–President Instructs Deficit Panel To Consider All Options
–Fed’s Bernanke Says ‘Significant Changes’ Needed To Fiscal Policy
–Republicans Focus On Spending Cuts, Dems Seek To Protect Key Programs

By John Shaw

WASHINGTON (MNI) – Whatever else may have been lacking in
Washington this week, it wasn’t words about the severity of the nation’s
fiscal problems.

Both at the first meeting of the newly appointed Fiscal
Responsibility and Reform Commission and at a day-long budget summit
hosted by the Peterson Foundation, top administration officials,
congressional budget leaders, and respected budget experts agreed the
U.S.’s fiscal policy is moving into very dangerous territory.

President Obama met Tuesday with the fiscal panel he created by
executive order and he urged it to carefully consider all options to
attack the U.S.’s long-term budget deficits.

“Everything has to be on the table,” he said in remarks after the
meeting, adding “I want this commission to be free to do its work.”

Obama said the nation faces “long-term, structural deficits, which
threaten to hobble our economy and leave our children and grandchildren
with a mountain of debt.”

The president said he inherited a $1.3 trillion budget deficit when
he assumed office in January of 2009 and acknowledged that policies he
has pushed would add about $1 trillion to the budget deficit over a
decade.

Obama said the administration has pushed pay-as-you-go budget
enforcement rules, identified more than $20 billion in savings from
government agencies and imposed a freeze in non-security discretionary
spending over three years.

“But all these steps, while significant are simply not enough,” he
said.

White House budget director Peter Orszag delivered remarks to the
panel and urged the group to offer sound recommendations — however
difficult they may be.

“The options to further reduce the deficit may not be popular, but
they are necessary,” Orszag said.

Federal Reserve Board Chairman Ben Bernanke also issued a stern
fiscal warning, saying that “without significant changes to current
policy, the ratio of federal debt to national income will continue to
rise sharply.”

The National Commission on Fiscal Responsibility and Reform is
chaired by former senator Alan Simpson and former White House chief of
staff Erskine Bowles. The commission includes the chairmen and ranking
members of the Senate and House Budget committees, the chairman of the
Senate Finance Committee, and a former White House budget director and
vice chairman of the Federal Reserve Board.

The panel includes some of the fiercest partisans of recent budget
battles, including five congressional Republicans who appear to believe
that tax increases should be off the table for fixing the U.S.’s fiscal
challenges. It also includes several representatives of Democratic
congressional leaders who argue that job creation is more important than
deficit reduction and that key social programs should be protected.

Obama created the commission on Feb. 18 by executive order after an
attempt by lawmakers to create a panel by statute failed in the Senate.
The commission is charged to issue a report by Dec. 1 that would cut the
deficit to about 3% of gross domestic product by fiscal year 2015 and
begin slowing the growth of debt over the long term.

In order for the panel to issue recommendations, 14 of the 18
members need to reach an agreement.

Analysts say it will be very difficult for this panel to reach an
agreement, but some hope the debate generates ideas that could be useful
in future budget deliberations.

Speaking to the fiscal summit the day after their first meeting,
Simpson and Bowles said their panel will try to develop a bipartisan
consensus on the precise nature of the nation’s fiscal problems and the
range of solutions that could be implemented to fix these problems.

“The American people know something is very, very wrong,” Simpson
said, adding that a critical goal of his panel is to “educate the
American public” about the specific nature of the U.S.’s fiscal problem.

He said the recent economic crisis may allow for consideration of
budget reforms that were politically unacceptable when earlier budget
commissions were convened such as the 1994 Kerrey-Danforth panel which
he served on.

Bowles said the 18-member panel will use a “real set of numbers” by
the Congressional Budget Office and the actuaries of the Social Security
and Medicare programs.

Once the scope of the problem is clearly identified, Bowles said,
the commission will try to outline a range of options and then coalesce
around a package of recommendations.

“If we don’t change and make big changes, we’re heading for
disaster,” Bowles said.

“The options are clear. The solutions are relatively easy to see,”
Bowles added.

The Peterson Foundation’s day-long fiscal summit heard from former
President Bill Clinton, former Federal Reserve Board Chairmen Paul
Volcker and Alan Greenspan, former Treasury Secretary Bob Rubin and
Orszag.

Rubin said the U.S.’s fiscal position is deeply troubling. “I’m
more worried about this than at any time in my lifetime,” he said.

** Market News International Washington Bureau: (202) 371-2121 **

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