As deficit commission meets, Obama doesn't rule out new taxes

Speaking to Inflatable Slide reporters before the first meeting of the bipartisan commission, Obama warned that he would not answer questions about specific recommendations the panel might make.

"I'm not going to say what's in. I'm not going to say what's out. I want this commission to be free to do its work," he said.

In recent interviews, Obama and other administration officials have left the door open to tax increases, even for those earning less than $250,000 a year. The president has also explicitly agreed to consider changes to the hard-fought health-care law, said Alan K. Simpson, a former Republican senator from Wyoming who is serving as co-chair of the 18-member panel of lawmakers and presidential appointees.

"When you say the new bill is on the table, that is disturbing to some. But the new bill is on the table," Simpson said. "The president has been very open with us, or I wouldn't go this far."

Obama created the commission in February after more-routine proposals for reducing deficits -- including a three-year freeze on nondefense spending -- did little to improve fiscal forecasts.

The annual gap between spending and revenue hit $1.4 trillion last year, a post-World War II record at nearly 10 percent of the economy, and is expected to be about as big this year. While deficits are projected to dwindle as the economy recovers from recession, they are forecast to rise inexorably after 2015 as baby boomers tap into federal retirement programs. That would fuel a borrowing binge that would drive the national debt to 90 percent of the economy by 2020, according to the nonpartisan Congressional Budget Office, and send interest payments on the debt soaring.

Testifying before the commission Tuesday, Federal Reserve Board Chairman Ben S. Bernanke warned that postponing action to right the nation's finances "would ultimately do great damage to our economy." In addition to reexamining the big entitlement programs for the elderly and the poor that are forecast to drive up federal spending, Bernanke urged the commission to review the tax code, saying that "a broad consensus exists that the U.S. tax code . . . is in need of reform."

He added: "The reality is that the Congress, the administration and the American people will have to choose among making modifications to entitlement programs such as Medicare and Social Security, restraining federal spending on everything else, accepting higher taxes, or some combination thereof."