Bowles, Simpson Face the Crisis in the Federal Budget

Facts, figures and wise cracks were tossed around the stage in equal measure Wednesday night, but Erskine Bowles and Alan Simpson made it clear the federal budget and congressional gridlock are no laughing matters.

“If Congress doesn’t wake up, we face the most predictable and avoidable economic crisis in history. This fiscal path is not sustainable,” said Bowles, who along with Simpson chaired a national bipartisan commission on the budget and the federal debt.  The two spoke in Page Auditorium in a session moderated by Sanford professor Philip Bennett.

“We knew we had succeeded when we pissed off everyone,” Simpson said of the commission’s plan.

Bowles, former White House chief of staff and president of the UNC system, and Simpson, former U.S. Senator from Wyoming, were tasked by President Obama with creating recommendations to balance the federal budget by 2015 and address the deficit. The plan was completed in December 2010 but has not been acted upon by Congress.

Bowles outlined four main drivers of federal debt: health care costs, defense spending, the tax code and interest on the debt. The United States spends twice as much as any other country on health care but ranks low on several key measures of health outcomes. Defense spending is greater than the spending of the next 14 largest countries combined. The tax code is antiquated, inefficient, anti-competitive and riddled with earmarks and expenditures. Without serious reform, interest on the debt could reach $1 trillion a year by 2020.

“Of all the revenue raised in 2011, 100 percent of it was consumed by entitlements and interest," said Bowles. "The rest of the money spent on wars defense, education and infrastructure was borrowed and half of it borrowed from foreign countries." The problem can’t be solved with just growth or just tax increases or just budget cuts, he said.

The commission’s plan includes a combination of budget cuts and tax reform, including changes in entitlement programs such as Medicare and Social Security and cuts in defense spending. It also includes changes to the tax rates to increase revenue that are politically challenging. “People act like raising taxes means [anti-tax advocate] Grover Norquist will come to your house and put a curse on you,” Simpson said.

They both stressed that the plan was shaped to take the recession into account and to protect the most vulnerable Americans.

When Bennett asked why President Obama didn’t embrace the plan when it was submitted, Simpson said, “He would have been torn to ribbons by his base.”  His economic guys were thrilled with the plan, but his political guys said to lay low, Simpson said.

“There is no trust in D.C.," Simpson said.  "It used to be if you shook hands and kept your word, it was OK. Nobody gave me the Jesus shoes to judge people, but it is sad to watch."

The two men are working with members of both the House and Senate to put the plan into legislative language.  The current congressional gridlock and political polarization in the county makes action on the commission’s plan unlikely in an election year, but they hope to introduce the legislation as soon as next month. 

Earlier in the day, the two meet with public policy students in the Rhodes conference room, along with Sanford professors Don Taylor and David Schanzer, the creators of the Gridlock program.

The talk was a Terry Sanford Distinguished Lecture, sponsored by the Sanford School of Public Policy and part of the school’s series, “Gridlock: Can Our System Address America’s Biggest Problems.” The event was recorded by WUNC and will be broadcast on the program “North Carolina Now” over two nights, Thursday, January 19, and Friday, January 20.