UPDATE 4-Obama names deficit panel, gives it broad leeway

* Seeks to balance budget, excluding interest, by 2015

* Panel targets cutting deficit to 3 percent of GDP

* Spending cuts and tax increases on table

* Analysts doubt Congress has will to address deficit
(Adds analysis throughout)

By Patricia Zengerle and Caren Bohan

WASHINGTON, Feb 18 (BestGrowthStock) – President Barack Obama named
a bipartisan panel on Thursday to tackle exploding U.S. budget
deficits and promised it broad leeway to recommend ways to put
the country on a path to fiscal responsibility.

“Everything’s on the table. That’s how this thing’s going
to work,” Obama told reporters after tapping former White House
chief of staff Erskine Bowles, a Democrat, and former Senator
Alan Simpson, a Republican, to lead the 18-member commission.

Obama’s comments suggested the panel would have the
latitude to consider any proposals to cut government spending
— which he warned had become extravagant — and raise taxes.

But any recommendations would have to be approved by the
bitterly divided Congress, which could be reluctant to take the
unpopular steps necessary to stem the tide of red ink amid
heavy lobbying by outside interest groups in the months before
a congressional election.

Obama promised during his campaign that families making
less than $250,000 would not face tax increases but recently
said he was “agnostic” about whether the panel could consider
middle-class tax hikes.

Facing political pressure and investor anxiety over
mounting government debt, Obama asked the commission to come up
with a strategy to balance the budget, excluding interest
payments, in five years.

“I’m asking them to produce clear recommendations on how to
cover the cost of all federal programs by 2015 and to
meaningfully improve our long-term fiscal picture,” he said. “I
have every confidence that they’ll do that.”

To achieve the goal, Obama paired Simpson, a tall, rangy
former legislator from Wyoming, with the bespectacled Bowles,
who has a patrician bearing as a North Carolina banker.

The administration estimates the panel’s recommendations
could bring annual budget deficits down to 3 percent of gross
domestic product. The White House forecast a $1.6 trillion
budget deficit this year, or about 10.6 percent of GDP.

Economists say 3 percent annual deficits could keep the
debt from soaring further, but some fiscal hawks lament that
Obama is not setting a more aggressive goal.

The panel’s recommendations must be reported to Congress by
December 1.

SYMBOLIC GESTURE?

Analysts said the commission would be only a symbolic
gesture unless legislators muster the will to take action.
Obama used an executive order to form the panel because the
Senate was unable to even pass a plan to create its own.

“Both sides need to probably slaughter some sacred cows,
and right now I don’t think that there’s political will on
either side — the well is so poisoned,” said Chris Krueger, an
analyst with Concept Capital, which tracks Washington for
institutional investors.

The commission has been called a way to provide political
cover for Obama and Congress in case they implement unpopular
measures such as raising taxes to close the budget gap.

Republicans, who have remained remarkably unified against
Democratic proposals on a host of issues, made clear they back
spending cuts to trim the deficit and oppose tax hikes.

“Americans know our problem is not that we tax too little
but that Washington spends too much — that should be the focus
of this commission,” Senate Republican leader Mitch McConnell
said in a statement.

McConnell will participate by naming members to the
commission, a spokeswoman said.

With Republicans hoping for big gains in November
congressional elections that could hand them control of the
House of Representatives or Senate, they have little incentive
to support the Democratic president’s efforts.

Obama’s fellow Democrats praised the choice of Bowles and
Simpson, although some worry about shifting focus too soon on
deficit reduction while the economy remains fragile.

“Their selection as co-chairs indicates that the Obama
administration is serious about making this process work,” said
Senate Budget Committee Chairman Kent Conrad, whose similar
proposal failed in the Senate last month.

Obama said encouraging businesses to create jobs would
remain his top priority, but said he had to act on the deficit.
“There’s no doubt that we’re going to have to also address the
long-term quandary of a government that routinely and
extravagantly spends more than it takes in,” he said.

The panel will have 18 members, 12 to be appointed by
Democratic and Republican leaders in Congress, and six by
Obama. No more than four of Obama’s choices will be from the
same political party. Fourteen of 18 votes on the panel will be
needed to report recommendations.

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(Additional reporting by Steve Holland and Thomas Ferraro;
editing by Todd Eastham)

UPDATE 4-Obama names deficit panel, gives it broad leeway