As part of a proposal to wrestle $1-trillion-plus deficits under control, their plan would also curb the growth of Medicare. It came a week after voters put Republicans back in charge of the House and told Washington that the government is too big.
However, the plan by Chairman Erskine Bowles and former Sen. Alan Simpson, the co-chairman, doesn't look like it can win the support from 14 commission members that is needed to force a debate in Congress. Bowles is a Democrat and was former President Bill Clinton's White House chief of staff. Simpson is a Wyoming Republican.
The two were among the first to acknowledge their plan's unpopularity - and to suggest it would be a nonstarter in Congress.
"We'll both be in a witness protection program when this is all over, so look us up," Simpson quipped to reporters. Bowles said: "We're not asking anybody to vote for this plan. This is a starting point."
The White House reserved judgment. "The president will wait until the bipartisan fiscal commission finishes its work before commenting," said White House spokesman Bill Burton. Burton called the proposals "only a step in the process." He said Obama respects the panel's challenging assignment "and he wants to give them space to work on it."
The proposals were floated as the Treasury Department reported that the federal government began the new budget year with a deficit in October that totaled $140.4 billion - down 20 percent from a year ago but still the third highest October shortfall on record. Even with the improvement, last month's red ink set the stage for what is expected to be a third consecutive year of $1 trillion-plus deficits.
The Social Security proposal would change the inflation measurement used to calculate cost-of-living adjustments for program benefits, reducing annual increases. It will almost certainly draw opposition from advocates for seniors, who are already upset that there will be no increase for 2011, the second straight year without a raise.
The plan would also raise the regular Social Security retirement age to 68 in about 2050 and to 69 in 2075. The full retirement age for those retiring now is 66. For those born in 1960 or after, the full retirement age is now 67.
Better-off beneficiaries would receive smaller Social Security payments than those in lower earning brackets under the proposal.
The commission is supposed to report a deficit-cutting plan on Dec. 1, but panel members are unsure at best whether they'll be able to agree on anything approaching Obama's goal of cutting the deficit to about 3 percent of the size of the gross domestic product.
Building the needed support of 14 of its 18 members will be difficult. Cuts to Social Security and Medicare are making some liberals on the panel recoil. And conservative Republicans are having difficulty with the options suggested for raising taxes. The plan also calls for cuts in farm subsidies, foreign aid and the Pentagon's budget.
"This is not a proposal I could support," said panel member Rep. Jan Schakowsky, D-Ill. "On Medicare and Social Security in particular, there are proposals that I could not support."
The plan released by Bowles is only a proposal put forth by him and Simpson. Members of the commission will resume debate on it later Wednesday and next week in a long-shot bid to reach a compromise.
The release of the proposal comes just a week after midterm elections that gave Republicans the House majority and increased their numbers in the Senate. During the campaign, neither political party talked of spending cuts of the magnitude proposed by Bowles, with Republicans simply proposing $100 million in cuts to domestic programs passed each year by Congress.
"It's a very provocative proposal," said a Republican panel member, Rep. Jeb Hensarling of Texas. "Some of it I like. Some of it disturbs me. And some of it I've got to study."
But member Sen. Judd Gregg, R-N.H., called the proposal "an aggressive and comprehensive plan for getting federal spending, deficits and the debt under control. ... This will not be the final proposal, but it is a significant step down the path of establishing fiscal responsibility."
Other proposals by Bowles and Simpson include:
- Increasing the gas tax by 15 cents a gallon to fund transportation programs.
- A three-year freeze in the pay of most federal employees and a 10 percent cut in the federal work force.
- Eliminating all congressional pet projects, known as earmarks.
Their plan also calls for a major overhaul of both the individual income tax and the corporate tax systems with the idea of lowering overall tax rates, simplifying the Tax Code and broadening the taxpayer base.
For individuals and families, the proposal would eliminate a host of popular tax credits and deductions, including the child tax credit and the mortgage interest deduction. However, it would significantly reduce income tax rates. The top rate would drop from 35 percent to 23 percent.
The deduction that companies take for providing health insurance to their employees would be eliminated but the corporate income tax rate would be reduced from 35 percent to 26 percent, and the U.S. would stop taxing overseas profits of U.S.-based multinational corporations.
Despite its slim chances of survival, the Bowles-Simpson proposal illustrates the painful choices involved in tackling a deficit that presently requires the government to borrow 37 cents out of every dollar it spends.
Even with the dramatic proposals, the Bowles-Simpson plan would leave deficits of about $300 billion in 2015, the year by which Obama tasked the group with balancing the federal budget, except for interest payments on a national debt that now stands at $13.7 trillion. If the changes to Social Security are dropped, the deficit would be about $400 billion in 2015.
But the plan is an aggressive assault on the longer-term deficit crisis, which is fueled by spiraling costs for retirement programs.