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Originally published April 27, 2010 at 7:32 PM | Page modified April 28, 2010 at 9:15 AM

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Dealing with Debt

Obama: Deficit panel must weigh all options

President Obama said Tuesday that every politically painful choice must be considered — including spending cuts, tax increases, even changing the new health-care law — as he launched what he hopes will be a bipartisan effort to reduce the government's soaring budget deficits.

McClatchy Newspapers

The day in D.C.

Financial regulation: Senate Republicans, who for the second day in a row blocked legislation to rein in Wall Street, floated a partial alternative to a Democratic proposal Tuesday. The plan would prohibit the use of taxpayer funds to bail out failing financial giants of the future and impose federal regulation on many but not all trades of complex investments known as derivatives. It also calls for consumer protections that appear weaker than Democrats and the White House seek, and it would create new regulations on mortgage giants Fannie Mae and Freddie Mac. Senate Majority Leader Harry Reid, D-Nev., said he would hold additional votes later in the week, and he and other Democrats have spent days accusing Republicans of doing the bidding of the big financial firms on Wall Street.

Health care fine-tuning: Facing urgent questions about one of the most popular new benefits of the recently enacted health-care overhaul, the Obama administration Tuesday moved to reassure parents that they would not have to pay additional taxes to keep children on their health plans up to age 27. Last week, after prodding from Health and Human Services Secretary Kathleen Sebelius, several leading national insurance companies said they would offer the extended coverage immediately to parents who buy plans on their own.

Vioxx ruling: A unanimous Supreme Court said Tuesday investors who lost millions betting on the blockbuster drug Vioxx can sue Merck & Co. over whether the pharmaceutical giant provided enough information about the painkiller's risks before it was pulled from the market. The high court agreed with a federal appeals court's decision to allow a class-action securities lawsuit.

Fort Hood fallout: The Obama administration said Tuesday that it will provide more information to Congress about the Fort Hood shootings but continued to defy a subpoena request for witness statements and other documents. After days of negotiations, the Defense and Justice departments informed a Senate committee that they will not comply with congressional subpoenas to share investigative records related to the Nov. 5 shootings at Fort Hood, Texas, which killed 13 people. The agencies said divulging the material could jeopardize their prosecution of Army Maj. Nidal Hasan, the alleged gunman.

Seattle Times news services

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WASHINGTON — President Obama said Tuesday that every politically painful choice must be considered — including spending cuts, tax increases, even changing the new health-care law — as he launched what he hopes will be a bipartisan effort to reduce the government's soaring budget deficits.

"Everything has to be on the table," Obama said after meeting with the National Commission on Fiscal Responsibility and Reform at its first session.

Despite his own campaign promise not to raise taxes on anyone who makes less than $200,000 annually, Obama said that it was a political game to try to get a president to rule things in or out when facing a debt crisis.

"It's an old Washington game, and one that has made it all but impossible in the past for people to sit down and have an honest discussion about putting our country on a more secure fiscal footing," he said in the White House Rose Garden.

"So my message is simple: We're not playing the game."

Underscoring his commitment to consider any recommendations, Obama agreed in private with a Republican demand that the health-care law be open to possible changes, according to commission co-Chairman Alan Simpson, a former Republican senator from Wyoming.

Several Republican commission members asked during its session whether the president's charge to put everything on the table meant they could revisit the recently enacted health-care law, spurring Sen. Dick Durbin, D-Ill., to react.

"This really shouldn't be a forum for revisiting the greatest hits of the latest health-care-reform debate," Durbin said. "Parts of the decisions made there have to be reconsidered here, I'm sure, but I think we need to get beyond that."

Regardless of whether spending cuts or tax increases are ruled out now, opening remarks by members of the panel suggested that those options might be ruled out before the commission's Dec. 1 deadline. To assure bipartisanship, it can make only recommendations to Congress that 14 of its 18 members support.

While many members affirmed that all options must be considered, some Democrats signaled that they would resist reducing spending for cherished programs such as education and health, and some Republicans warned that they'd find it difficult to endorse any tax increases.

"Balancing the budget and reducing the debt, in my mind, are not ends in and of themselves," said Rep. Jan Schakowsky, D-Ill. "We can't afford to skimp on our children's education, assuring access to quality, affordable health care, retirement security, achieving energy independence, investing in our infrastructure, supporting medical research, creating more jobs."

Countered Sen. Mike Crapo, R-Idaho: " ... a significant portion of the solution will be found on the spending side of the ledger."

One area of possible agreement: Sen. Max Baucus, D-Mont., suggested that the panel first try to cut waste and fraud in spending and to collect more in taxes already owed. He said that the IRS had estimated that it failed to collect $345 billion a year in income taxes owed, either because people reported too little income or took too many deductions.

"If we can put a man on the moon, if we can think about landing an astronaut on Mars, we can collect more of the taxes owed," he said. "We should not cut one dime of federal benefits or raise one dime of federal taxes until we have done everything we can to collect the taxes that are already owed."

However, none of those answers will get the job done, budget experts advised the panel. Federal Reserve Chairman Ben Bernanke summed up their advice:

"The reality is that the Congress, the administration and the American people will have to choose among making modifications to entitlement programs, such as Medicare and Social Security, restraining federal spending on everything else, accepting higher taxes or some combination thereof."

Two former directors of the Congressional Budget Office, Rudy Penner, appointed by Republicans, and Robert Reischauer, appointed by Democrats, agreed.

"The budget is on a ruinous path. And getting off that path requires far more policy changes than the American people are used to," Penner said.

Said Reischauer: "Few Americans understand the seriousness of the problem, the consequences of inaction or the degree of sacrifice that is required to fix the problem."

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