Alan Simpson and Erskine Bowles brought their message of fiscal restraint and reform to Schwab Impact 2012 on Thursday, and the packed house of advisors in Chicago expressed their reaction in multiple rounds of applause and voiced support in the question-and-answer session for the two men’s quixotic cause.
Quixotic perhaps, but Simpson, a former Republican senator from Wyoming, and Bowles, a former Clinton Administration budget director, are also realists who understand how Washington works. So when one advisor asked Simpson how the stalemate in Washington can be changed, Simpson had a one-word answer: “Pressure.”
He encouraged the audience members to contact their congressmen and voiced support for a bipartisan solution to the short-term fiscal cliff and the longer term debt and deficit issues that the country faced. He and Bowles also urged attendees to visit their website, fixthedebt.org, and sign a petition calling on Congress to make the hard decisions to restore fiscal sanity to the United States’ balance sheet . “We need one thing,” said Simpson. “We need you.”
Bowles also said that while he and Simpson speak to many groups, they were particularly interested in speaking at the Schwab event, since the advisor attendees tend to be highly involved in their local communities. He urged the advisors to talk to their clients, within their communities, within their businesses, in their churches and clubs to put pressure on Congress to act.
Bowles (right) warned that “if we reach the fiscal cliff” without a solution, “we go back into recession” and unemployment “will spike.” Simpson later said that he was particularly infuriated by both Republicans and Democrats who were speaking openly of the political benefits that could accrue to both parties if we did go over the cliff. Bowles voiced frustration with the lack of activity in Congress and among both parties to address the fiscal cliff and the deeper problems: “While the rest of the country was having a fragile recovery, they were having an election.”
Bowles listed the five biggest budget problems, many of them “third rails,” as Simpson acknowledged that the U.S. faced and must take action on:
1) Healthcare spending: “We spend more than any other country but we don’t get the outcomes” we should on that investment in terms of actual health.
2) Defense: “We spend more today than the next 17 top countries combined.” Perhaps the biggest round of applause came when Bowles proclaimed: “America can’t afford to be the world’s cop.”
3) Taxes: Bowles got another round of applause when he listed the third big problem the country faces budget-wise, “the most inefficient, globally anticompetitive tax code that can be imagined.” The Bowles-Simpson proposal: “Let’s get rid of all this backdoor tax spending,” much of it in the form of deductions, that he said costs the Treasury $1.1 trillion. In exchange he called for reducing individual income tax rates and the corporate tax rate.
4) Social Security: Bowles said jokingly that “President Roosevelt was too smart” in setting up a Social Security system that started paying benefits at age 65 when average life expectancy was 62. “Let’s make Social Security sustainably solvent so it will actually be there when we need it.”
5) Compound interest: By this Bowles means the compounding of our debt that will be an albatross for the country. Referring to his decision to partner with Simpson in his fiscal crusade, Bowles said, “I began this thinking I was doing it for my grandchildren, and then for my children, but we’ve got to do it for ourselves, here, today.”
Simpson (right) received many rounds of laughter with his folksy manner of speaking, but he often would follow by saying, “It’s funny, but not really.” Acknowledging that their proposals, have “effectively irritated everyone in the United States,” he listed some of those “third rails” that Simpson-Bowles has irritated.