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The bipartisan deficit-reduction commission appointed by Obama, led by Democrat Erskine Bowles and Republican Alan Simpson, called late last year for slashing about $4 trillion from budget deficits over the coming decade. Roughly two-thirds of that would come through program cuts and one-third through increased taxes. Although overall tax rates would decline, dozens of popular tax breaks would be scaled back or eliminated, including the child tax credit, mortgage interest deduction and deduction claimed by employers who provide health insurance. Obama praised the panel for its work, but embraced few of its recommendations, and none of the major ones on new taxes. About the same time, another bipartisan panel headed by Republican Pete V. Domenici and Democrat Alice Rivlin came out with its own plan that would go even further
-- getting roughly half of its deficit reductions from tax increases and half from spending cuts. Rivlin, a former Federal Reserve vice chairwoman and budget director in the Clinton administration, says there's no other way than a mix. "It cannot be all on the spending side," she said. Panels recommending tax increases haven't fared very well. When President George W. Bush's tax-code overhaul commission, chaired by former GOP Sen. Connie Mack of Florida, recommended big cuts in the cherished home mortgage deduction and other popular tax breaks in 2005, Bush gave it a cold shoulder. Ever since Democratic presidential candidate Walter Mondale famously said in 1984 that, if elected, he would reluctantly raise taxes
-- and promptly got clobbered in President Ronald Reagan's re-election landslide
-- advocating tax increases has been dangerous territory for politicians of all stripes. Reagan's "supply side" economics, the notion that tax cuts can pay for themselves and that lower taxes mean higher revenues, remains Republican gospel. No matter that few mainstream economists totally subscribe to that theory, or that Reagan proposed tax increases in every one of his eight years in office except the first. "It's gotten much worse since then," suggests Bruce Bartlett, a domestic policy adviser to Reagan and a Treasury official under President George H. W. Bush. Bartlett cited the growing influence of unrelenting anti-tax advocates like Americans for Tax Reform and some within the tea party movement. Bartlett said he's "enough of a libertarian" to wish that the nation's budget woes could indeed be solved by spending cuts alone. "But I just don't see how that's humanly possible, giving the aging of our society, the wars we're involved in and various other things." This year's budget deficit is expected to be a record $1.6 trillion. But that's just for one year. Added to previous years' deficits, it brings the national debt to a shade under $14.3 trillion. Annual deficits are expected to decline as the economy recovers from the worst downturn since the 1930s, but then climb again as millions of baby boomers qualify for government Social Security and Medicare benefits.
[Associated
Press;
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