US deficit-cut plan falls short, offers framework

* Plan fails to cross 14-vote threshold to go to Congress

* But it wins backing of 11 commissioners, a majority

* Proposals expected to inform Obama budget, debate

By Kevin Drawbaugh and Donna Smith

WASHINGTON, Dec 3 (BestGrowthStock) – A bold plan to slash the U.S.
budget deficit fell short on Friday of winning the support
needed to trigger legislative action in Congress, shifting the
fiscal responsibility issue to the White House and lawmakers.

The outcome was a sour note, coming the same day the
government said the U.S. unemployment rate jumped to 9.8
percent and as both Democrats and Republicans battled over
expiring tax cuts that, if extended, will only add to the
deficit.

President Barack Obama must introduce a new budget early
next year, and analysts expected the White House could use
portions of the aggressive deficit-cutting plan drawn up by a
presidential commission.

But the outcome was a sobering blow to Obama and a reminder
of how politically volatile resolving the debt crisis will be.

“I don’t doubt our ability to meet this challenge, but our
success depends on our willingness to engage in the kind of
honest conversation and cooperation that hasn’t always happened
in Washington,” Obama said in a statement released by the White
House while the president was in Afghanistan.

Yet the plan found more backing on the commission than many
anticipated, notably with some Democrats embracing social
program cutbacks and some Republicans backing tax hikes.

A formal vote on the plan did not occur. But 11 members
said they supported the plan and seven said they did not. It
needed 14 votes to be sent to Congress as a formal
recommendation. The commission will now disband.

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While not dead, the recommendations will probably need some
high-profile backers from both parties to ever see the light of
day.

“We should not let this proposal fall idly by the
wayside,” said Republican Senator Mike Crapo, a commission
member who backed its proposals to cut federal spending deeply,
raise taxes and kill or narrow a range of tax breaks.

“I have seen too many proposals, good proposals, simply be
shelved. We’ve shown that we can get the majority … needed to
pass this kind of legislation,” Crapo said.

As Europe wrestles with a government debt crisis, the
commission’s work appeared to have galvanized lawmakers around
the need to take firm action soon on reducing a budget deficit
that hit $1.3 trillion in the last fiscal year and slowing the
rapid growth of what is now a $13.8 trillion national debt.

CONRAD BACKS PLAN

“We’ve crossed an important hurdle here and laid out a plan
that will be resurrected because it must be,” said Democrat
Kent Conrad, chairman of the Senate Budget Committee, at the
commission’s last meeting, when he backed the plan.

“Other than the terrorist threat … this debt threat
constitutes the greatest threat to America,” Conrad said.

The commission was set up in February by Obama as the
annual deficit reached levels not seen since World War Two.

It was co-chaired by Erskine Bowles, chief of staff to
Democratic President Bill Clinton, and Alan Simpson, a former
Republican senator.

Former labor union leader Andy Stern, also a commission
member, said he could not back the plan that resulted from 10
months of work, but urged Congress and Obama to act on it.

“This president needs to make sure that by the State of the
Union address (early next year), he has his own plan because
this is the issue of the day,” Stern said.

Polls show voters are worried about the deficit, as they
made clear in this year’s 2010 congressional elections, when
Republicans won control of the House of Representatives and
gained seats in the Senate.

A renewed push to cut the deficit has emerged against the
backdrop of a sluggish economy and high unemployment. The
government said on Friday that the unemployment rate rose to
9.8 percent in November from 9.6 percent in October.

TAX OVERHAUL PROPOSED

The Bowles-Simpson plan proposed a major tax code overhaul
and deep spending cuts to eventually balance the U.S. budget,
reaching every corner of the government and offending special
interests across the political spectrum.

Republicans slammed tax hikes the plan called for and said
it did too little to fix healthcare. Democrats slammed it as
too tough on Medicare and Social Security programs for the
elderly.

The plan envisioned reducing the budget deficit to 2.3
percent of gross domestic product by 2015, from 8.9 percent in
the last fiscal year that ended Sept. 30 — a figure bloated by
efforts to lift the U.S. economy out of its deepest recession
since the 1930s, Bush-era tax cuts and two costly wars.

To accomplish that goal, the plan urged deep cuts in
military and domestic programs starting in 2012, a 15 cent-a-
gallon hike in the gas tax and requiring Medicare participants
to pay more costs themselves. It also recommended raising the
age for receiving Social Security benefits.

The commission’s work was released amid a white-hot debate
over Bush-era tax cuts that greatly boosted the deficit in the
last decade. Extending those cuts would drive the deficit
higher. Obama has argued for letting them lapse for families
earning more than $250,000 a year. Republicans say any lapse
would harm the economy.
(Additional reporting by Andy Sullivan, Alister Bull and Steve
Holland; Editing by Philip Barbara)

US deficit-cut plan falls short, offers framework