By Larry Jones
July 19, 2010

To rein in out-of-control federal spending, a bipartisan deficit reduction commission will most likely make a number of unpopular recommendations to the President and Congress later this year to address the nations debt and deficit problems. During the July 12 closing session of the National Governors Association annual meeting in Boston, Erskine Bowles told the nations governors the federal debt, which is expected to reach $14 trillion next year, is like a “cancer” that is “going to destroy the country from within.” Bowles, who served as White House Chief of Staff under President Bill Clinton, was appointed by President Barack Obama along with former Wyoming Senator Alan Simpson as co-chairman of the 18-member panel charged with coming up with recommendations to reduce the federal governments annual deficits by three percent of the economy by 2015.

To achieve this goal, both leaders said it will take spending cuts and tax increases. By law, the commission has until December 1 to make its recommendations. As they consider options, Bowles and Simpson are insisting that everything remain on the table—including cutting back or eliminating popular grant programs supported by local governments, adjusting or doing away with tax breaks such as the home mortgage deduction and putting in place a financial trigger for Medicare coverage, all unpopular ideas that have been rejected by Congress in the past.

Although its unlikely Congress will adopt everything the commission suggests, many believe a lot of their recommendations will be adopted because if left undone the national debt and deficit problems will continue to grow out of control; recommendations may offer members of both parties the best chance to agree on a bipartisan approach to tackling a very difficult problem.

Explaining the severity of the debt problem, Bowles said without a reduction in the nations debt, the country will spend $2 trillion by 2020 just to pay for the interest on the debt. He said this is not something that can be solved by economic growth and he warned, “We could have decades of double-digit growth and not grow our way out of this enormous debt problem. We cant tax our way out. Weve got to cut spending or increase revenues or do some combination of that.” He also explained that federal discretionary income is being fully consumed by just three programs: Social Security, Medicare and Medicaid and the rest of federal spending, including spending on two wars, education, veterans and homeland security, is paid for by borrowing from China (which is currently holding $1 trillion in IOUs) and other nations.

If Congress decides to make deep cuts in programs to reduce the national debt, many local priorities may be at risk in the 2012 budget cycle including community development block grants, energy block grants, jobs programs to put Americans back to work, transportation programs, education and job training programs. The White House is already taking steps to bring spending under control. In his fiscal year 2011 budget proposal, the President recommended freezing non'security spending at fiscal year 2010 levels for three years. And looking ahead, White House Office of Management and Budget Director Peter Orszag recently instructed all federal agencies to aim for 2012 spending levels that are 5 percent below the Presidents fiscal year 2011 budget proposal.