WASHINGTON A U.S. commission tasked with reducing the country's huge budget deficits is likely to emphasize spending cuts over tax increases, a key Republican senator on the panel said on Wednesday.
Despite skepticism by some analysts that the 18-member panel will fail to reach consensus, Senator Judd Gregg said at the Reuters Washington Summit that he is confident the commission will agree on an outline by its early December deadline.
"I think everybody understands that the majority of the issue is on the spending side, and so this commission, to the extent that it reports, I suspect is going to have a heavy tilt toward controlling spending. It has to, because that's where the problem is," Gregg said.
President Barack Obama earlier this year appointed the panel to recommend ways to cut ballooning debt and deficits.
Pressured by tax cuts, two wars and the worst recession since the 1930s, U.S. budget deficits have ballooned in recent years to nearly 10 percent of gross domestic product. The federal government is expected to spend $1.34 trillion more than it takes in during the fiscal year that ends September 30, according to the nonpartisan Congressional Budget Office.
Gregg said that a failure by the commission to reach consensus on reducing the country's budget shortfall could roil financial markets, though he downplayed the likelihood of that occurring.
"I genuinely believe that if we fail, it will be a very bad signal to the American people and the markets," Gregg said at the Reuters Summit held at the Reuters office in Washington.
He added that he thinks getting the 14 votes needed for agreement on the commission for a substantive plan is attainable, "and I expect it to occur."
But privately, even some of his aides wonder if it will be possible for the bipartisan panel to reach agreement.
The panel might come up with a list of options and leave it to Obama to decide whether to push for passage of some or all of them in the U.S. Congress, some analysts say.
"There is a sincerity by every member of this commission. we have spent a lot of time ... understanding the extent of the problem," Gregg said, while adding that he recognized it would be extremely difficult to find common ground.
The commission, chaired by former White House chief of staff Erskine Bowles and former Senator Alan Simpson, is due to report back on December 1, a few weeks after the November 2 congressional elections.
Many pollsters predict Obama's Democrats could face huge losses in those elections that could cost them control of the House of Representatives and possibly also the Senate.
Gregg warned the United States could be headed for a severe crisis in U.S. debt markets over the next five to seven years.
The Congressional Budget Office projects that the debt-to-GDP ratio, now at 53 percent, will reach 69 percent by the end of the decade.
Gregg said that historically low interest rates on long-term U.S. debt do not signal complacency about the problem but are the result of investors flocking to the dollar as a safe-haven currency.
But he said that confidence in the U.S. economy and its ability to pay its debts could shift -- and when it does the change could occur suddenly.
"I think the markets presume we're going to take action, that as a culture we've always done that," Gregg said.