Alan Simpson: US Budget Deficits Heading For a Train Wreck
Bi-Partisan Support Building in Congress for Simpson-Bowles Initiative
JIM: Joining me as my special guest today is the former senator from Wyoming Alan Simpson.
Senator Simpson headed up the Simpson-Bowles Commission, which was given the task by President Obama of trying to figure out a way to get out of the mess that we've dug ourselves in with our national debt.
Senator, it’s been roughly 14-15 months now since the Simpson-Bowles Commission came out. Can you kind of bring our listeners up to date in terms of...it seems like there is growing support within Congress, but this is also an election year. So why don’t you tell us. There is support, but is anything really going to be done?
SEN. SIMPSON: Well, you have to give people heart. And you know, the reason ours sticks in the throat of so many is because it is very specific and it slaughters every sacred cow in the pasture and people don’t like that. They laughed when we came out with it anyway and, "Oh, these guys are crazy." But now they see people talking about [it].
You can’t get there unless you deal heavily and painfully with Medicare, Medicaid, the solvency of Social Security, defense — we’re not hollowing out the defense budget. The defense budget of the United States is about $760 billion and the top 14 countries in the world are less, including Russia and China; $540 billion is the figure for all defense in the largest 14 countries other than us, and ours is 760. I mean, don’t let anybody tell you we're hollowing out anything unless it’s your brain. [2:14]
JIM: You know, I’m just looking at it, we had the debt ceiling debacle in August where there’s $1.2 trillion in automatic spending, but if you take a look at the avalanche of borrowed money, it’s like — I think the figure is $20.1 trillion by 2022; 81 percent of GDP. And even the president’s new budget, if you take a look at that, we're going to be looking at interest costs of something like $150 billion by the year 2022, and that will go to 15 percent from 6 percent. So apparently, the window of time in which we can act and do something is running out. [2:56]
SEN. SIMPSON: Well, I — to answer that first question. Have heart because we have about 51 US Senators, equal Democrats and Republicans; probably 150-160 House members, equally divided, who are ready to go. And we’re putting this entire — being drafted right now and we’ve been being drafted for the last month — to put it into legislative language, so that the ancient ploy is, Well, it looks pretty vague. If I can see something on it?
Well, they’re going to see something on it because it will be in legislative language. Then we’ll submit it to the full Congress and we’ll let them start messing around with it and say, Look, if you don’t like this, what amendment would you add to it, but let’s just not sit here and gripe.
And so this is very helpful, but those figures, bless you, you’re right on target. It is totally unsustainable. We’ll be paying a trillion bucks in interest if we sit like this. [3:50]
JIM: You know the thing that really surprised me, Senator, was the payroll extension tax. We talk about Social Security as a sacred cow in American politics.
SEN. SIMPSON: Oh boy! You’re so right. Please keep going—let ‘em know what’s going on.
This is good. Go ahead.
JIM: You’re taking and reducing the Social Security tax by one-third on the one hand, and then you're turning around and telling people that you’re for maintaining Social Security. How can you do that when now Social Security is running a deficit and you just reduced payroll taxes by a third for a one-year extension? What are you doing to the program? You're crippling it. [4:30]
SEN. SIMPSON: Oh, I tell you, yours is a clarion call. And you know why nothing’s happening? The AARP, they are caught. Let me tell you. They know damn well that the worst possible thing is happening right now.
If you go back and look at the whole history of AARP, other than one of the founders having been a felon, he got the schoolteacher to do the front work and he got indicted about three times; that’s a great organization way back in its history. Anyway, those people are marketers.
The hierarchy of AARP are not patriots, they are marketers. And they have said all through their history that the lodestone, the bloodstream of Social Security is the payroll tax and it must be maintained. Well, where are they? I haven't heard one peep out of the AARP or any of those senior groups when they’ve taken the bloodstream, the gold flow and knock it down from 6.2 to 4.2 is absolutely absurd. They are going to have to go get the money. And when they try to put it back, it’ll be called a tax increase by Grover Norquist and his happy band of warriors. [5:35]
JIM: Well, you know, I’m just looking at the president has come out with his budget and I’m taking a look at the way the CBO looked at it and he has some things out there about getting rid of some tax expenditures, but as Governor Mitch Daniels said, There are smart ways and dumb ways to get money from the rich, and this isn’t one of the smart ways.
I mean the Commission basically got rid of tax expenditures, but in exchange for that, you broaden the tax base and you lower tax rates where it is economic or, let's say, a billionaire or a millionaire has an incentive to go out and invest and do things. It doesn’t seem like the budget that the president is proposing is going to do that. [6:23]
SEN. SIMPSON: Well, it’s a start. Let’s give him some start.
And then of course today, they’ve done a nice little thing which is part of what we've suggested, they recommend taking the corporate tax down from 28 percent; we recommend 26. Take it to 28 from 36.
And so talking with Geithner yesterday, who called Erskine and I and said, you know, we’re going to adapt this portion. I said, Well, there’s a lot left to adapt and adopt.
But you’re going to see a lot of piecemeal stuff here because this thing is like a stink bomb in a garden party: You can’t get away from the fact that you have to do something with Medicare. Medicare is the mastodon in the kitchen. And it doesn’t matter whether you call it Obamacare or Elvis-Presley care or I-don’t-care care, it can’t possibly work.
And people say, Well, why not?
Well, 10,000 people a day are turning 65. You've got to do pre-existing conditions for a three-year old; you’ve one person in America who weighs more than the other two — obesity is endemic; you've got A and B diabetes; you've got to affluence test these people; you've got to do tort reform; you've got to knock down doctors, providers, get into tort reform. And if a guy gets a heart operation, it could buy half your radio station and cost 150,000 bucks and he doesn't even get a bill.
Come on. Wake up, America. [7:51]
JIM: You know, this is something that, Senator, most Americans — and you've seen the public opinion polls, you’ll ask somebody about reducing the deficit and overwhelmingly, about 75 percent of Americans are for that, but then you start getting down to the sacred cows and then everybody says, "Well, yeah, I think it’s a good idea but don’t reduce my benefit." You can’t take a government that spends almost 65 percent of its budget on entitlements and interest and say, you’re going to balance your books in 10 years. Mathematically, it’s not possible. [8:24]
SEN. SIMPSON: Even worse, you have people peckering around in the discretionary budget. Forget that. Unless you do something with Medicare alone, that’s on automatic pilot, it will squeeze out —
I say to people all over the country, What do you love? Well, I love culture, I love education, I love this, I love defense. All of that is in the discretionary budget, all of that will be squeezed out by a system which is totally uncontrollable. Everybody knows it. The docs know it, the lawyers know it, the providers know it; the hospitals are going to have to start keeping one set of books instead of two.
We had 105 groups testify before us; they said we’re headed on a trajectory of debt, deficit and interest which is unsustainable, unconscionable, totally predictable. And then they finished and said, Don’t touch ours. [9:13]
JIM: The Greeks were saying that at one time, and Portugal and Spain.
And Senator, I wonder sometimes if we don’t really tackle this, if it’s going to be tackled for us by those nasty guys called the bond vigilantes, where one day they show up and they say, you know what, you guys aren’t fiscally responsible and if we're going to buy your bonds, we're going to demand more payment from you. And that would even worsen our situation, as interest rates were going up at a time that we have just an incredible amount of debt that we've been piling up. [9:51]
SEN. SIMPSON: Well, you’re doing a service that you can’t imagine. Everything you’ve said is absolutely true and no one can challenge those figures. No one. And you’re speaking truth to power.
But I can tell you: Social Security, if you do nothing, and that’s what the AARP is saying, Do nothing, we're going to solve it later. If you do nothing, you’re going to waddle up to the window in 2036 and get a check for 23 percent less and not one person in the range of your station can object to one bit. That is absolutely the truth and it’s absolute madness.
It is absolute madness.
Everybody knows where it’s going and the money guys that you describe, they don’t care who’s running the shop; they don’t care about who’s going to get elected. They care about their money and they’re going to say, you know, we love you, but we're going to loan you more but we're going to get more interest and then up comes interest, up comes inflation and the guy that gets pinged the worst is the little guy. What hypocrisy. [10:49]
JIM: Yeah. There’s only one way out of this. Either we get this under control because financially, I look at the budget numbers; I look at how much is going to automatic spending programs where they’re on automatic pilot, like, Social Security, Medicare, Medicaid.
And the other thing, Senator, that strikes me is right now America is a beneficiary. There are problems in Europe with countries that can’t be responsible with their budgets. We've seen it with Greece, Portugal, Spain. They are paying ungodly interest rates. America is viewed as a safe haven. Money has come into our country, they are buying our bonds, they’ve helped to support the dollar. So we have a window; a period where we can structure our debt. Maybe just do like a homeowner, lock in a lower interest rate, get our budget in line.
And I think we would enjoy and become that beacon on a hill if we can get our act together. So I think there is a lot more positive things that could come of it.
You know, Senator, it reminds me of going to a doctor. You know, you’re overweight, your cholesterol is high, your arteries are clogged and your doctor’s saying, Look, you’re going to have to go on a healthy diet and you’re going to have to exercise. But if you do those two things, you’re going to be a healthier person.
And I wonder why politicians have a hard time just explaining that to the American people. [12:14]
SEN. SIMPSON: Because they want to get reelected. They worship the god of reelection. Take Grover Norquist, he’s got 95 percent of the Republicans signed up never to raise one penny of taxes without a spending [cut] accompanying and Coburn, with a lot of guts, sticks a bill in there to get rid of ethanol subsidies — six billion bucks — gets it done and Grover calls that a tax increase, to which Coburn says that’s ludicrous. And I add that it’s not ludicrous, it’s deceptive. Now, that’s where we are.
And we have these people — what can Grover do to you? He can’t murder you, he can’t burn down your house. The only thing he can do to you is assure that you get defeated, or stick a guy in a primary to pick you off. Usually some koo-koo.
And so there he is. And if that means more to you than your country in extremity when they need patriots in Congress, you shouldn’t even be in Congress. [13:05]
JIM: Do you think, Senator, that the way this plays out — this is an election year, so most of the politicians I see running for office are handing out candy and lollipops and telling us we're going to have a wonderful life and we're going to get extra goodies, and in addition to a free lunch, we're going to have a free dinner if only we taxed rich people.
I looked at the numbers and if you took rich people and just said to everybody making over 250, let’s just take 100 percent of it, we still can’t balance our books. [13:38]
SEN. SIMPSON: Where did you get that figure because I’ve used that fact? The last time I got that I said, Look, forget the tax. Let’s just — anybody with a net worth over a million bucks and that’s a pretty good net worth, just take everything; the yachts, the islands, the jets, and just roll it up into a big ball and it’ll run the country for nine months, Ladies and Gentlemen, because this day your country borrowed three-billion-six-hundred -million bucks and they’ll borrow three-billion-six-hundred-million bucks tomorrow and the deficit will be one-trillion-three-hundred billion.
Come on. I mean it’s just —
Actually, it’s kind of fun to go around the country because people just sit there because we don’t do BS or mush. Erskine and I just say, Pull up a chair. You’re talking to a couple of guys and backed by five Democrats and five Republicans who didn’t decide to do BS or mush and you’d better pay attention. And they say, Well, what is a trillion?
You can’t even describe it, but I use one: If you use a buck a second starting today, you wouldn’t reach a trillion for 32,500 years. And that’s one trillion.
Italy is going down the pipe. What’s their debt? 2.6 trillion.
Ours is 16.2. I mean, you know, you have to laugh because you’re drilling rocks. The American people are smarter than their politicians. The American people figured this out. Wherever we go, we’ve talked to 4-500,000 people. We do that in an hour; no BS, no mush. We get a standing ovation.
And we're not looking for standing ovations. We look to penetrate this unbelievable crap from the senior groups and Grover Norquist. If Grover Norquist and the AARP are going to carry the day, we ain’t got a prayer. [15:28]
JIM: Well, you know, I’m just looking, Senator, and you've probably been to this website. I’m looking at the US Debt Clock and we're approaching 16 trillion. And then I look over to my Bloomberg bond screen and our 10-year Treasury yield is 2 percent. But as I go down my bond screen and I look at Italy, it’s 5 ½.
So a one or two percent increase in interest rates — let’s just say those nasty bond guys show up and just say, you know what, you guys aren’t responsible enough, we're going to require another 2 percent or 3 percent. You know, Senator, that’s another 3-400, 500 billion dollars a year in interest. I mean think what we could buy or what we could do for this country with half a billion dollars. But that’s the kind of scenario we're going to face if we don’t get real about this. [16:14]
SEN. SIMPSON: I just know that — I do a lot of stuff and shows and interviews, but you are speaking with greater clarity than anyone I’ve talked to in the last three weeks. I mean you are giving them the hard numbers without blaming whoever. You know, it’s the great game: Bush didn’t veto a single bill for six-and-a-half years, yeah, but this guy did TARP, he did the stimulus.
Forget it. The issue is: Forget how we got here, it’s what the hell do we do now. [16:48]
JIM: I like to use the medical analogy. I mean you can spend a lifetime eating fatty foods and drinking beer and doing all kinds of bad things and you could say, well, it was the beer, it was the diet, it was the lack of exercise.
It doesn’t matter: The doctor says that your arteries are clogged, you've got to do something or you’re going to have a heart attack. And I think that’s the point that we've arrived at.
I think if it was explained in the way that you and Erskine have done. This is an American problem. It’s not a Democrat, it’s not a Republican, it’s not an independent. It’s America. And the only way we're going to solve it is as Americans.
I just can’t see this. I just hope, Senator, going to your website, I see that you've lined up a lot more Senators and Congressmen on both sides. I think people are waking up. [17:45]
SEN. SIMPSON: Yep.
JIM: Heck, all you have to do is turn on the TV and just watch the latest stuff coming out of Greece and it’s kind of a grim reminder of what could be coming here if we don’t get our act in gear. [17:53]
SEN. SIMPSON: Well, as Erskine says, we are the healthiest source in the glue factory.
JIM: Well, listen, Senator, as we close, if our listeners would like to follow, you’ve got a lot of great information on your website. I’d like to give that out.
SEN. SIMPSON: Sure.
JIM: And urge our listeners to go there. You've got a lot of unbiased stuff here and I think that people really need to read this because this is a very important election year. I think that we're at a pivotal turning point or tipping point in this country. And we're either going to fix this problem and move on or we're not going to fix it and then somebody else is going to fix it for us. And that’s the outcome I don’t want to see.
The name of the website is called www.momentoftruthproject.org. And I’d highly recommend that you download the Moment of Truth report which was published in December 2010 because, Senator, I think you wrote that for the average American. It was written in words that people could understand; it wasn’t full of a lot of legalese. But I’ll tell you one thing. It has a lot of sobering facts and charts in it. [19:05]
SEN. SIMPSON: It’s only 67 pages long. And I always tell people and boy, I get vicious, vicious mail, you know, from people saying — the most vicious are from people who are over 70. I can’t believe it. The most foul emails and calls — and I’ve never had an unlisted number — are from people over 70 saying, what are you doing to Social Security.
Well, I’ll tell you who’s generating that. The AARP and the Committee for the Preservation of Social Security and Medicare. Those guys are not patriots. They are marketers. They make money. And it’s a very sad thing to watch. And when you tell people, even people over 60 or over 55 aren’t affected, but boy, if they can’t understand what’s happening to their precious payroll tax coming down from 6.2 to 4.2, boy, you know, you've got to be a lightweight or a boob not to catch that one. [19:55]
JIM: Well, I just hope that more of this gets out and it’s like shared expense. Once again, it’s not a Democrat or a Republican —
SEN. SIMPSON: A shared sacrifice. A shared sacrifice —
JIM: I’m in 100 percent agreement. Well, listen, Senator, keep up the good work. And you’re starting to have an impact because I see that there are more and more people on both sides of the aisle that are waking up to the fact that this is a problem that’s not going to go away and the longer that we delay in it, it’s just going to worsen. And nobody wants to see an outcome like what we're seeing take place in Greece today. [20:27]
SEN. SIMPSON: And you know, you've talked about America moments ago. America this and America that; and that would have usually solved the problem and we could get it done. But this time, Europe is involved whether we like it or not. Think how many banks in this country still hold that trash of theirs. They wear the dam; they can’t sell it —and holding their breath along with it. [20:51]
JIM: Well, I tell you —
SEN. SIMPSON: Mother never told me.
JIM: Well, listen, Senator, keep up the good work and I appreciate you coming on the program and we're going to do all that we can to help you. [21:00]
SEN. SIMPSON: Thanks for your clarity. You’re doing a magnificent job. I mean that sincerely.
JIM: Well, thank you, Senator.
SEN. SIMPSON: You bet. Thank you. [21:08]