Panel says major changes needed to avoid economic crisis

Major changes to spending, tax and entitlement programs will be needed to head off a financial crisis, members of the bipartisan White House fiscal commission said during its first meeting Tuesday.

“If we don’t face up to these deficits and rising debt, we will have a tremendous economic crisis,” said the panel’s Democratic co-chairman, Erskine Bowles. “We do need an economic plan.”

Commission members from both parties and experts who testified said proposals for fiscal “sustainability” must be implemented or the next generation of Americans will suffer a lower standard of living. 

“This goal can be achieved by bringing spending, exclusive of interest payments, roughly into line with revenues,” Federal Reserve Chairman Ben Bernanke told the group. “Unfortunately, most projections suggest that we are far from this goal, and that without significant changes to current policy, the ratio of federal debt to national income will continue to rise sharply.”

Higher levels of debt would mean higher interest rates, larger interest payments, more taxes, less economic growth and less flexibility for policymakers to address future financial crises, Bernanke said.

President Barack Obama has asked the 18-member commission — which includes six Democratic and six GOP lawmakers, as well as six people selected by the president — to produce a fiscal reform plan in December that will significantly reduce the multitrillion-dollar deficit. Democratic leaders in Congress have pledged to bring up the proposals for floor votes the same month. At least 14 members must support the commission’s final package of recommendations.

Obama and the commission co-chairmen said Tuesday that “everything will be on the table,” including changes to entitlement programs and spending cuts that will be unpopular with Democrats and tax increases that Republicans won’t like.

“I’m not going to say what’s in, I’m not going to say what’s out,” Obama said. “I want this commission to be free to do its work.”

Former Sen. Alan Simpson (Wyo.), the commission’s Republican co-chairman, told the group to expect attacks from both sides.

“None of us will gain from this, but we sure all do have skin in the game, and that’s our children and grandchildren,” he said. “Anything we actually do will be met by howls of anguish. … The extreme left and extreme right will savage our final product.”