President Barack Obama on Tuesday told a panel he set up to rein in soaring U.S. budget deficits it must consider every possible measure as he sought to show his commitment to lessen the nation's fiscal burden.
Obama said the 18-member bipartisan National Commission on Fiscal Responsibility, which held its first meeting, should be free to work without limitations. He declined to discuss what revenue increases or spending cuts the panel should consider.
"It's important that we not restrict the review or the recommendations that this commission comes up with in any way," Obama said. "Everything has to be on the table."
The U.S. deficit was $1.4 trillion in 2009, nearly 10 percent of the overall economy, and it is expected to be similar this year. Popular concern over the deficit is expected to be a big factor in elections in November when Republicans hope to seize back control of Congress from Obama's Democrats.
Longer term, the retiring baby boom generation will strain the Social Security retirement program and the Medicare health insurance program for the elderly and disabled, putting even more pressure on government spending.
Obama spoke in the Rose Garden after a private meeting with the panel's co-chairmen, Erskine Bowles, a Democrat who was White House chief of staff under President Bill Clinton, and former Republican Senator Alan Simpson.
The commission has been asked to make recommendations by December 1, just weeks after the elections.
Obama's remarks came as international investors worried about a worsening debt crisis in Greece, which last week asked for financial aid from fellow European Union nations and the International Monetary Fund.
The U.S. budget deficit has been fueled in part by measures Obama took, including a $787 billion stimulus package, to reinvigorate the economy after the global financial crisis.
Standard and Poor's on Tuesday cut its rating on Greek debt again and lowered its credit rating for heavily-indebted Portugal, shaking financial markets in both the United States and Europe.
White House Budget Director Peter Orszag warned that huge budget deficits could cause investors to lose confidence in a government's credit worthiness.
Much of U.S. debt is held by other countries including China and Orszag told the panel that failing to rein-in future deficits could "require increased borrowing abroad which will mortgage our future income to foreign creditors."
TAX HIKES OR SPENDING CUTS
Debate has already erupted over options Obama's panel might consider, with conservatives urging that tax increases be ruled out and liberals seeking to shield the Social Security retirement program and other safety-net programs from cuts.
Federal Reserve Chairman Ben Bernanke told the commission the country was on an unsustainable fiscal path and policymakers needed to act quickly or risk having the heavy debt load put upward pressure on interest rates.
The U.S. debt has topped $12 trillion, and some analysts fear it could double in the next decade or so.
"Given the significant costs and risks associated with a rapidly rising federal debt, our nation should soon put in place a credible plan for reducing deficits to sustainable levels over time," Bernanke said.
Former Congressional Budget Office director Robert Reischauer told the panel tax increases have to be considered. "To achieve fiscal sustainability we are going to have to accept higher tax burdens," than in the past, he said.
Simpson told the panel to brace for criticisms on all sides of the deficit debate.
"None of you will gain from this," Simpson said, "Anything we eventually do in any way will be met by howls of anguish.
"Get ready for it. The extreme right and the extreme left will savage our final product," he added.
Conservatives have vowed to head off any consideration of a European-style value-added tax, an idea that Paul Volcker, the former Federal Reserve chairman and an outside adviser to Obama, has said is worth looking at.
Barbara Kennelly, head of the National Committee to Preserve Social Security and Medicare, told reporters on Tuesday that Social Security and other entitlement programs were the wrong place to look to solve the budget mess.
Social Security "should not be used as a piggy bank to pay our way out of the fiscal hole we find ourselves in," she said. Kennelly argues that since the mid-1980s, the program has been bringing in more money than it pays out in benefits and has as a result helped mask problems elsewhere in the budget.
(Additional reporting by Pedro Nicolaci da Costa; Kim Dixon; Ross Colvin and Donna Smith; Editing by David Storey)