World and Nation

Rising Criticism for Both Deficit and Solutions

Advocates of more aggressive steps to address the national debt failed on Tuesday in their effort to create a bipartisan commission to press for tax increases and spending cuts, but President Barack Obama now plans to establish a similar panel by executive order in his State of the Union address on Wednesday.

The proposal for a commission died when its supporters could not muster enough votes in the Senate to push it ahead, reflecting unwillingness among many Republicans to back any move toward tax increases and objections among Democrats to the prospect of deep spending cuts in Medicare and Medicaid. While 53 senators voted for the plan and 46 against, it needed 60 votes to be approved under Senate rules.

The alternative panel to be established by Obama will also come up with recommendations by December to reduce annual budget deficits and slow or reverse the growth of the national debt. But unlike the commission proposal killed by the Senate, Obama’s bipartisan panel would not have the authority to force Congress to vote on its suggestions.

The debate was just the latest demonstration of the intensity of the election-year fight shaping up over the nation’s rising debt and its causes and solutions.

The issue will be a major theme of Obama’s nationally televised speech Wednesday night, as he seeks to respond to the public’s concern about the budget deficit. But his responses so far, including the debt commission and a proposed three-year freeze on domestic programs, drew howls of anger on Tuesday from his party’s left, which objected to his exempting defense spending while putting Medicare and Medicaid on the chopping block. At the same time, he earned mainly derision from Republicans.

Just before senators voted, the Congressional Budget Office released a report projecting that the deficit for this fiscal year, which ends Sept. 30, would be $1.3 trillion. That is a slight improvement over last year’s shortfall, because of early, fragile signs of economic growth, and it would be a return to the annual level projected when President George W. Bush left office.

But the long-term budget outlook, according to the office, is persistent high deficits that will accumulate to drive the debt ever upward, to the point that it could equal the value of the nation’s entire economic output by 2020.

With hiring lagging behind the recovery that began in the second half of last year, the budget office forecast that the unemployment rate would remain at 10 percent through this year. That will keep Democrats on the defensive in a congressional election year. But even by 2012, when Obama faces re-election, the jobless rate would be just below 9 percent, the budget office projected.

A $1.3 trillion deficit for this fiscal year would equal about 9.2 percent of gross domestic product. Last year’s $1.4 trillion deficit was nearly 10 percent of gross domestic product, making it the largest since World War II measured against the size of the economy.

But the budget office said that additional stimulus spending and tax cuts could well result in a deficit for this year that exceeds last year’s.