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Debt Commission Gets Started With 'Everything' on the Table, Including National Sales Tax

Former Sen. Alan Simpson speaks during a dedication ceremony on the University of Wyoming campus Sept. 10, 2009, in Laramie, Wyo. (AP Photo)

President Obama said Tuesday that "everything has to be on the table" as his newly appointed debt commission goes to work, but he would not entertain questions about whether tax increases, included a value-added tax, or spending cuts will get serious consideration. 

"We're not playing that game," the president said. 

Among the proposals that have generated attention recently is the idea of a value-added tax, a form of a national sales tax.  Though Obama has indicated an openness to considering the tax, he said Tuesday that he would not indulge in any speculation. 

"We're not going to say what's in. I'm not going to say what's out. I want this commission to be free to do its work," he said, warning that the country would face a "day of reckoning" if the federal government cannot control its spending. 

Former Wyoming Republican Sen. Alan Simpson will join former Clinton Chief of Staff Erskine Bowles to lead the elite18-member debt commission convening Tuesday -- a panel appointed by Democrats and Republicans to come up with a plan to save America from its spendthrift ways. 

The commission's charge is to produce a deficit no bigger than $550 billion by 2015, an amount equal to about 3 percent of the total U.S. economy. That would require deficit savings in the range of $250 billion or more. 

The deficit for last fiscal year, which ended Sept. 30, was $1.4 trillion. Many projections show the yearly deficit not dipping below 4 percent of the economy over the next decade. 

Peter Orszag, White House budget office director, said in prepared remarks to the commission that persistently high deficits could eventually stifle the economy. 

"The options to further reduce the deficit may not be popular, but they are necessary," he said. 

Simpson said he doesn't know what will make the final recommendations -- due Dec. 1 -- but he is not going to take anything for granted, including the VAT, which would add a charge on all stages of production of a good for sale in the United States

But Simpson said the VAT should not be an additional tax on top of the income tax. 

"To drag this specter of the value added tax like a dead rat through the room without doing
something with the income tax is a fakery," Simpson told Fox News on Monday. "What is this value added tax? I haven't the slightest idea but if you're going mess around in that area or flat tax, you're going to adjust the other tax in accordance." 

The VAT is commonly used in Europe and adds about 17 percent to the price of a good sold in the United Kingdom

Obama said last week that he was listening to arguments for a VAT, but those against it say that it reduces consumer purchasing power. 

"It's like carbon monoxide, you can't see it you can't smell it, but it kills you just as effectively," said British author James Delingpole, who wrote, "Welcome to Obamaland." 

But finding consensus among the panel -- composed of 10 Democratically appointed commissioners and eight Republican appointees -- will be an especially challenging task because it takes 14 votes out of the 18 members to approve a recommendation. 

"This is a suicide mission," Simpson, R-Wyo., said on "Fox News Sunday." 

The options for curbing the deficit -- cutting spending on popular entitlement programs and broad-based tax increases -- are politically toxic, part of the reason, Simpson said, the panel set its deadline after the November midterm election -- so the recommendations couldn't be used by politicians seeking a congressional seat. 

The hope is that the commission can insulate itself from politics and that the requirement for bipartisanship would give both sides political cover. With few exceptions, most successful deficit reduction efforts have been bipartisan. 

"Let's see if we can persuade people to trust each other, come together, and really take some of these tough stands to bring down spending," Bowles, said on "Fox News Sunday." "Everything has to be on the table, whether it's revenue or spending. I personally would like to go after spending first." 

Simpson said there are no sacred cows when it comes to taxes or spending because the minor economic comeback so far this year can do nothing to sustain the rate of debt. 

"If that's the wind, that's got to be a sparrow belch in a typhoon. We can't grow our way out of this. Double rates the growth in 30 years wouldn't grow out of this," he said, adding that the United States is going to borrow to pay for war, homeland security, education and veteran benefits not to mention the cost of obligations through Social Security, Medicare and Medicaid

But finding common ground will be the biggest challenge as 12 of the commission members -- six Democrats and six Republicans -- are currently members of Congress appointed by their party leaders. The other six -- Simpson, Bowles, former Young and Rubicam CEO Ann Fudge, former Federal Reserve Vice Chairwoman Alice Rivlin, Service Employees International Union chief Andy Stern and Honeywell Corp. Chief Executive Dave Cote were appointed by the president. 

Already, interest groups on the left are weighing in, urging Democrats to avoid cutting spending on popular benefit programs like Social Security and Medicare. 

"Simply put, Social Security has not contributed one thin dime to the current deficit. It should not be used as a piggy bank to pay our way out of the fiscal hole we find ourselves in," said Barbara Kennelly, president of the National Committee to Preserve Social Security and Medicare. 

There hasn't been a significant deficit-cutting effort since 1997, when a GOP-led Congress and newly re-elected Clinton came together to produce a balanced budget plan combining a relatively painless set of spending cuts with tax cuts sought by Republicans and a new children's health plan embraced by both parties. That deal was greatly helped by improving deficit projections. 

But the fiscal gap confronting the commission is considerably more daunting. Executive Director Bruce Reed says the debt panel will try to close the 2015 budget deficit from the $793 billion projected by the Congressional Budget Office for Obama's budget down to $520 billion or so. 

Obama will meet privately with the panel for 20 minutes or so and make brief remarks afterward. Federal Reserve Board Chairman Ben Bernanke and Obama's budget chief Peter Orszag will also address the panel. 

The Associated Press contributed to this report.

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