Transcript: Erskine Bowles says the U.S. will likely go over the ‘fiscal cliff’
Transcribed & edited by Jenny Jiang
Transcript of remarks by Erskine Bowles, co-chair of the National Commission on Fiscal Responsibility and Reform, on the fiscal cliff at the Christian Science Monitor breakfast on Nov. 28, 2012:
I thought I would update you on where I think things are now – that’s probably what you’re most interested in.
Yesterday, I had a meeting with a group of CEOs that we took in to meet with the White House’s economic team and Jack Lew, and then I subsequently had a meeting with President Obama.
And I came away from those meetings feeling that these guys really were serious. They were serious about the debt. They got it. They were serious about reducing the deficit and the need to get on with and had some sense of urgency.
They were serious about raising revenues from higher-income taxpayers and that includes raising rates – with some flexibility there.
They were serious about reducing spending, and I would say to you all – all have heard a lot about the tax side of the equation, we need to know more about spending side of the equation because they’re equally important if we’re going to get a balanced plan out. But they are serious about reducing spending and that would include spending on health care and entitlements.
I thought they were serious about protecting the middle-class and you can really tell the President’s passion on that.
And they were serious about restoring confidence in the short and long-term so our economy can grow and create jobs.
I think the President’s always been for a balanced approach just as Alan and I have.
Alan and my message to the President and the Congress on day one has been to say, I think, the problem is real; the solutions are painful; and there’s not going to be an easy way out of this.
The problem is so big, in fact, the only way to solve it is with a balanced plan that raises revenues and cut spending, and one with out the other won’t work.
Where do I think we are? I’m really worried. I believe the probability is that we’re going over the cliff, and I think that would be horrible. I think that would be devastating to the economy.
And it particularly bothers me, especially given the fact that I believe this is the magic moment and what I mean by that is God, if we’re ever going to get a deal done, now is the time to do it. We’ve got a second term Democratic President who has been willing to put entitlements on the table. We’ve got a Republican Speaker who gets it, who’s been willing to put revenues on the table. We’ve got at least half the Senate in equal number of Republicans and Democrats who have said, “Look, we ought to have a balanced plan.” And most importantly, you know, to get something done here in town, you’ve got to have a crisis, and we got one. We got a real crisis in the fiscal cliff.
And I think it would be insane to breach this fiscal cliff. Yet, I think there’s only a one-third possibility we’ll actually get something done before Dec. 31st.
You all know what it means if we don’t. If we go over the cliff, I think you’ll see economic growth slow by as much as 3% to 5%. That’s obviously enough to put us back into recession since we’re only growing 1.5% to 2% now. It will throw another 2 million people out of work. Unemployment will go to 9%.
I guarantee you these members of Congress and the President’s economic team will hear from the business community today that they are already slowing hiring; they’re already slowing investing and capital expenditures. And shortly, you’ll see this begin to affect the consumer – consumer confidence.
I guarantee you if we go over the cliff, the stock market hasn’t factored that in; they don’t think we’d be stupid enough to do that. And if we do go over the cliff, I think you’ll see the stock market really crash, and I think we’ll get a downgrade in our credit this time from Moody’s and [incomprehensible audio], and we’ll pay a big price for that over time.
So, man, I’m for getting a deal done and done now and done right. Where do I see the sticking points today?
The President wants about $1.5 trillion in revenue as part of this deal and in the revenue package he wants to see rate increases on the top 2%. He has some flexibility there. But, you know, he has real reasons why he wants to see the increase in rates, and that is because that share of revenues he’s afraid when you get to the Congress and you start talking about reducing tax expenditures then you’ll see people come in and every university like mine says, “Oh my God, you know, you’re going to take away the charitable deductions” and the like.
Republicans, on the other hand, want less revenue and none from rates and all from broadening the base and simplifying the code.
And lastly, the other thing that worries me about the sticking point is there’s been no serious discussions yet about entitlement cuts and reforms, except for the fact that the President has in his budget $325 billion in health care cuts and that’s simply not enough to slow the rate of growth of health care to the growth of rate of the economy.
Now, we can do this. I really think we must do it. I think it’s my generation that screwed this up, and we got to be the ones that fix it. And I include in my generation those of you sitting around this table – we all got some egg on our face. I don’t care if you’re Republican or Democrat, a reporter or a political person.
But I think the chances are about one-third we’ll get it done in the lame duck. I think it’s about a third it’ll go over the cliff and people will come to their senses quickly for lots of different reasons from the first week or so. And again, that will be bad because we’ll already experience a lot of the – you’ll see in the numbers in the fourth quarter the adverse effects of what’s happening.
But I think the real problem is if we go over the cliff and we don’t get a deal right away – that’s also one-fifth of the probably – and I think that will lead to chaos.
So I think that’s where it stands now. Al and I are going to do everything we can to bring about the compromise – the honorable compromise – it takes to get a deal done that makes sense for the country and phases in these changes so we don’t disrupt a very fragile economic recovery, so we don’t hurt the truly disadvantaged but we do put our fiscal house in order.
- WhatTheFolly.com: Transcript: Alan Simpson supports eliminating tax expenditures to avert ‘fiscal cliff’
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- WhatTheFolly.com: Why the Super Committee failed
- WhatTheFolly.com: Obama intensifies pressure on House Republicans to extend middle-class tax cuts
- WhatTheFolly.com: Congressional leaders strike positive tone after White House meeting on the “fiscal cliff”
- WhatTheFolly.com: White House holds “fiscal cliff” talks with Congressional leaders this week
- WhatTheFolly.com: Obama wins re-election, renews call for bipartisanship to solve nation’s debt problem
- WhatTheFolly.com: Analysis: Impact of sequestration on non-defense discretionary spending
- WhatTheFolly.com: Text of the Joint Committee on Taxation’s letter on eliminating major tax expenditures to lower tax rates
- WhatTheFolly.com: N.Y. Sen. Chuck Schumer outlines Democrat’s deal to avoid ‘fiscal cliff’
- WhatTheFolly.com: CBO analysis shows ‘fiscal cliff’ will sharply reduce long-term deficits but lead to a recession in 2013
- WhatTheFolly.com: Senate Finance Committee Chair Max Baucus says tax reform is needed to bring down deficit
- WhatTheFolly.com: CBO warns of approaching ‘fiscal cliff’
- WhatTheFolly.com: Why the Super Committee failed
- WhatTheFolly.com: Simple answers but difficult choices facing Super Committee
- WhatTheFolly.com: Transcript: Super Committee testimony by former Sen. Alan Simpson, Co-Chair of the National Commission on Fiscal Responsibility and Reform
- WhatTheFolly.com: Transcript: Super Committee testimony by Erskine Bowles, Co-Chair of the National Commission on Fiscal Responsibility and Reform
- National Commission on Fiscal Responsibility and Reform’s website
- National Commission on Fiscal Responsibility and Reform: Final Report – The Moment of Truth (PDF)
- C-Span.org: Video of Alan Simpson and Erskine Bowles on the ‘Fiscal Cliff’ on Nov. 28, 2012
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