Obama Deficit Reduction Panel Releases Revised Report; Final Vote Delayed

But concerns remain that the commission's plan could undermine Americans' retirement security. The American Society of Pension Professionals and Actuaries (ASPPA) said that the plan "would eliminate all tax expenditures including retirement tax preferences." The plan also calls for reducing the defined contribution limit "by more than half," ASPPA says. "Tax-free contribution limits would be cut from the current limit of $49,000 to a new cap of $20,000 or 20% of pay." If adopted by Congress, ASPPA continued, this plan "would effectively eliminate employer-sponsored profit sharing plans, shifting responsiblity for retirement savings to workers."

The 18-member deficit reduction panel planned to discuss the newly revised plan on Wednesday and render a final vote on Friday. But the wide-held view is that the Commission’s report will fail to garner the 14 votes needed to send it to Capitol Hill for consideration and a vote.

Erskine and Bowles noted in the report that the Congressional Budget Office (CBO) projects if the nation continues on its current course, deficits will remain high throughout the rest of this decade and beyond, and debt will spiral ever higher, reaching 90% of GDP in 2020.

As baby boomers retire and health care costs continue to grow, the two said, the “situation will become far worse.” By 2025, they continued, “revenue will be able to finance only interest payments, Medicare, Medicaid, and Social Security. Every other federal government activity–from national defense and homeland security to transportation and energy–will have to be paid for with borrowed money.” Debt held by the public, they said, “will outstrip the entire American economy, growing to as much as 185% of GDP by 2035. Interest on the debt could rise to nearly $1 trillion by 2020. These mandatory payments–which buy absolutely no goods or services–will squeeze out funding for all other priorities.”