Time to get serious on the debt, deficit

The leaders of President Barack Obama's 18-member deficit reduction commission have presented a timely draft of tough economic medicine to bring the nation's huge debt and deficit under control. Their recommendations should not be dismissed out of hand by either the political left or right.

It is past time to have a grown-up conversation between Congress and the White House on these vital policy issues. As co-chair Erskine Bowles notes, the current interest on the federal debt is about $200 billion and is projected to grow "a trillion dollars in just 10 years." (Paul Ryan, the incoming budget chairman in the U.S. House, says the interest is more than $365 billion per year.)

In terms of government spending, Bowles says, "pretty soon you have no money left for anything else." Of course, this means our nation won't have the capital to fund our military and project our power -- which plays right into the hands of our enemies.

That's why the commission recommends hundreds of billions of dollars in spending cuts -- thus adding pressure on the president to adopt many of them before he unveils his own budget in February.

Democrat Bowles and Republican co-chair Alan Simpson especially raised eyebrows with controversial changes in spending and tax policy, such as increasing the gasoline tax and eliminating the deduction for home mortgage interest as part of an overhaul of the tax code. The commission's interim proposal also includes $100 billion in defense spending cuts, which target weapons programs, health care benefits and overseas bases.

Of course, some legitimately fear that such a hit would take money that Defense Secretary Robert Gates was planning to use for modernization -- basically weapons purchases. (U.S. military spending tops $700 billion a year, and is by far the largest discretionary portion of the federal budget.) There are systems that can be eliminated and when you have, in some cases, 30 layers of bureaucracy you can find at least $100 billion of waste and redundancy.

Regarding Social Security, there are tough choices. You either have to raise the retirement age, cut benefits, boost taxes, or get more out of the current income pool. The commission would gradually hike the retirement age to 68 around 2050 and to 69 by 2075. It would combine various cuts to benefits with an increase in taxes on "wealthier" people. It would also rein in federal spending on the president's recently-passed health care law, including slowing the growth of the Medicare program.

Republicans will not like the tax increases, although the recommendations call for a flatter tax, long sought by fiscal conservatives. Liberal John Podesta, an informal adviser to President Obama, notes the discretionary cuts are deep and "some of them are probably politically untenable, but the framework of equal cuts in domestic and defense spending enforced by hard caps may be tenable" if accompanied by some tax increases.

The commission's final version is due by Dec. 1 and will be the starting point for any plan the Congress and the White House agree upon to reduce the $1.3 trillion budget deficit. The Wall Street Journal hopes this first draft will improve chances for a viable final version by making it look milder by comparison. "At a minimum," the newspaper notes, "the plan's release gives President Obama a chance to appear serious about deficit cutting should he adopt its recommendations."

If the draft plan was adopted in its entirety, the Journal reports, it would reduce the deficit to 2.2 percent of Gross Domestic Product by 2015. Still, despite the many spending cuts and changes to the tax code, it would take until 2037 to balance the budget entirely. Taking 27 years is another sign of how badly we have overspent.

By the way, the commission doesn't address cutting the massive amount of waste, fraud and abuse in government agencies that can't pass an audit. Additional billions of dollars could be saved -- especially regarding Medicare fraud alone -- so the size of the federal government could be reduced by, say 10 or 15 percent. And that would mean there wouldn't be a need for the tax hikes. Eliminating waste, fraud and abuse alone isn't the answer, but it has to be a part of the answer.

In any event, strong fiscal medicine must be taken by the patient starting in 2011. After all, a U.S. financial debt crisis could strike quickly. In the words of Simpson, a crisis here would be "swift and very dramatic like in Greece, Ireland, Portugal or Spain. It won't be like a year to prepare -- it will be 'woosh,' like that."

That's a compelling reason why the elected leaders of both major political parties had better get down to serious negotiating toward an agreement. The commission has thankfully given them an excellent road map to start the journey.

J.C. Watts (JCWatts01@jcwatts.com), chairman of J.C. Watts Companies, a business consulting group, is former chairman of the Republican Conference of the U.S. House, where he served as an Oklahoma representative from 1995 to 2002.