Transcript: Simpson-Bowles on the cost of “kicking the can down the road” on deficit reduction

Transcript of excerpts from the Politico Playbook Breakfast with Alan Simpson and Erskine Bowles, co-chairs of the National Commission on Fiscal Responsibility and Reform, on sequestration and deficit reduction. The event was held on Feb. 19, 2013 and moderated by Mike Allen, Politico’s White House correspondent.

Mike Allen:
The point that you make in this…is that it gets more expensive by the day because we get more into the baby booms, because of more debt we’re paying interest on, because of inflation, because of growth. This problem is getting much more expensive to fix. I think that in 2010 it was $4 trillion over 9. Now, it’s $5 trillion over 10. How fast is it going to get too expensive to fix?

Erskine Bowles:
Look, there’s nothing more powerful than compound interest. You know, lots of smart people have said that. And we’re spending $250 billion a year on interests today. We’ll be spending – if interest rates were at their normal level they were in the 1990s – $650 billion. It won’t be long before we’re spending a trillion dollars a year on interests. Think about that – that’s a trillion dollars we can’t spend in this country to educate our kids, to build our infrastructure, to do the high-value added research. And unfortunately, since we’re borrowing so much of that money principally from places like Asia, it’s a trillion that will be spent over there to educate their kids, to build their infrastructure, to do the high-value added research in those countries so the next new thing is created there so that jobs of the future are there not here. That’s crazy. That’s what we have to stop. That’s why we need to do something now.

Mike Allen:
How close do you think we are to a grand bargain?

Erskine Bowles:
I think we could have had a grand bargain. I really think it was realistic. You know, both side really were prepared to make a move. If you look at the end of last year, you know, they were prepared to do more revenue. They agreed to do more revenue than was in the fiscal cliff deal. They agreed to do more health care cuts than certainly have been done to date but it was on both the beneficiary and on the provider side. They had agreed to do other mandatory cuts that were, you know, anything from agriculture, to federal retirees. They agreed to do cuts in defense and non-defense beyond what’s in the Budget Control Act, and they agreed to do the chained-CPI. So I thought that was a – that would have been a very, very positive step forward, and unfortunately it broke down. It wouldn’t have solved the problem because it only gotten to debt down around 73% of GDP; it didn’t keep it on a downward path; it began to go up after that. And we’ve got to quit focusing on this next 10 year and really focus on the out-years. That’s why we need structural change. That’s why we need to make Social Security sustainably solvent. That’s why we have to slow the rate of growth of health care and get serious about bending the health care cost curve.

Alan Simpson:
But watching that happen, Erskine and I felt compelled to do this. We said if these guys were this close back in December, then we’ll pick it up from there and try to move it along. That’s what this is, not Simpson-Bowles or Bowles-Simpson. It’s do something.

Mike Allen:
My last question is right on that. If not President Obama, who? There’s a short window here for a re-elected President. If the sides are just too dug in this year, it can’t be done 3 years from now, there’s a whole new window to get something done. What do you think it’ll take if it’s not President Obama?

Erskine Bowles:
Look, my experience in negotiating the balanced budget agreement in 1996 at the beginning of a President’s first term – President Clinton’s first term – was now is the opportune time, and so what we need to do as Americans is to quit complaining and push these guys to make the compromise they have to make in order to get something real done that puts our fiscal house in order.

Alan Simpson:
…The markets will do the shot, and they don’t care a whit about who’s the President or they don’t care a whit about Democrats or a whit about Republicans. They care about their money. If anybody can’t figure that out, they only got rocks for brains.

Mike Allen:
…You said the markets will do the shot. Tell us what will happen and when to the markets if this is – if the can keeps getting…

Alan Simpson:
What is the word you use – you money guys – the word for when they want their money and they’re out there? Not panic – we don’t want to use that word. There’s that tipping point. I don’t know what it is but I do know that the longer we stumble and look as unbelievably unable to function to even talk with each other, to visit with each other, to sit down as I used to with Ted Kennedy or Tip O’Neill. That’s what I did – that’s how I was successful. I was a legislator. I didn’t come here to be king or leader; I came to legislate. And until we see this open up again, and it will open up again when the markets call the shot and inflation kicks in and interest rates go up and the people of America say, “Who did this on whose watch? You were here and you didn’t do a lick and you’re outta here next time.” That will be the [incomprehensible audio] beginning of this solution.

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