–Analysts Await Budgets of Pres. Obama, Rep. Ryan, Sen. Conrad
–Experts Say New Reports Show Severity of Problem, Outline Solutions
–Concord Coalition’s Bixby: ‘We’ll Know By March’ If Budget Deal Looms

By John Shaw

WASHINGTON (MNI) – When it comes to budget politics in the United
State, only the foolhardy offer hard deadlines and make specific
predictions.

But in the wake of the release of three sweeping reports in the
last month about the impending fiscal crisis in the U.S., many budget
experts are willing to make this prediction: it will be clear by early
next spring if the U.S.’s fiscal debate has turned a corner and is
focusing on finding solutions to the nation’s increasingly serious
fiscal outlook or if a decade-long budget stalemate will continue.

“We should know by March if we’re about to turn the corner on
fiscal policy,” says Bob Bixby, the executive director of the Concord
Coalition.

“By that time the three key players will have stepped forward with
their new budgets: President Obama, Kent Conrad and Paul Ryan. We will
soon see if these plans include any of the tough solutions that these
commissions have come up with,” he said.

Obama will release his new budget in February. Conrad, the
Democratic chairman of the Senate Budget Committee, and Ryan, the
incoming Republican chairman of the House Budget Committee, will offer
their fiscal alternatives by March.

“When we look at these three budgets we’ll know if it’s
business-as-usual or whether we’re really going to go to work on the
deficit problem,” Bixby said.

Budget experts say they are encouraged by favorable response to the
hard-hitting fiscal report by the National Commission on Fiscal
Responsibility and Reform.

The panel voted 11 to 7 Friday to endorse a nearly $4 trillion
deficit reduction plan.

The package failed to garner the 14 votes that are needed to send
it directly to Congress for prompt consideration. But it secured the
support of some key congressional members of the panel such as Senate
Budget Committee Chairman Kent Conrad, Senate Majority Whip Dick Durbin
and two Republican senators, Tom Coburn and Mike Crapo.

And Ryan, who is likely to be a key GOP leader on fiscal issues,
said he will incorporate much of the report into his new budget next
year.

The two Republican leaders in Congress issued careful but mostly
positive statements Friday about the plan developed by the panel’s
chairmen, Alan Simpson and Erskine Bowles.

House Republican leader John Boehner, the incoming House speaker,
called the plan a “sobering look at the tough choices that lie ahead.”

In a separate statement, Senate Republican leader Mitch McConnell
called the plan a “bold attempt to provide a pathway back to a
sustainable economic future for our country.”

The Simpson-Bowles plan calls for about $4 trillion in deficit
reduction between 2012 and 2020. To achieve this, it calls for $1.6
trillion from discretionary savings, $556 billion in entitlement
savings, $785 billion by scaling back so-called “tax earmarks,” and $673
billion in interest savings.

The plan would bring the federal budget deficit down to 2.3% of
gross domestic product by 2015. It would reduce the nation’s debt to 60%
of GDP by 2023 and to 40% of GDP by 2035.

The plan calls for fiscal changes that would bring federal spending
down to about 21% of GDP and boost revenues to bring them up to 21% of
GDP.

In addition to this report, former Senate Budget Committee Chairman
Pete Domenici and former White House budget director Alice Rivlin
released a fiscal overhaul plan a few weeks ago that would secure nearly
$6 trillion of budget savings by 2020.

The plan by Domenici and Rivlin would restructure major spending
programs such as Social Security and Medicare, place a multiyear freeze
on many domestic and defense programs and fundamentally overhaul the
U.S. tax system.

Domenici and Rivlin co-chaired a budget project that was sponsored
by the Bipartisan Policy Center.

In their report, Domenici and Rivlin call for a one year payroll
tax holiday in 2011 which would suspend Social Security payroll taxes
for employers and employees. This is an effort to boost the economy in
the short-term. Domenici said it would be effectively a $650 billion tax
cut that would stabilize and strengthen the American economy.

The bulk of their report focuses on driving down the deficit.
Between 2012 and 2020, it outlines $2.7 trillion in spending savings,
$1.9 trillion in tax expenditure savings, $435 billion in new revenues
and $877 billion in debt service savings.

Domenici and Rivlin said their plan would stabilize the federal
debt below 60% of GDP by 2020. It would reduce federal spending from 26%
of GDP to 23% by 2020. Under their plan, revenues would reach 21.4% of
GDP by 2020.

And several weeks ago, the Peterson-Pew Commission on Budget
Reform issued a report in which they outlined a host of budget process
reforms to bring the budget closer to balance–and keep it there.

Bill Frenzel, a former Republican congressman who is now a guest
scholar at the Brookings Institution, said he is encouraged by the
deficit cutting ideas, but added that by early next year it will be
critical for policymakers to offer specific budgets.

“It’s going to be very important to see what kind of budget remarks
the president makes in his State of the Union speech in January and what
is in his new budget in February. That is going to be huge,” he added.

** Market News International Washington Bureau: (202) 371-2121 **

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