(Photo:Reuters /Jonathan Ernst)
“I’m worried you’re going to fail the country,” Erskine Bowles told the Joint Select Committee on Deficit Reduction, or “supercommittee,” on Tuesday. Bowles, a Democrat, is the former White House Chief of Staff under President Bill Clinton and co-chaired, with former Republican Senator Alan Simpson (Wyo.), President Obama's National Commission on Fiscal Responsibility and Reform.
The supercommittee was created by the Budget Control Act of 2011 to craft a bill that would reduce future budget deficits by at least $1.2 trillion over the next decade. Bowles was speaking at the supercommittee's last public hearing before its Nov. 23 deadline.
“I think that we face the most predictable economic crisis in history. I know that the fiscal path we are on here in Washington is not sustainable, and I know that each of you know it and you see it, because it is as clear as day,” Bowles said.
The supercommittee is currently in a stalemate over revenue increases and entitlement reforms. The Republicans on the committee do not want any changes that would increase revenues and the Democrats will not accept entitlement reforms without revenue increases from corporations or wealthy Americans.
There are four main sources to the nation's fiscal problems, according to Bowles – healthcare spending, military spending, the tax code, and interest on the debt.
“I believe that we have the most ineffective, inefficient, anti-competitive tax system that man could dream up,” Bowles said. He recommended broadening the base and simplifying the tax code by eliminating deductions and credits, then using that money to reduce overall tax rates and reduce the deficit.
Though the supercommittee is required to reduce deficits by $1.2 trillion, Bowles said $4 trillion in deficit reduction is what is really needed.
“We didn't make the $4 trillion dollar number up because the number four bus rode down the street. Four trillion is not the maximum amount we need to reduce the deficit. It's not the ideal amount. It is the minimum amount we need to reduce the deficit in order to stabilize the debt and get it on a downward path as a percent of GDP,” Bowles said.
Simpson, who has a reputation for his use of colorful and humorous language, spoke after Bowles and had sharp words for both Grover Norquist and the AARP. Norquist is the president of Americans for Tax Reform, which opposes any effort to reduce deficits through increased revenue. The AARP, which represents seniors, recently ran an ad opposing any deficit reduction package that would reduce the current rate of growth for Social Security and Medicare benefits.
“Let me tell you, [Norquist] has people enthralled. That's a terrible phrase. Lincoln used it. It means your mind has been captured. You're in bondage with [your] soul,” Simpson said.
Speaking about the AARP's ad, Simpson said, “that is the most disgusting ad I've ever seen. … That is a really ugly thing, but let me tell you about the AARP, let's remember what they will be when they do nothing. … Let me tell you what will happen with their view of the world, which is to do nothing to restore the solvency of Social Security. In the year 2036, you're going to waddle up to the window and get a check for 23 percent less and then I hope that they will remember the AARP. I certainly will and a lot of young people will too.”
If Congress does not pass the supercommittee bill, or any other bill, that reduces the deficit by $1.2 trillion, automatic spending cuts, mostly in the defense budget, will go into effect. Secretary of Defense Leon Panetta has said those cuts would harm national security. A recent report by Bank of America said that another U.S. credit downgrade is likely because it does not expect the supercommittee to reach an agreement, and the automatic cuts would be harmful to the national economy.
“Guess who gets hurt?” Simpson said, if the supercommittee fails. “The little guy, the vulnerable guy that everybody babbles about day and night will be the one hit with the hammer on the schnoz.”
The national debt is almost $15 trillion with over $116 trillion in unfunded liabilities.