Obama's Debt Panel Calls for Sacrifice and Lots of It

While President Obama tooled around Asia this week, his bipartisan Debt Panel sprang a surprise on all of us.

Co-chaired by former Sen. Alan Simpson (R-Wyo.) and former Clinton White House Chief of Staff Erskine Bowles, the panel released a highly controversial report that outlines its recommendations for trimming $4 trillion from the national deficit by taking a knife to some our most sacred cows such as Social Security and by raising the retirement age to 69. France just hiked its retirement age to 62 and it sparked rioting in the streets.

As harsh as these proposals sound, let's put them into perspective. First, in an effort to make Social Security more solvent, the panel recommends reducing the annual cost-of-living increases for many recipients and a cap on the wealthy, or those who don't really need it. Most of us can live with that if it means we get to keep those Social Security checks coming in.

As for raising the retirement age, this will basically not impact anyone over the age of 26 because it won't go into effect until 2050, when the proposed retirement age would rise from 66 to 68 and then to 69 in 2075.  Younger readers should heed the advice of a few generations ago: never trust anyone over, in this case, 26.

There are some proposed cuts and changes that would take place earlier, but they seem kind of minor when you consider the interest on this deficit alone cost us five cents out of every tax dollar we give to the federal government.

Of course, the plan still has to get through Congress and based on the most recent election, do you really think any congressman or senator is going to do something the American voters think they are against at any given moment?  Before the plan even gets to Congress, it has to win final approval from the entire Debt Panel. That's not even close to happening yet.

Worth considering

Still, some of the proposals are worth noting because they make so much sense. For example, they call for reducing Congressional and White House budgets by 15%, freezing federal salaries, bonuses and other compensation at non-Defense agencies for three years.

Who isn't for that? Did you even know federal workers received bonuses? I didn't. Other sensible proposals include slowing the growth of foreign aid, eliminating all congressional earmarks (whatever that means) and selling any excess federal property. Not to mention a 10% reduction of the federal workforce.

The 18-member commission will make its formal recommendations to President Obama on December 1 before going to committees in both houses. No one expects the plan to be adopted by Congress in its current state. But it's certain to touch off a string of debates over the next few months Congress takes on how to reduce the nation's unsustainable long-term debt.

Here's one proposal that seems like a keeper. Lower income tax rates and simplify the tax code. It would also abolish the Alternative Minimum Tax -- the so-called wealth tax -- and reduce tax breaks.

As for eliminating or reducing such well-loved tax deductions as mortgage interest, that's been raised and shot down before.

There are a ton of other recommendations such as increasing the tax on gas by 15%, eliminating funding for commercial space travel and reducing farm subsidies, among others.

When they issued their recommendations, the co-chairmen of the panel, former Republican Senator Alan Simpson and former White House chief of staff under President Clinton, Erskine Bowles, said "America cannot be great if we go broke." And then Simpson added, "We'll both be in the witness protection program when this is all over."