Interview with Former US Senator Alan Simpson

The following is a partial transcript of Jim's interview with former US Senator Alan Simpson. If you would like to listen to the audio interview, please click here.

Jim Puplava: Well, you've heard us talk on this program about the pressing issues of the national debt. Every single month we get reminded as the deficit figures get bigger and Congress squabbles over how to come up with the debt limit. The debt limit has now reached its limit at $14.3 trillion and we will be adding another $1.7 trillion this year and trillions into the future. Sooner or later, we’re going to hit a brick wall. Joining us on the program is the co-chairman of the President's National Commission on Fiscal Responsibility and Reform, Senator Alan Simpson. He's the former Republican senator from Wyoming. First of all Senator, I remember the day that you and Erskine announced the results of your Fiscal Responsibility and Reform Commission. And you had gored so many sacred cows that you immediately asked for protection in the witness protection program. So, are you in that program now and are you speaking to us from an undisclosed location?

Senator Alan Simpson: Well, I sneak out sporadically from time to time, just to take in calls like this and then retreat to this black cave where I reside.

Jim: Huh, huh, well ok. For our listeners Senator, I want to talk about the makeup of this commission, because I think it's important that people know that this truly was a bipartisan effort. As I understand there was an equal number—six Democrats, six Republicans, somebody from two CEOs, a think tank, and the unions. So it was pretty equally balanced between both sides. Is that correct?

Senator Simpson: It was. There were 18 of us. Six appointed by the President, among those a CEO of HoneyWell, Andy Stern of the Service Workers’ Union, and then 12 members of Congress. The six Democrat and six Republican from majority and minority, three from majority and minority of each house. We worked for a year and came up with a plan that was supported by five Democrats, five Republicans, and one Independent, which was sixty percent of the commission.

Jim: Now the name of your report is called “A Moment of Truth.” When I open up this report and I look at a deficit graph, you have your proposal, you have a baseline proposal, and the fiscal alternative. If you look at that fiscal alternative graph that's a pretty scary scenario. So this is a problem that this country is facing, and it's not one that we’re going to be able to walk away from. It’s staring us in the face, is it not?

Senator Simpson: Yeah, and we never had a single witness to tell us that we could grow our way out of this. In fact, the consensus was you couldn’t grow your way out of this horrible situation with double digit growth for 20 years. So, you know with growth at two, three, or four percent, obviously it’s never going to happen. And the debt is fourteen trillion, three hundred billion and the deficit will be one trillion seven hundred billion, and people don't pay attention because they can't make a distinction between a billion and a trillion. Wherever you hear the word now that we should cut a billion here or there, change the “B” to a “TR” because thats the only way we’ll get out of the hole.

Jim: Now, as you open up on this report, you talk about this looming crisis where we've seen the national debt, the federal debt, go from 33% of GDP to 62% of GDP in nearly just one decade. So as you look at these numbers and you look at going forward, it seems to me that how are we going to grapple with this looming crisis without, I guess making an attempt to look at entitlements. Because as you look in your report, you take entitlements, Social Security, Medicare, Medicaid, you take interest on the debt, you take national defense, there's about 80% of your budget, discretionary spending is about 20%, so how can we realistically bring this under control without touching entitlements?

Senator Simpson: You can’t. And the sooner you listen to your next favorite politician get up on his or her hind legs, and say, “Look, we can get this done without touching Medicare, Medicaid, the solvency of Social Security, or defense,” just give them the old “heehaw” like a donkey from the audience, cause this is just fakery. Total fakery. You cannot get this done without touching every one of those. And if you do, I mean, you know, then you’re chopping the heads off seniors, you’re cheating the unions, you’re breaking the bedpans in the VA Hospitals, the babies are dying, I mean honestly. This is really—and you haven’t seen anything yet—they’re going to have to do something. They’re going to have to find some revenue. We suggested ways to do it and that is to get rid of all these tax expenditures which are just spending by another name. But you can go on and people will tune you out because they don't understand GDP. They don't know what a trillion is. The way I get to them is, I just say, “Here you are guys, if you spend more than you earn, you lose your butt. And if you spend a buck and borrow forty-one cents of it, you’ve got to be stupid. And that’s your government right now. Your Republicans, your Democrats, your White House. We are spending a buck and borrowing forty-one cents, which is stupid.”

Jim: And not only is it stupid or irresponsible, but here's the thing that concerns me, Senator, because in your report you emphatically say this is something we need to be doing now, not kicking the can down the road. And you’ve been in Washington long enough to know that any time that they come up with some programs, and they go and we’ll cut it and its 10 years down the road, that the so-called budget cuts take place. Now, you were commissioned to look at this and you had various objectives, and I'm just taking some your guiding principles here. Don't disrupt a fragile economic recovery. Cut and invest to promote economic growth. Protect the truly disadvantaged. Cut spending we cannot afford with no exceptions. And here's one that I'm sure is going to raise a lot of eyebrows, reform and simplify the tax code. Get rid of the inefficiencies, the loopholes. But here's something that really took me by surprise, you guys lowered the tax rates, but at the same time you're broadening the tax base. So let’s get into the specifics. How do you start cutting without disrupting a fragile economic recovery?

Senator Simpson: Well, ours didn’t kick in until 2013. We thought that would be a good little cushion. And then I think we were all stunned to get into the tax code and find over a hundred eighty things called “tax expenditures.” We finally decided to call them what they were, they’re “tax earmarks.” Even better than that, they’re called “spending” by any other name. And they cost one trillion one hundred billion a year and there’s no oversight. Nobody ever touches them. And they’re little things of course, like home mortgage interest deduction, a million bucks, which is absurd, five hundred would cover it. We suggest that. Take care of the little guy, give him twelve and a half percent of nonrefundable tax refund to take care of that, and then go in and get rid of them all, and then take the one trillion one hundred billion and give a hundred billion to deficit reduction and with the other trillion bucks set up three tax rates: 0-70,000 bucks you pay eight percent; 70,000 - 210,000 and you pay 14% taxes; everything over that they pay 23. And you reduce the corporate tax to 26 from 36, making it competitive with the world. And that's what people’ve been shrieking about now. Just broaden the base, lower the rate, get spending out of the code. Well there it is. That’s it, right there. Grab it.

Jim: You know, Senator, I think, correct me, but didn't Ronald Reagan at one time in the ‘80s, you were in the Senate at that time, didn’t he say okay we’re going to get rid of a lot of these tax expenditures, ‘cause I was in the industry and the amount of tax shelters that we had back then, you could zero out your taxes and he said in exchange for that we’re going to lower the rates. What happened to that?

Senator Simpson: One side cheated. In other words, Reagan said that and did it, and other side went the other way. But Reagan raised taxes 11 times during his eight years, and I asked that of Grover Norquist who seems to make a lot of money at terrorizing people by the simple message that if you are in congress, and you raise taxes one half of one penny, you will be toast. We will get rid of you. They proved up a bit. They got rid of Bob Bennett. They’re after Orrin Hatch now. Orrin Hatch now apparently is a commie because he suggested some realistic things. I mean, this is absurd. And if the world is in thrall, I love that word that Lincoln used in one of his addresses, that if we are in thrall it means in a mystical command and judgment by Grover Norquist and the AARP, this country hasn’t got a chance.

Jim: We just got through tax season. And my tax return is almost an inch thick. I think many Americans, including those listen to this program, would love a day where you had a one-page tax return. This is what you made, this is what your tax rate is, send it in. Verses the complexity, I forget, I think there's more pages in the tax code than there is in the Bible.

Senator Simpson: It may well be and it’s certainly probably more well read, sadly enough. Anyway, but it is a sad situation. The American public can’t use these charts, you can’t use PowerPoint, but they sure hear you. And whenever Erskine (Bowles) and I go out, we do a lot of speaking around the country, just give us 40 minutes or 45 minutes with any group, and let them ask any question they want, and we’ll get a standing ovation. I meant they hear us because people are lying. Let’s get right to the one that, that I given bellyful of it, and this, we’ll get at it. And that is Social Security. What in the hell do we think we’re doing, by doing nothing? By doing nothing in Social Security, in the year 2036, you’ll waddle up to the window and get a check for 23% less. And that figure changed last year. It used to be 2037 and now it’s 2036, they moved it up a year. It used to be 22% less, now it’s 23, and we say look, we’re going to raise the retirement age to 68 by the year 2050. Now if you can't get organized in your life, figure out what's coming in 2050, and the sad part of it is the law. You can't get around this baby. The law says that if the Social Security Administration can’t pay out the scheduled benefits, the thing you get the mail, that you will receive only the payable benefit. And the payable benefit, by doing nothing in 2036 will be 23% less. I think that's cheating on people. So we said, look what the guff? Here’s what we’ll do: we give the lowest twenty percent 125% of poverty, that will take money out of Social Security. We’ll raise that wage limit to 190,000, where you hit them at 190 instead of 108.6 right now. And we change the cost-of-living index to a more modern one. We take care of the guy who can't work, who’s exhausted, or working in the steel mills, or whatever, he doesn’t have to retire any later than 62. We do all those things, we hit the rich a little more than the wealthy, than the poor, because we set up the bend points, I don’t have the technical term, but it’s a distributional analysis to take care of the minorities, the people that don't have the funds, and we are very precise in our recommendation, and all we get from the AARP is that somehow this is savaging the Social Security. I mean these people at the AARP, the upper echelon, they’re are not patriots, they’re marketers and anybody that hasn’t have figured that out is out to lunch.

Jim: And you know, even when you talk about lowering the tax rates and getting rid of all these tax expenditures, which is basically deductions, you still have a reasonable amount. Now for example, I think you keep what, the mortgage interest about a half million, and you still keep charitable giving, and you can still put money in a retirement savings account. So you still leave some things in there that are very important to the American public, but if you listen to the way that your tax proposals have been demagogued, one would think that you're going to take everything away from everybody in that, I've heard people say you’re going cause another housing collapse. That's extreme.

Senator Simpson: Well there will be a lot more of that because don’t forget how this game works. You make your contribution. The real cancer out in America is, along with the debt, and don't forget what the chairman of the Joint Chiefs of Staff said: he said the greatest threat to America's security is the debt. That’s quite a statement coming from a military man. I haven't been speaking about terrorism. But if you can’t begin to get together a handle on this stuff, or even just just stabilize things, or have a plan. We don’t have a plan. Germany has a plan, people might not like it. Great Britain has a plan, maybe they don’t like that, but they’ve got one. France has a plan. But we have no plan and that’s why Standard & Poor's said that if you continue this with no plan, we’re going to lower your rating. Now that's not just romancing and dancing, that’s what they intend to do because they will see that we don't have that cuts or the courage, or any kind of common sense to at least get a plan in place. Even even though you don't put teeth in it right now, get a plan.

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