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Another big debate is on its way in Washington. It's about the exploding nation debt, huge budget deficits and what to do about President Bush's tax cuts, which expire at the end of the year. All of this happens as baby boomers prepare to retire. NPR's national political correspondent Mara Liasson reports on the challenges.

MARA LIASSON: Alarm bells are ringing over the size of the national debt. The federal government's red ink is now equal to 84 percent of the gross national product. It hasn't been that high since right after World War II. Moody's is hinting that the federal treasury's Triple A bond rating is in jeopardy, and the Chairman of the Federal Reserve Ben Bernanke is warning that China, our biggest foreign creditor, may start charging us higher interest rates.

Mr. BEN BERNANKE (Chairman, Federal Reserve): The arithmetic is, unfortunately, quite clear: To avoid large and unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above. These choices are difficult, and it always seems easier to put them off, until the day they cannot be put off any more.

LIASSON: And if those choices are not made, say a chorus of economists, the U.S. could become a second-rate power. But even before the debate about what combination of spending cuts and tax hikes are needed begins in earnest, the deficit has already become a political issue.

Republican candidates are using concerns about the debt and the deficit and taxes to help channel anti-government anger. President Obama, whose party is on the receiving end of that anger, is well aware of voters' demands for fiscal discipline.

President BARACK OBAMA: That's why I proposed a freeze on discretionary spending, signed a law that restores the pay-as-you-go principle that helped produce the surpluses of the 1990s, and created a bipartisan, independent commission to help solve our fiscal crisis and close the deficits that have been growing for a decade.

Mr. BRUCE REED (Executive director, National Commission on Fiscal Responsibility and Reform): I'm Bruce Reed. I'm executive director of the National Commission on Fiscal Responsibility and Reform.

LIASSON: The commission's first meeting is a week from today. And on December 1st, safely after the midterm elections, the commission is supposed to present its consensus recommendations to the president and Congress. Consensus seems impossible in this hyper-partisan political climate, but Bruce Reed says there is a reason to be optimistic.

Mr. REED: The American people are way ahead of the politicians on this one. There's a deep concern about the long-term challenges we face as a country, and a real willingness on the part of Americans to do something about it. Americans have responded brilliantly to the economic crisis. They've saved more, spent less, and they want their leaders to do the same.

LIASSON: Individual families may have saved more and spent less at home, but collectively, the public still wants more from the federal government than they're willing to pay for. Right now, tax revenues equal around 19 percent of GDP, government spending around 25 percent. And that gap will only widen when the bill for the baby boomers' Medicare and Social Security checks comes due. Something has to give, says Republican Senator Judd Gregg, a member of the commission.

Senator JUDD GREGG (Republican, New Hampshire): You're going to have to face up to the fact that you're going to have to reduce the rate of growth of the government, which means you've got to reduce the rate of growth of spending, which means people are going to have to accept the fact that the government can't do everything it's promising to do.

LIASSON: For a Republican like Gregg, the answer starts with cutting spending, although he says everything should be on the table. But spending cuts alone can't solve the problem. Neither can the preferred Democratic solution: tax hikes on the rich. Exploding both those myths and bridging the partisan gap is the job of the president's commission. But even Obama's top adviser, David Axelrod, is playing down expectations on what it can achieve.

Mr. DAVID AXELROD (Presidential Adviser): And our hope is that out of this will come proposals that we can forge bipartisan consensus about, because there is no doubt that the deficit is a big, looming cloud on our horizon, and it's going to take bipartisan effort. I don't know quite how the commission story will end, but I'm certain that we will be in a better place in terms of dealing with this issue for having gone through the exercise than if we had not.

LIASSON: It's hard to find anyone in Washington right now who's confident that exercise will result in the required 14 out of the 18 commission members reaching agreement. After all, that's a higher hurdle than overcoming a filibuster in the Senate. But even if it doesn't reach consensus, the commission should be able to identify the choices that Americans will have to make and the consequences of avoiding them.

Mara Liasson, NPR News, Washington.

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