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Deficit Commission’s recommendations include 15-cent gas tax increase

WASHINGTON — A tough new cost-cutting playbook submitted by the co-chairmen of President Barack Obama's deficit commission drew critical support from the chairman and senior Republican on the Senate Budget Committee Wednesday.

But other panelists voiced opposition or serious reservations, underscoring deep divisions on the issue.

One of the commission’s recommendations is to fully fund the transportation trust fund by dedicating a 15-cent-per-gallon increase in the gas tax rather than relying on deficit spending. It also would limit spending if necessary to match the revenues the trust fund collects each year.

The Commission recommends gradually increasing the per-gallon gas tax by 15 cents between 2013 and 2015. “Before asking taxpayers to pay more for roads, rail, bridges and infrastructure, we must ensure existing funds are not wasted,” the commission’s report stated.

“Congress should limit trust fund spending to the most pressing infrastructure needs rather than forcing states to fund low-priority projects.”

Transportation for America Director James Corless was quick to applaud the gas tax inclusion. He said while “new revenue is deeply necessary, it is hardly sufficient. As Simpson and Bowles acknowledge, any new revenues must be coupled with significant reforms and a commitment to spending existing funds wisely. We urge the full Commission to include the gas tax increase in its final proposal and urge Congress to support the debt commission's call for reform by conditioning any increase in revenue on a rewrite of a long-term federal transportation bill that prioritizes rebuilding and repairing our existing infrastructure; enacts benchmarks and objectives for every federal dollar; and, ensures that any new construction increases travel options for all Americans.”

"We are … encouraged that the report emphasizes the vital link between transportation and balancing the federal deficit," said John Horsley, executive director of the American Association of State Highway and Transportation Officials. "This crucial investment in transportation will pay huge dividends in the form of safer highways and transit systems for generations to come, while creating and sustaining hundreds of thousands of good paying jobs today."

The Colorado Contractors Association also was quick to weigh in and Tony Milo, the group’s executive director said “Hiking the federal gas tax to adjust for inflation is well over a decade past due and represents one small, responsible step toward restoring our nation’s deteriorating system of roads, bridges and transit infrastructure while creating desperately needed jobs.”

Even critics of the plan depicted the recommendations of the commission's co-chairmen as a good start on the road to getting the nation's fiscal house in order.

As the commission convened Wednesday to discuss the call by Erskine Bowles and Alan Simpson for raising the Social Security retirement age, slashing spending and increasing the motor fuel tax, Sens. Kent Conrad, D-N.D., and Jeb Gregg, R-N.H., said that despite their reservations, they feel the fiscal course of the country requires their support.

Resistance to the commission's austere deficit-reduction recommendations is certain, not only because of the idea of raising the Social Security retirement age, but also because of proposed cuts to Medicare, curtailment of tax breaks and a doubling of the federal tax on a gallon of gasoline.

"There are no easy fixes here, so while I do not agree with all parts of the cochairmen's final proposal, I will support it because it represents a step forward that we urgently need," said Gregg, the Budget Committee's top Republican who's retiring from the Senate. "Inaction on our debt crisis is not an option at this point."

Other members of the panel voicing support included Alice Rivlin, White House budget director in the Clinton administration; David Cote, CEO of Honeywell International; and Ann Fudge, a former chief executive of Young & Rubicam.

That puts seven of the panel's 18 members declaring support for the proposal. House Budget Committee Chairman John Spratt Jr., D-S.C., who lost a reelection race last month, said he's leaning in favor of the plan and Sen. Tom Coburn, R-Okla., seemed to lean in favor as well.

But Rep. Jan Schakowsky, a liberal Democrat from Illinois, told the panel she could not support the plan, claiming it proposed disproportionate cuts in social programs, particularly slashing at federal programs for seniors. She said the plan should have paved the way toward "a more robust Social Security."

Also, Rep. Paul Ryan, R-Wis., a sponsor of a competing deficit-reduction plan, signaled he would oppose the plan, saying it "doesn't sufficiently fix the health care problem." He said the plan embraces implementation of Obama's health care overhaul bill and raise taxes by a total of $1 trillion over the upcoming decade.

And Rep. Jeb Hensarling, R-Texas, praised the co-chairmen for "simply putting a plan on the table," but indicated he could not support the plan, citing concerns about parts that would result in higher taxes.

The plan needs the vote of 14 of the panel's 18 members to be officially conveyed to Congress.

"Are there 14 votes here? I have no idea," Gregg told reporters at the conclusion of Wednesday's meeting. The panel will vote on Friday.

Bowles, a Democrat and former White House chief of staff under President Bill Clinton, and Republican Simpson, a former senator, released a revised version of their plan earlier Wednesday.

"The era of debt denial and the denial of its consequences is over," said Bowles, adding, "we have started an adult conversation that will dominate the debate until the elected leadership in Washington does something real."

Simpson said he understands the predicament of lawmakers facing tough decisions, saying they must be ready to confront groups "waiting out there in temples around the city to shred this baby to bits." The Wyoming Republican told congressional members of the commission "there may be less cash in your Christmas stocking for the next election."

Obama named the commission in hopes of bringing a deficit-fighting plan up for a vote in Congress this year, but it appears to be falling well short of the 14-vote bipartisan supermajority needed.

A new version of the plan makes mostly minor changes to a draft that whipped up enormous controversy when unveiled earlier this month. Some domestic spending cuts are modestly higher than previously proposed, and health care savings from overhauling the medical malpractice system would reap less than proposed earlier this month.

Even with all of the sacrifices, the plan would fail to balance the budget — leaving a deficit of $421 billion in 2015 — but would stabilize the national debt at a economically sustainable level compared to the size of the economy.

Unlike their original proposal, Bowles and Simpson stop short of calling for caps on medical malpractice awards. Instead they recommend changes in how awards are made.

But other proposals remain the same. Among them are a gradual increase in the Social Security retirement age to 68 by 2050 and 69 by 2075, using a less generous cost-of-living adjustment for the programs and increasing the cap on income subject to Social Security taxes. The early retirement age would increase from 62 to 64 along the same timetable.

The plan also retains a three-year freeze on federal worker pay and the elimination of 200,000 workers from the federal payroll through attrition.

Other recommendations:

Impose tight "caps" on the agency budgets adopted by Congress each year, including a near-freeze on the Pentagon's budget. Eliminate congressional pet spending projects known as "earmarks." Reduce the corporate income tax rate to 28 percent from 35 percent and stop taxing the overseas profits of U.S.-based multinational corporations, and Overhaul individual income taxes and corporate taxes, giving Congress the choice of reducing the top rate to as low as 23 percent and no higher than 29 percent. The lower the rate, the fewer the tax credits and deductions that would be available to taxpayers.
Under one scenario proposed by Bowles and Simpson, taxpayers would face three tax brackets of 12 percent, 21 percent and 28 percent. Taxpayers would still be able to claim an earned income tax credit and child tax credit as well as all standard deductions and exemptions. Capital gains and dividends would be taxed at ordinary income tax rates. Taxpayers could claim a mortgage interest deduction up to $500,000, but only on their primary residence.

If Congress does not undertake a comprehensive overhaul of the tax system by 2013, the plan calls for a "fail-safe" provision that would trigger across-the-board reductions in tax breaks, designed to raise revenue by $80 billion in 2015 and $180 billion in 2020.

Bowles was White House chief of staff when former President Bill Clinton negotiated a balanced budget plan in 1997; Simpson is a former GOP senator from Wyoming. Republican senators seem more likely to vote for the plan than their rigidly anti-tax increase House counterparts.

A supermajority of 14 of the 18 panel members would have to approve recommendations for a possible vote in the lame-duck session of Congress. That seems out of reach, but Bowles says it's just as important to have jump-started a national debate on what it'll really take to bring the deficit under control.

The Trucker staff may be contacted to comment at [email protected] .

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