The authors of a controversial debt reduction plan spoke last night at Wake Forest University. Erskine Bowles, former Chief of Staff to President Clinton, and former Senator Alan Simpson of Wyoming were appointed by President Obama to co-chair the bipartisan commission to find ways to reduce the nation's multi-trillion dollar debt.
"I think it's most important, what Erskine and I do, as we travel together, we really say what's really at stake here?" said Simpson. "And then we use the strangest, most curious 4-letter word in the alphabet called math. We don't do PowerPoint, we don't do charts, we just do math." Simpson acknowledged that he and Bowles came under attack from both liberals and conservatives because, he said, "we used phrases like shared sacrifice, going broke, skin in the game, slaughter every sacred cow, harpoon every whale in the ocean, even the minnows, and we did."
They both warned against believing politicians who claim that the budget can be balanced without touching entitlements or without raising revenues. Bowles said the problem lies in just five core areas: healthcare, defense, the current income tax code, Social Security, and compound interest. Of this last item, Bowles noted that the US currently spends $250 billion annually on interest costs alone -- which would be $650 billion without today's extremely low interest rates. And he warned that if we do nothing about it now, the country will spend more than a trillion dollars each year on interest by the year 2020.
"This is not a problem that we can solely grow our way out of," he said. "You could have double-digit growth for decades and not solve this problem. It's not a problem that we can solely tax our way out of: raising taxes doesn't do a thing to change the demographics of the country or to change the fact that healthcare is growing at a faster rate than GDP. And unfortunately, as fiscally conservative as we are, I can tell you it's not a problem we can solely cut our way out of: we can't cut our way out of this problem without disrupting what I believe is still a fragile economic recovery, or hurting the truly disadvantaged, or by making so severe cuts in education, infrastructure and research that America won't be competitive in this new knowledge-based, global economy."
The Simpson-Bowles plan found a way to reduce the debt by four trillion dollars over the next decade. They identified one trillion dollars through reforming the tax code and another three trillion dollars by reducing spending. There was bipartisan support in committees, but not enough to be passable yet in Congress. The two men see a bright future if tough choices are made now. Otherwise, they say America is on its way to becoming a second-rate power.
