CHICAGO Nov 15 A major overhaul of the U.S. tax
code and steep cuts to social programs are needed to deal with
mounting U.S. debt, according to the former co-chairs of a
deficit panel put together by President Barack Obama, who never
fully endorsed their plan.
Politicians from both sides of the aisle need to work
together to prevent a full-blown debt crisis, Erskine Bowles,
former chief of staff to Bill Clinton, and Alan Simpson, a
former Republican senator, told a group of financial advisers in
Chicago on Thursday.
"The fiscal path that America is on today is simply not
sustainable," Bowles said at the Charles Schwab Corp
U.S. deficits have topped $1 trillion for each of the past
four years and the country's debt has surpassed $16 trillion.
Bowles pointed to five areas where he said spending must be
cut in order to get the deficit under control: healthcare,
defense, the "inefficient" tax code, social security and
interest on the national debt.
"If we do nothing and we breach this 'fiscal cliff' and we
don't get an agreement immediately thereafter, you know what
happens the next year, in 2013? We go back into recession," he
said, referring to the year-end expiration of Bush-era tax cuts
and the launch of automatic spending cuts.
The result would be a hit of about $600 billion to the U.S.
economy next year, according to the nonpartisan Congressional
Bowles said he put the chances of a deal happening by the
end of the year at around 33 percent.
He said that every dollar spent last year in the United
States was on mandatory spending - Medicare, Medicaid, and
Social Security - and interest on the debt, while every dollar
spent on the wars in Iraq and Afghanistan, on national security,
homeland security, education, and infrastructure, was borrowed.
"This is not a problem we can solely grow our way out of,
it's not a problem we can solely tax our way out of, and ...
it's not a thing we can solely cut our way out of," he said.
Both Bowles and Simpson bemoaned the fact that compromise
has seemingly become a dirty word in politics. "If you can't
learn to compromise on an issue without compromising yourself,
you should never be in the legislature," said Simpson.
In 2010, the Simpson-Bowles panel called for a mix of
spending cuts and tax reform to trim the debt by $4 trillion
over a decade.
Obama did not embrace the plan and it never got off the
ground, though the concept has received renewed attention as
Congress gets closer to going over the fiscal cliff. The plan
called for about $3 in spending cuts for every $1 in new revenue
to achieve its goals.
Both Democrats and Republicans are in favor of extending the
Bush tax cuts to lower and middle income Americans, but the
president is in favor of letting them expire for the wealthiest
2 percent of the population.
However, Senate Republican leader Mitch McConnell warned on
Thursday, "What we won't do is raise tax rates."