Erskine Bowles: 'We Are Going Over the Fiscal Cliff'
Three of the country's most prominent minds on U.S. budgetary problems issued a stark warning to lawmakers today as Congress approaches what many have called a "fiscal cliff" of tax hikes and spending cuts that are set to take effect Jan. 1.
Erskine Bowles, who served as President Clinton's chief of staff, former Sen. Alan Simpson and billionaire investor Warren Buffet all expressed pessimism as to whether Congress and President Obama could reach a compromise to reduce the debt and avoid another fiscal crisis, during an interview with CNBC Thursday morning.
While both Republicans and Democrats have said they do not want to let all the tax cuts expire and plan to stave off the bulk of the spending cuts, Bowles said partisan politics would likely thwart any deal to avoid the looming taxmageddon.
"I think if I had to tell you the probability, I'd say the chances are we are going over the fiscal cliff," Bowles said. "I hate to say it, but I think that's probably right."
Bowles, whom Obama appointed, along with Simpson, to create a bipartisan debt-reduction plan, said today that because debt reduction was "politically painful" and "really tough," it was not likely Congress and the president would make the tough choices to reform entitlements, cut spending and simplify the tax code, as the Bowles-Simpson plan suggests.
"I think that if we don't get these politicians to come together we face the most predictable economic crisis in history," Bowles said during this morning's interview in Sun Valley, Idaho. "I think it's absolutely clear that the fiscal path we are on is not sustainable, and for me, the best analogy is these deficits are like a cancer, and over time they will destroy the country from within."
The Congressional Budget Office estimated that if the Bush tax cuts were allowed to expire and the automatic spending cuts went into effect, the country would plunge back into a recession.
Bowles said that "every nickel" the country brings in each year only paid for interest on the debt and mandatory spending on entitlement programs, such as Medicare, Medicaid and Social Security.
"What that means is every single dollar we spent last year on these two wars, national defense, homeland security education infrastructure, high value-added research, every dollar was borrowed and half of it was borrowed from foreign countries," he said. "That is crazy. Crazy! It's a formula for failure in any organization."
But while Democrats and Republicans bicker in Washington over which party was to blame for the current fiscal problems, Simpson said it's the average American who pays the price.
"When the tipping point comes and the guys who gave us money want more money for their money inflation … and all these things in interest, guess who will be hurt the worst? The little guy that everybody talks about day and night," Simpson said. "What fakery. What phoniness.