By Larry Jones and Ron Thaniel
November 22, 2010

The Chairmen of an 18-member bipartisan deficit reduction commission on November 10 made public their proposal for solving the nation's fiscal problems. It includes recommendations for reducing the nation's record high federal budget deficit and trimming the national debt. Recommendations call for significant reductions in federal spending, capping revenues, reforming and simplifying the tax code, reducing health care costs and strengthening Social Security. At this point the proposal only enjoys the support of the co-chairmen, Erskine Bowles, who served as chief of staff to former President Bill Clinton and Alan Simpson, a former Wyoming Senator who served as the No. 2 Republican in the Senate for a decade. Before it can be advanced to Congress as the commission's recommendation, it must win support from at least 14 of the panel's members.

The commission was established last February by President Barack Obama to make recommendations that will bring the federal budget in primary balance so that all operations and programs are paid for by 2015 and so that meaningful progress is made towards improving the long-term fiscal outlook. Since that time members have been working to develop and reach consensus on recommendations that must be submitted to the President and Congress by the end of November.

Some of the recommendations called for in the proposal could have a significant impact on local governments. Over the long term it calls for $ 4 trillion in deficit reduction between now and the year 2020 and provides more than 50 specific ways to scale back federal programs. In the short run it calls for rolling back domestic and defense discretionary spending to FY 2010 levels for FY 2012; and requires a one percent cut in discretionary spending every year from FY 2013 through FY 2015. By 2015, discretionary spending would be $204 billion (16%) below the amount in the President's budget and $127 billion below the Congressional Budget Office baseline.

Although the proposal does not recommend cuts in specific programs, it calls for $100 billion in savings from domestic discretionary programs and $100 billion in savings from defense programs by 2015. If these targets are adopted, a number of local priorities supported by the Conference of Mayors including community development block grants, the COPS program, energy block grants, key transit and rail programs, and job training assistance will undoubtedly face drastic cuts or elimination. It also calls for a number of highly controversial actions including reducing annual cost-of-living increases in Social Security benefits, curbing the growth of Medicare, and eliminating the very popular mortgage interest deductions.

With the 112th Congress expected to take up the long-delayed reauthorization of the federal surface transportation law, the proposal recommends raising federal taxes on gasoline and diesel fuel by fifteen cents per gallon beginning in 2013 to pay for transportation infrastructure improvements funded through the Highway Trust Fund. With this increase, the intention is to end the practice of transferring general funds to bailout the Highway Trust Fund. Since 2008, three general fund transfers have been made to the Highway Trust Fund to keep its programs solvent. The Conference of Mayors will not support an increase in federal taxes on gasoline and diesel fuel until reforms are made to the federal surface transportation program that redirects significant decision-making and transportation investments to cities and metropolitan areas. Two-thirds of the country lives in cities and metropolitan areas, home to the worst traffic jams and its oldest roads, bridges, and transit systems, yet, the federal surface transportation program continues to allocate decision-making and funding to states who direct a lion's share of those resources to new road and highway projects outside cities and metropolitan areas.

As noted previously, the proposal recommends discretionary spending caps. This recommendation could have a detrimental impact on transportation programs that receive funding from the general fund, including key transit programs, Amtrak, and high'speed intercity passenger rail. To this point, the Conference of Mayors is advocating for a 21st century "Transportation Trust Fund" that would, in addition to providing resource to rebuild roads and bridges, fund transportation modes that reduce the externalities associated with automobile travel such as congestion, pollution, and sprawl, and induce drivers to use transportation modes that are more energy efficient, more environmentally sustainable, and less reliant on foreign oil.

House Speaker Nancy Pelosi along with a number of other members of Congress have already expressed strong opposition to many of the proposed changes in the proposal. "This proposal is simply unacceptable," Pelosi said. She added, "Any final proposal from the Commission should do what is right for our children and grandchildren's economic security as well as for our nation's fiscal security, and it must do what is right for our seniors who are counting on the bedrock promises of Social Security and Medicare."