US panel proposes $4 trillion in deficit cuts, including defence

By Arun Kumar, IANS
Thursday, November 11, 2010

WASHINGTON - A bipartisan panel set up by President Barack Obama to reduce America’s burgeoning deficit has proposed slashing spending at the Pentagon and wiping out more than $100 billion a year in popular tax breaks

It has also proposed curbing increases in social security benefits as part of an aggressive plan to rebalance the federal budget according to preliminary proposals released Wednesday by fiscal commission co-chairmen.

The report from Erskine Bowles and Alan Simpson recommends spending cuts beginning in 2012, as well as tax reform and other ways to reduce the deficit by $4 trillion over the next decade. Three quarters of the $4 trillion would be achieved through spending cuts — including defence — and the rest from more tax revenue.

“America cannot be great if we go broke,” wrote Bowles, former White House chief of staff under Democrat President Bill Clinton, and Simpson, a former Republican senator from Wyoming.

Among the proposed defence cuts: Freeze noncombat military pay at 2011 levels for three years to save $9.2 billion and reduce overseas bases by one-third to save $8.5 billion. It would also direct $28 billion in cuts already proposed by Defence Secretary Robert Gates toward deficit reduction.

Outside of Defence, the report recommends eliminating 250,000 contractors, saving $18.4 billion, and freezing federal pay for three years, saving $15.1 billion.

The 18-member commission will make formal recommendations to Obama Dec 1.

The preliminary report recommends that taxes be capped at 21 percent of gross domestic product. It would also limit federal spending initially to 22 percent of the economy and eventually to 21 percent.

It also proposes close to $200 billion in domestic and Defence spending cuts in 2015. The report would lower income tax rates and simplify the tax code. It would abolish the Alternative Minimum Tax — the so-called wealth tax — and reduce tax breaks.

The report aims to make Social Security solvent over 75 years through a number of measures, including smaller benefits for wealthier recipients, a less generous cost-of-living adjustment for benefits, and a very slow rise in the retirement age (from 67 to 68 by 2050; rising to 69 by 2075). It also would expand over 40 years the amount of workers’ income subject to the payroll tax.

(Arun Kumar can be contacted at

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