Second Bipartisan Commission In A Week Warns of Deficit Disaster

In a sign of how much danger the nation's finances could be in, yet another bipartisan group is calling for sweeping changes to federal spending as well as the tax system.

Alice Rivlin, a former Clinton Administration official and co-chair of the group says, "We've gotten ourselves into a very deep hole and it will take awhile to climb out. The basic problem is that federal spending as we look ahead on anybody's projections, grows faster than the economy and revenues don't."

And that problem gets worse even after the recession is projected to be over. By 2025, for instance, all of federal revenues, all of them, will go for interest on the debate and entitlements such as Medicare, Medicaid and Social Security. At that point, the report says, "The Treasury will have to borrow money to finance all of its other obligations-- including defense, homeland security, law enforcement, food and drug inspection and other vital operations."In a sign of how bad they think the debt crisis is, the bipartisan group of 19 people is recommending what some will see as drastic measures:

-- Multi-year spending freezes for both domestic (4 years) and defense spending (five years)-- Establish a new 6.5 percent national Sales Tax dedicated entirely to deficit reduction. -- Increasing the amount seniors would pay for Medicare and reducing future increases in Social Security benefits for wealthy seniors, among other things.-- Eliminating most tax deductions and credits and simplify those that remain -- That includes replacing the deductions for mortgage interest and charitable contributions with 15 percent refundable credits that anyone who owns a home or gives to charity can claim.

Such steps are necessary says Senator Pete Domenici, the other co-chair of the commission, who believes the debt situation is destroying the nation. "This silent killer is eating away at our growth, at our prosperity, at our future," he says.

And Rivlin adds, "We dont know exactly when a crisis would occur, but we think it might be quite soon. And therefore, reining in the debt is an imperative. We've got to do it to ward off an imminent crisis."

The Commission also hopes to spur economic growth which would generate more revenues.

To that end, it proposes a one year FICA or Social Security tax holiday for both workers and employers. That would put money in people's pockets and might make hiring seem more attractive. It would only last one year and the money would be made up later to make Social Security whole.

To further streamline the system and boost economic growth, the report proposes substantial cuts in tax rates in the following ways:-- By 2018, nearly 90 million households (about half of potential tax filers) would no longer have to file tax returns. -- Cut individual income tax rates and establish just two rates - 15% and 27% - replacing the current six rates that go up to 35%.-- And cut the top corporate tax rate to 27% from its current 35%, making the United States a more attractive place to invest.

And in another repudiation of lawmakers such as House Speaker Nancy Pelosi and various interest groups that claim nothing need be done to Social Security, the bipartisan commission makes clear that action is necessary.

Rivlin tells Fox that, "We think it is very important to put social security on a firm financial basis so that people who are now in the labor force and are going to be retiring, know that they will get their benefits. Right now social security is not on a sustainable track."

There are many other changes as well. And while they are controversial, the members of the commission believe they are necessary to avoid a financial catastrophe for the United States.

Together with several other groups they feel they may have some national support for tough action, in part because of the tea party movement.

Senator Domenici says, "I think the tea party movement has caused in many cases some very positive reaction by Americans to focus on and consider ways to reduce deficit spending."

"And I only hope...that they will look at this plan and will not be turned off because they pick one piece or another and say they don't like it. I hope they will look at it as a package and say is this what we were talking about when we took to the streets and talked about how deficits are killing us," he added.

So, yet another bipartisan group is warning the nation it has to change its ways. The details may be difficult to swallow, but more and more recognize something radical has to be done, or the nation will continue to flirt with financial disaster.

And late Tuesday, Erskine Bowles, the co-chair of the Fiscal Commission which has similar recommendations, told reporters, "The era of debt denial is over."

As his 18-member commission works to hammer a final proposal, he said it "will have spending caps - we've not decided amounts or mechanism yet."And just as other bipartisan groups vow, he says, "All spending is on the table, including defense."