Deficit Panel to Unveil Plan Wednesday but Vote Friday

CNBC.com with Reuters

A presidential commission on balancing the U.S. budget will deliver a final report on its deficit-cutting plan Wednesday but delay a vote on the proposal until Friday, reflecting sharp divisions within the bi-partisan panel.

National Commission on Fiscal Responsibility and Reform co-chairmen Erskine Bowles, and Alan Simpson.
Scott J. Ferrell | CQ- Roll | Getty Images

In a press conference on Tuesday, the commission's co-chairmen — former Republican Senator Alan Simpson and Erskine Bowles, who was chief of staff for President Bill Clinton — said they would meet the Dec. 1 deadline for delivering a plan.

But after failing to nail down 14 votes among the commission's 18 members — a super-majority threshold set when the panel was created in February — they said they would wait until Friday to vote on the proposal.

Simpson and Bowles released a draft plan on Nov. 10 that urged spending and benefit cuts and a major tax overhaul. Working from that draft, they have sought a compromise acceptable to 12 other commission members.

"Our goal...has been to start an adult conversation here in Washington about the dangers of this debt and the deficits we are running," Bowles said at the press conference. "It is the exact same conversation that every family, every single business, every state and every municipality has been having for the last several years."

Bowles added: "The era of deficit denial in Washington is over."

Debt Commission Co-Chairs on Negotiations

After months of meetings and debate, the commission's work has painted a harsh picture of the fiscal choices ahead for the United States, while also showing starkly how difficult it is to achieve bipartisan consensus on facing up to them.

The rough shape of their work so far will emerge soon, but lobbyists and lawmakers said details were still in flux, with the Medicare and Medicaid health programs seen as key sticking points, along with Social Security pensions, defense spending and the mortgage interest tax deduction.

Simpson, a veteran like Bowles of Washington's long-running budget deficit wars, said he expected the final plan to attract sharp criticism from all sides of an issue that touches virtually every corner of U.S. society.

"They're going to rip this thing to shreds and do it with zeal,'' Simpson said. "We will listen now in the next few days to the same old crap I've been dealing with in all my public life—emotion, fear, guilt and racism. When people use emotion, fear, guilt and racism on you, you use facts on them, which really irritates them.''

The $1.3-trillion deficit, near levels not seen since World War Two, adds annually to the fast-rising national debt.

The International Monetary Fund estimated gross U.S. government debt, counting the Medicare and Social Security programs, to be 92.7 percent of gross domestic product, or GDP. That compares to 225.9 percent in Japan, 118.4 percent in Italy, 84.2 percent in France and 81.7 percent in Canada.

A CNBC-AP poll Tuesday found a high level of U.S. public concern over the issue, with 54 percent of those surveyed saying taxes will have to be raised and services cut. (Click here to see CNBC poll.)

Voters vented their concerns about the deficit earlier this month, but financial markets have registered little worry. Investors continue to pour money into U.S. Treasury bonds.

With another sovereign debt crisis—this time in Ireland—rocking Europe, U.S. debt still looks like the world's safest capital haven, though budget hawks warn this could change quickly if markets lose faith in U.S. credit-worthiness.

The National Commission on Fiscal Responsibility and Reform, the panel's formal name, was set up to find ways to balance the budget, excluding interest payments on the debt, by 2015 and "meaningfully improve the long-run fiscal outlook.''

Obama underscored his deficit concern Monday by calling for a two-year freeze on civilian U.S. federal worker pay, but no substantive action is expected this year on the deficit.

Whether Congress tackles it next year will depend in part on the Bowles-Simpson commission's result.

That will be decided not just by how many, but whose votes back the plan, said Michael Linden, associate director for tax and budget policy at the Center for American Progress, a liberal think tank.

The commission has six members who are not in Congress and 12 who are, including some powerful committee chairmen.

"I could imagine a scenario in which they get 11 or 12 votes,'' Linden said. "If they do that with, say, all six non-elected members and three Republicans and three Democrats, that could be pretty powerful. If they get only seven or eight (votes), I think it will be less influential.''

—Reuters provided most of the reporting for this article.