By TODD J. GILLMAN / The Dallas Morning News
tgillman@dallasnews.com

WASHINGTON – A White House commission unveiled a complex plan Wednesday that would lop $3.8 trillion in red ink over a decade through steep spending cuts, rolling back retirement benefits and eliminating popular tax deductions such as the one for home mortgage interest.

The package is, in many ways, a collection of politically toxic proposals that would tackle a host of long-unassailable elements of the federal budget, from the Pentagon to Social Security. It would touch virtually every American in some way, and institutions from corporations to interest groups:

Anyone who drives would pay an extra 15 cent per gallon gasoline tax, though revenue would be set aside to improve highways and bridges.

Investors would have to pay tax on capital gains and dividends at ordinary income tax rates, rather than at today's 15 percent rate.

April 15 could become less puzzling, with fewer tax brackets – and fewer deductions, too.

First, though, it's unclear whether the plan will get very far. Fewer than half the commission members were willing to initially support it, ahead of a vote Friday that will determine if Congress must act on the recommendations.

But with the national debt approaching $14 trillion, and interest payments threatening to consume an untenable share of federal revenue within a decade, advocates said they would be satisfied to force an "adult conversation" about the looming crisis and the steps needed to avert it.

"We are headed for a fiscal cliff. America is in danger, and we can either look the other way, hope somebody else does something, or we can act," said Senate Budget Chairman Kent Conrad, D-N.D., declaring his support for the plan.

Advocates hoped that by spreading the pain, a sense of shared sacrifice would overcome the resistance in Congress and among myriad interest groups.

"It's impossible to sweep our country's vast debt problem under the carpet anymore," said Erskine Bowles, co-chairman of the National Commission on Fiscal Responsibility and Reform created by President Barack Obama.

He and the GOP co-chair, former Wyoming Sen. Alan Simpson, dramatically titled their 65-page plan "The Moment of Truth." But there was more consensus about the urgency of the problem than about this particular combination of solutions.

Only seven of the 18 members of the bipartisan commission committed Wednesday to support the plan, though only one declared firmly against it – Rep. Jan Schakowsky, a liberal Democrat from Illinois, who said it would only exacerbate the growing gap between rich and poor.

Dallas Rep. Jeb Hensarling, the fourth-ranking House GOP leader, was noncommittal, and many observers expect him and other House Republicans on the commission to oppose the plan.

"The thing I like most about your plan is – it is a plan. There are not a lot out there," Hensarling told Bowles and Simpson at the meeting. But he objected to contemplating tax increases without doing more to curb the rising costs of health care. "If health care's not on the table, you're not fixing the problem."

At the White House, spokesman Robert Gibbs said Obama would withhold judgment until the commission takes its final vote.

Congressional leaders have agreed to put to a vote any recommendations that draw support from 14 members of the panel.

Without that imprimatur, the plan could be shelved like many others crafted by outside groups and experts.

Still, commission member Rep. Xavier Becerra, D-Calif., lauded Simpson and Bowles for taking a bold step.

"You put taboos on the table. Sacred cows are in your plan," he said.

"If nothing else, we have laid before the American public a template that gives people an opportunity to start discussing what we have to do to try to get our fiscal house in order."

Business groups lauded the focus on spending cuts, while the pushback from liberal groups and unions was intense. Labor leader Richard Trumka said the message to workers was: "Drop dead."

The changes that Bowles and Simpson call for are sweeping.

The current array of five tax brackets would be compressed to three – 8, 14 and 23 percent. Corporations would face a top rate of 26 percent, down from 35 percent under current law.

But the plan insists on eliminating a litany of "backdoor spending" by closing loopholes known as tax expenditures, which put a $1.1 trillion annual dent in federal revenue.

Employer-provided health insurance would no longer be exempt from taxes.

Anyone who owns a home and itemizes deductions could face a higher tax bill without the mortgage interest deduction. That could mean lower home values and higher tax bills, especially for higher-income taxpayers with relatively costly houses.

Fourth-graders should expect to wait longer than their parents to retire. Current law sets the retirement age at 67 in 2022. The fiscal commission would raise that to 68 in 2050 and 69 in 2075 – a slow-motion way to impose a 15 percent cut to lifetime retirement benefits.

Retirees would see smaller cost-of-living adjustments, and retirees at nearly all income levels would get smaller payouts than current law provides.

But as commissioners noted, Social Security is heading toward insolvency. Without changes, payments would automatically get cut 22 percent in about 20 years.

The proposal set off howls of protest from advocates for seniors. AARP executive vice president John Rother said the might work as a budget exercise, but the commission should "more fully assess then impact of its recommendations on real people."

Those who end up in physically demanding jobs would get some relief under the commission plan, though: A hardship waiver would allow early retirement at 62. As many as 20 percent of workers could be eligible.

High-income workers would face a bigger bite from their paychecks. Currently, income over $106,800 is free from payroll tax. The commission would gradually raise that cap to ensure that 90 percent of income is subject to payroll tax by 2050.

Simpson noted that putting all the ideas into practice would mean fending off countless "zealots" – from special interests to ideologues across the political spectrum.

"Look at what's happening to other countries," he said. "We're not unique. If we don't address this, we face the most predictable economic crisis in history. ... We can either wake up and smell the coffee or we can wait to watch it happen."