1:15pm

Mon November 29, 2010
Economy

Solving Federal Debt Crisis Hinges On Compromises

The debt that haunts us has roots in the past and threatens our future.

This much seems clear from the work of a White House commission that is looking for ways to rein in the federal debt.

The National Commission on Fiscal Responsibility and Reform wraps up its work this week. But members of the bipartisan group may or may not reach a consensus on steps to reduce the red ink.

So, in preparation for the commission's report, NPR is borrowing a page from Charles Dickens and the story of one man's redemption.

A New World View

In A Christmas Carol, an old man wakes up with a whole new view of the world. That's what the authors of the report hope the country will do after they issue their report on the debt this week.

Most of the time, the only people losing sleep over the federal debt are government accountants and professional scolds. But this year, the specter of red ink seems to have a lot more ordinary Americans tossing and turning.

"I think it's a national problem," Bernie Marony told NPR on Election Day. "I think it needs to be solved. And I think we need to live within our means."

Another voter, Didi Wojtal, said: "I am extremely worried about government spending. We need to balance our checkbook like the American taxpayers do."

President Obama insists he is ready to tackle this tough issue. So, when Congress balked at creating a commission to help cut the debt, Obama appointed his own panel.

The 10 Democrats and eight Republicans who make up the commission have been studying the problem for months by reviewing the tax code, discretionary spending and entitlement programs like Social Security.

A Plan For Spending Cuts, New Taxes

And the co-chairs -- former Wyoming Sen. Alan Simpson and Erskine Bowles, who served as President Clinton's chief of staff -- have already gone public with a draft proposal.

As Bowles told a breakfast organized by The Christian Science Monitor, lawmakers can either deal with the rising debt or have a fix thrust upon them by those who've been lending the nation money.

"The problem we face is real," Bowles said. "The solutions are all tough. And what Alan and I decided was, everything had to be on the table."

The Simpson-Bowles plan includes significant spending cuts and new tax revenues. Predictably, Simpson says, it drew immediate protests from both the left and the right.

"We have irritated hopefully everyone in the United States, and especially every group," he says. "The groups have organized against us and will come like harpies off the cliffs with their taloned hands and fingers out. You can be savaged on the right and the left, which is good -- [a] good place."

Another Plan For Cutting The Debt

A second bipartisan group issued its recommendations for cutting the debt a week after Simpson and Bowles unveiled their plan.

While there are important differences, both maps lead in the same direction. For example, both would increase tax revenues not by raising rates, but by cutting out deductions. Income tax rates would actually come down.

Both plans would curtail Social Security benefits for future retirees, while increasing payments to the neediest seniors. In other words, both plans involve compromise.

And chief economist Diane Lim Rogers of the fiscal watchdog The Concord Coalition says both are reasonable.

"As soon as we can get the conservatives to realize that in these proposals are pro-growth tax reform proposals, and the liberals to realize that in these proposals are Social Security reforms that actually strengthen the safety net, as soon as they can realize that, we'll be getting somewhere," she says.

The Challenge Of Digging Out

Even talking about raising tax revenues or cutting spending is difficult while the country is still trying to dig out from the recession. But Rogers notes that none of the proposals would take effect before 2012 at the earliest.

"I think it's possible to start talking about or remind policymakers about the need for fiscal responsibility even in a time when you're running big budget deficits," she says.

Obama has avoided commenting on either of the plans until his own commission has a chance to finish its work. But he told a gathering of business leaders in Japan this month that he's not willing to cut government spending in areas he sees as growth engines, such as education or clean energy.

"We will make sacrifices," Obama said. "But everyone here should know that as long as I'm president, we are not going to sacrifice America's future or our leadership in the world."

A Future That's Not Set In Stone

Of course, unless the government gets control of its debt, it may not have the money, or the borrowing capacity, to make those investments in the future.

But as Dickens wrote, the future is not set in stone.

"Men's courses will foreshadow certain ends, I accept it," Ebenezer Scrooge said in A Christmas Carol. "But if those courses be departed from, the ends must change. Tell me that is so, by what you show me."

On Tuesday's Morning Edition, we explore the choices for dealing with the debt. Copyright 2011 National Public Radio. To see more, visit http://www.npr.org/.