, and over $600 billion from paying less interest on debt.
Under this proposal, in 2020, the budget deficit is projected to be to just $382 billion, or 1.6 percent of the projected 2020 GDP. By 2037, the budget would be balanced and then turned into surpluses in subsequent years.
The spending cuts would start gradually in 2012 in order to not disturb the fragile economic recovery, the commission said.
The White House, in a statement released by spokesperson Bill Burton, called the proposal a step in the process and said President Obama would reserve comment on the proposal until the commission presents its finished report.
He respects the challenging task that the Co-Chairs and the Commissioners are undertaking and wants to give them space to work on it, Burton said.
The commission is co-chaired by former financial advisor to President Clinton, Erskine Bowles, and former Republican Senator from Wyoming, Alan Simpson
Anticipating controversy, Simpson said, We'll both be in a witness protection program when this is all over, so look us up.
Congressional Democrats were not amused.
This proposal is simply unacceptable said lame-duck House Speaker Nancy Pelosi, D-CA. Any final proposal from the Commission should do what is right for our children and grandchildren's economic security as well as for our nation's fiscal security, and it must do what is right for our seniors, who are counting on the bedrock promises of Social Security and Medicare. And it must strengthen America's middle class families--under siege for the last decade, and unable to withstand further encroachment on their economic security.
Rep. Jerrold Nadler, D-NY, echoed the Speaker's sentiments.
The recommendations released today in the Fiscal Commission's chairmen's mark are a recipe for economic disaster and social regression. With some exceptions, the recommendations read like the wish lists of right-wing conservatives for the last 50 years, Nadler said.
Increasing the retirement age is a terrible idea and would lead to serious reductions in benefits when our seniors need them most, Nadler said. It simply isn't necessary to tinker with Social Security, which will be solvent for the foreseeable future and adds nothing to the federal deficit.
Nadler condemned the proposal as kowtowing to the ranks of the billionaires' club.
Congressional Republicans, who will take over control of the House in January, were cautiously optimistic.
We appreciate Alan Simpson and Erskine Bowles for their leadership on the Fiscal Commission, and their shared commitment to help address our pressing fiscal challenges, said GOP Reps. Paul Ryan, WI, Jeb Hensarling, TX and Dave Camp, MI, in a joint statement. This is a provocative proposal, and while we have concerns with some of their specifics, we commend the co-chairs for advancing the debate. We will continue to work toward solutions that help spur economic growth and restrain the explosive growth of government spending.
AFL-CIO President Richard Trumka ripped the report.
The chairmen of the Deficit Commission just told working Americans to 'Drop Dead,' Trumka said in a release. Especially in these tough economic times, it is unconscionable to be proposing cuts to the critical economic lifelines for working people, Social Security and Medicare. Some people are saying this is plan is just a 'starting point.' Let me be clear, it is not.
But Maya MacGuineas, president of the Committee for a Responsible Federal Budget, called the propsal most encouraging.
It is truly a remarkable plan, MacGuineas said. This plan does it all - allows time for the economy to strengthen, brings down future deficits and debt, protects the most disadvantaged, makes government more effective and efficient, and promotes economic growth and competiveness.
It's great to see debate among the fiscal commission's members now centering on a bold proposal that addresses each area of the budget, MacGuineas said. While certainly not everyone will agree with each and every recommendation, the proposal certainly would fix our fiscal problems and truly reflects a balanced compromise across party lines.