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

    Comment number 5.

    President Obama won the election NOT the Republicans but they still want to play the political hostage game that the american people rejected and sided with Obama's agenda for the country including hitting the rich for they they ought to pay. Obama must not give a inch to these coporate fascist thugs. Let things go off the cliff it will be the end of the Republican party which needs to die.

  • rate this

    Comment number 13.

    Reaching out to the obdurate Republicans, Obama is bending himself backwards to secure a deal. The GOP is driven by a desire to thwart Obama every step of the way:discomforting him after his thumping victory makes the problem even more stark! When will the Republicans see real sense?Supporting the rich to the hilt could torpedo all efforts to reach a pragmatic solution.The poor need to be helped

  • rate this

    Comment number 18.

    I've read that increasing taxes would only raise billions when the debt is trillions; this raise would keep the govt running for 8 days!
    Spending cuts will seriously hurt the sick and the aged; I'm sure they're worried sick in any case.
    The US needs to stop spending so much on its military, or is killing people more important than taking care of Americans?

  • rate this

    Comment number 19.

    Perhaps if the USA stopped fighting wars in other countries so often, and stopped all the threats that result in them needing to pay huge amounts of money for increasingly sophisticated defence systems, then there wouldn't be so much being paid out. Perhapd of the USA decided to reliquish its position as "top dog" gracefully, and not petulantly, there would be no need for massive bribes and so on.

  • rate this

    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.


Comments 5 of 39



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