Fiscal cliff: Simpson and Bowles gloomy on deal chances

 
Erskine Bowles and Alan Simpson at the Christian Science Monitor Breakfast (28 November) Bowles, left, and Simpson have been called "an improbable buddy act"

Over bacon and eggs and bagels and muffins in a fancy hotel in Washington, one of the US capital's oddest double acts is sounding the alarm.

The American republic, say Erskine Bowles and Alan Simpson, is heading toward the edge of the cliff. Without a deal on tax and spending "we have no idea where it will go".

Perhaps 40 members of Washington's press corps are in the room. Under four huge chandeliers a long table is littered with audio recorders and notepads. TV lights illuminate the scene to an almost maddening brightness. Silverware shines, and light bounces off glasses of iced water.

Both men are softly spoken - the journalists lean in to catch their words.

Mr Bowles is a former White House chief of staff under Bill Clinton. Mr Simpson was a Wyoming senator for almost two decades.

Together they chaired a commission that came up with the last plan - never adopted - to cut the US budget deficit and send its debt in a more stable direction.

They are sounding the alarm over the crunch that will come on 1 January if Congress and the White House can't come up with a deal on tax and spending.

Economic gains threatened

The crunch - the "fiscal cliff" to those who eat and breathe this sort of stuff - is a combination of tax rises and spending cuts that would suck more than $500 billion out of the economy.

The impact of such a sharp reduction in government spending and individual income, reckons the Congressional Budget Office, would be to shrink the economy by 0.5% of GDP (compared to 1.7% projected growth) and add more than a percentage point to unemployment.

It would undo, in short, the rather meagre gains of the past three years.

Mr Bowles sounds almost impossibly gloomy about reaching an agreement on tax and spending to avert the automatic tax rises and spending cuts. He sees a one-in-three chance Democrats and Republicans in Washington can reach a deal.

Mr Simpson talks about about the US reaching a "tipping point" when creditors see a "totally dysfunctional government kicking the can down the road" and decide they want more in return for their loans. And who gets hurt? he asks. "The little guy."

He likes this kind of language - folksy, sometimes pungent turns of phrase. Some Republicans are "as rigid as a fireplace poker but without the occasional warmth". Leaders need to "go big or go home". Playing politics with this issue is "like betting your country".

Everyone around the table - and everyone in political Washington - knows the kind of deal that would avert the fiscal cliff: some tax rises, some tax reform, some spending cuts, and some reform to the giant social programmes to trim future spending.

But the consensual middle has been sucked out of Washington in the past decade or so. Sometimes it seems people have forgotten how to make a deal.

'I'm really worried'

Mr Bowles speaks with less flourish, but is stark about the risks of continuing disagreement.

Already, he says, businessmen are delaying investment and not replacing workers.

Consumer confidence will begin to dip without a deal, and even if a deal is reached in the days immediately after the deadline there will be damage to the economy.

"I'm really worried," he says. "I believe the problem is that we are going over the cliff. It will be horrible for the economy."

There are some signs, both men say, of compromise at the edges. Some legislators have renounced a "no tax-rise" pledge they made. The election has given both sides a bit of wiggle room.

But neither man came to breakfast to give a pep talk. You can almost reach out and touch the gloom they feel about the process. Time is running out, says Mr Bowles, and there's still a big distance between the sides.

From Mr Simpson, the former mountain state senator, comes a populist cry. Americans, he says, "are thirsting for someone to tell them the truth, rather than the hogwash from both parties".

But from Mr Bowles comes a cold dose of Washington realism, and what seems to be the prime driver of his pessimism.

"There's been no punishment," he says, "for intransigence in this town."

 
Jonny Dymond Article written by Jonny Dymond Jonny Dymond Washington correspondent

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  • rate this
    0

    Comment number 39.

    One thing the U.S. could do to cut expenses is to quit NATO and de-mobilize the forces that were dedicated to defending Europe. Europe is fully recovered from the devastation of WWII and can afford to to pay for it's own security.

  • rate this
    0

    Comment number 38.

    Obama proposed tax increase on the wealthy has not taken effect. Bush tax cuts for richc is still in place. If lower tax rate for the wealthiest Americans is the answer, why haven't more jobs been created in 12yrs, including Bush's last 8yrs? America's credit rating was downgraded not for her debt/higher taxes,but because Republicans refused to work with Obama at the country's expense.

  • Comment number 37.

    All this user's posts have been removed.Why?

  • rate this
    +1

    Comment number 36.

    35.UnCivil_in_NY
    @34 I mind paying more if it's going to be horribly misused like the rest of my taxes are."
    **
    Me, too.

  • rate this
    +1

    Comment number 35.

    @34 I mind paying more if it's going to be horribly misused like the rest of my taxes are.

  • rate this
    +2

    Comment number 34.

    I think that both tax increases and spending decreases are inevitable. I say let the Bush tax cuts expire...I don't mind paying a little more. But we need to get out of the Middle East, and put more cuts in "defense" than in social programs.

    We need to build up our own nation more than we do Iraq or Afghanistan. With wise investment, we can give our kids a better nation than what we have now.

  • rate this
    0

    Comment number 33.

    If I remember correctly, the amount of money per paycheque I netted with the tax change was equal to one or two "Happy Meals" at McDonald's.It would be no great loss.I'm more concerned how the folk who run small businesses&actually hire people will be affected.Larger companies will continue to shift business overseas to avoid taxes & costs.

  • Comment number 32.

    All this user's posts have been removed.Why?

  • rate this
    +3

    Comment number 31.

    Let the fiscal cliff come it will put things in order and take down the Republicans into oblivion as a party. Obama ought not to give into Republican chicanery let them hang on the hook of their own making come 2014 even more Republicans will lose their seats in Congress then Obama will not have to deal with them at all. Trickle down rightest economics has proven a total failure.

  • rate this
    0

    Comment number 30.

    @28.ColadadelCid ,
    Mr Obama's executive position is only one part of our govt.He's not a dictator&can't proceed without Congress.

  • rate this
    0

    Comment number 29.

    @28 - If he had any sort of mandate, congress would have flipped. It didn't. He won because people hated Romney so much. His piteous cries of "why can't we get along" are because he has no power over congress, even the Democrats in congress, but will be blamed for their failure.

  • rate this
    0

    Comment number 28.

    President Obama is acting as if he lost the election whereas he was handed a clear mandate by the american voter to advance his agenda regardless of Republican opposition that has lost credibility and ressonance. Obama incredibly is playing "Can't we just all get along" nonsense instead of hammering the Republicans for what they are ideological obstructionists who only care for the wealthy.

  • rate this
    +1

    Comment number 27.

    Well! The NY Times' "Balance the Budget" game showed us that it's possible to balance the budget and cut down federal debt in the short- and long-term using a slew of measures, primarily some tax raises and cuts on defense and social welfare. So, unlike in the EU, it's possible if the political will is there. Is it now?

  • rate this
    +1

    Comment number 26.

    @24 - or we could simply default and refuse to pay the debt, sneer and balance the budget.

    I vote we render void all debts of or in the US, including private debts - then ban loaning on interest.

  • rate this
    +1

    Comment number 25.

    5.ColadadelCid
    President Obama won the election NOT the Republicans"
    **
    Romney lost, but many GOP won state elections &still hold the House of Reps. majority.The GOP ran a clueless campaign.Obama's team had the edge to get the votes out&had been working on that for the past 4 yrs.I don't think things have changed that much.We're right where we were 2 yrs ago.

  • rate this
    0

    Comment number 24.

    there is easily enough equity present in the nation able to be mortgaged to pay off the entire national debt, then repaid over the course of several really hard years where currency and monetary exchange were kept track of with records but not actually tendered; as all capital would have to flow back into the financed landholdings but it would bring about 100% creditworthiness & axe the interest

  • rate this
    0

    Comment number 23.

    @22 What would have been better would be a blanaced budget amendment. Congress has shown that it can't amange debt, so it cannot be callowed to borrow - ever.

  • rate this
    +1

    Comment number 22.

    Well, the Democrats say you need to raise taxes and the Republicans say you need to cut spending. This 'fiscal cliff' sounds like the best of both worlds! Whatever happens, the US should have some sympathy with Greece and Spain. Alle ist kapital works for this, too, everything is political especially if someone says it isn't.

  • rate this
    +2

    Comment number 21.

    Executive powers it is then... possibly by going over the cliff and then reversing some of the the cuts but keeping all of the tax rises, if it cant be done before 1st Jan via negotiation.

  • rate this
    0

    Comment number 20.

    Do these putzes have the authoirty to negotiate on behalf of congress? No? Who cares what they have to say.

    Compares "are not replacing workers" because we're going through a "jobless recovery" the only kind of recovery the US ever goes through since the invention of automation and outsourcing.

    The government failing to deal won't impact the spending of 90% of us, we can only afford the basics.

 

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