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CNBC Transcript: Erskine Bowles, Fix the Debt Campaign Co-Founder, on CNBC's "Closing Bell" Today

Friday, 4 Jan 2013 | 4:48 PM ET

WHEN: TODAY, FRIDAY, JANUARY 4TH

WHERE: CNBC'S "CLOSING BELL"

Following is the unofficial transcript of a CNBC interview with Erskine Bowles, Fix The Debt Campaign Co-Founder, today on CNBC's "Closing Bell." Following is a link to the interview on CNBC.com:
http://video.cnbc.com/gallery/?play=1&video=3000139328. All references must be sourced to CNBC.

CARUSO-CABRERA: A MISSED OPPORTUNITY. THAT'S WHAT THE FIX-THE-DEBT CO-FOUNDERS ERSKINE BOWLES AND ALAN SIMPSON ARE CALLING THE TAX DEAL WE GOT FROM WASHINGTON TO AVERT THE FISCAL CLIFF.

GRIFFETH: MR BOWLES WHO ALSO CO-CHAIRED THE PRESIDENT'S DEBT COMMISSION WITH SENATOR ALAN SIMPSON HAS GONE ON TO SAY THAT IT WAS A CHANCE TO DO SOMETHING BIG, TO PUT OUR FISCAL HOUSE IN ORDER, AND WE ABSOLUTELY BLEW IT. ERSKINE BOWLES JOINS US RIGHT NOW WITH MORE OF YOUR THOUGHTS ON ALL OF THIS. I MEAN, WHAT WERE YOU THINKING AS THESE NEGOTIATIONS WERE GETTING CLOSER AND CLOSER TO THE DEADLINE AND THEY CAME UP WITH THIS TAX BILL?

BOWLES: LOOK, BILL, I WAS -- I WAS HOPING, YOU KNOW, THAT WE WOULDN'T TAKE THIS BIG, YOU KNOW, HIT IN THE GUT AND GO OVER THIS FISCAL CLIFF AND REALLY DO SOME REAL DEVASTATION TO THE ECONOMY.

GRIFFETH: SO YOU'RE GLAD THEY DID SOMETHING?

BOWLES: YEAH, LOOK IT. WE GOT SOMETHING. WE GOT ABOUT $620 BILLION WORTH OF REVENUES. UNFORTUNATELY, IT WAS A MISSED OPPORTUNITY. THIS WAS A MAGIC MOMENT TO DO SOMETHING REALLY BIG ABOUT OUR LONG-TERM FISCAL PROBLEMS.

CARUSO-CABRERA: CAN I PLAY A SOUND BITE FOR YOU WHEN IT COMES TO SPENDING FROM ARTHUR BROOKS, THE PRESIDENT OF AEI, WHO WAS ON "SQUAWK BOX" THIS MORNING AND TAKE A LISTEN TO WHAT HE SAID.

BOWLES: SURE.

ARTHUR BROOKS (SOT): IT'S PRETTY CLEAR THAT OBAMA BELIEVES THAT THE ONLY PROBLEM THAT WE HAVE IS AN UNDERTAXING PROBLEM IN THIS COUNTRY.

JOE KERNEN (SOT): FOR MEDICARE AS WELL?

ARTHUR BROOKS (SOT): EVERYTHING, EVERYTHING. THERE'S NO INDICATION THAT HE HONESTLY BELIEVES THAT WE HAVE A SPENDING AND ENTITLEMENT PROBLEM IN THIS COUNTRY THAT CAN'T BE TAKEN CARE OF THROUGH THE FISCAL CONSOLIDATION THAT COMES AROUND BY TAXING PEOPLE.

CARUSO-CABRERA: I AGREE WITH HIM, SIR. I DO NOT BELIEVE THAT PRESIDENT OBAMA WANTS TO CUT SPENDING. DO YOU THINK HE DOES?

BOWLES: YEAH, I DO. I DON'T THINK HE WANTS TO CUT IT ENOUGH AND WON'T GO AS FAR AS I WANT HIM TO GO, BUT, YOU KNOW, HE'S LAID OUT $375 BILLION WORTH OF CUTS IN THINGS LIKE MEDICARE THAT ARE AT LEAST A GOOD START. I DON'T BELIEVE HE IS WILLING TO DO AS MUCH AS I THINK WE SHOULD.

CARUSO-CABRERA: BUT WITH ALL DUE RESPECT, $375 BILLION IN CUTS, THAT'S OVER TEN YEARS, RIGHT? EVERY MONTH WE SPEND $100 BILLION MORE THAN WE BRING IN. $375 BILLION OVER TEN YEARS WHEN YOU'RE SPENDING 100 BILLION MORE PER MONTH THAN YOU SHOULD IS PITIFUL.

BOWLES: MICHELLE, THAT'S WHY OUR COMMISSION PROPOSED TO CUT SPENDING BY $3 TRILLION OVER A TEN-YEAR PERIOD. I GET IT, BELIEVE ME. YOU KNOW, WE'VE GOT TO HAVE AT LEAST THAT AMOUNT OF CUTS IF WE'RE GOING TO PUT OUR FISCAL HOUSE IN ORDER.

CARUSO-CABRERA: WHAT'S IT GOING TO TAKE FOR THE PRESIDENT TO GET IT, DO YOU THINK?

BOWLES: WELL, I THINK IT'S GOING TO TAKE SOME MORE PUSHING ON THE PART OF PEOPLE LIKE ME AND THE BUSINESS COMMUNITY AND JUST PLAIN FOLKS WHO ARE GOING TO ONE DAY WAKE UP AND FORCE THESE MEMBERS OF CONGRESS AND THE ADMINISTRATION TO UNDERSTAND THAT WE'VE GOT TO FACE UP THIS PROBLEM AND WE'VE GOT TO FACE UP TO IT NOW. IT'S OUR GENERATION THAT CREATED THIS MESS. WE ARE THE ONES THAT HAVE A RESPONSIBILITY TO CLEAN IT UP.

GRIFFETH: WELL, WE'VE GOT THIS NEXT DEADLINE COMING UP IN A COUPLE OF MONTHS, MR. BOWLES, WITH THE DEBT CEILING ISSUE. WE ALL KNOW THAT THAT'S GOING TO BE USED AS A TOOL OR MAYBE A WEAPON, DEPENDING ON YOUR POINT OF VIEW, TO GET SOME NEXT PHASE OF THE DEAL DONE. WHAT DO YOU EXPECT TO HAPPEN AT THAT POINT? LET'S TALK ABOUT THAT FOR A LITTLE BIT.

BOWLES: LOOK, I THINK WE HAVE THREE WEAPONS. WE HAVE THE END OF THE SEQUESTER. WE HAVE THE CONTINUING RESOLUTION THAT COMES TO AN END, AND WE HAVE THE DEBT CEILING. I HOPE TO HIGH HEAVEN THAT THESE GUYS DON'T MESS AROUND WITH THE FULL FAITH AND CREDIT OF THE U.S. GOVERNMENT. USING THE DEBT CEILING I THINK IS THE WRONG PLACE TO DRAW THE LINE IN THE SAND. I THINK SPEAKER GINGRICH IS RIGHT, THAT IF THEY DO DRAW THE LINE IN THE SAND THERE, THEY WILL END UP AT THE END OF THE DAY JUST FOLDING, YOU KNOW. LET'S START NEGOTIATING TODAY.

GRIFFETH: WHAT OTHER LEVERAGE --

BOWLES: LET'S GET THE FISCAL HOUSE IN ORDER. LET'S BRING PEOPLE TOGETHER AND ACTUALLY DO SOMETHING INSTEAD OF TALK ABOUT IT.

GRIFFETH: WHAT OTHER LEVERAGE IS THERE UNLESS YOU -- I MEAN, THERE WOULD BE NO TAX DEAL FROM THE OTHER NIGHT IF THERE HAD NOT BEEN A FISCAL CLIFF DEADLINE. NOW WE HAVE A DEBT CEILING DEADLINE. WHAT OTHER LEVERAGE DO YOU HAVE TO BRING EVERYBODY TO THE TABLE WITH A SENSE OF URGENCY?

BOWLES: YOU HAVE GOOD LEVERAGE, THE EXPIRATION OF THE SEQUESTER IN TWO MONTHS. YOU HAVE THE END OF A CONTINUING RESOLUTION WHERE THEY COULD SHUT THE GOVERNMENT DOWN. WE'VE GOT LOTS OF WAYS TO PUT PRESSURE ON THE ADMINISTRATION AND THE CONGRESS TO ACTUALLY TAKE SOME RESPONSIBLE ACTION WITHOUT PUTTING IN JEOPARDY THE FULL FAITH AND CREDIT OF OUR GOVERNMENT.

CARUSO-CABRERA: DO YOU REALLY BELIEVE THE FULL FAITH AND CREDIT OF THE U.S. GOVERNMENT IS -- I MEAN, ARE YOU SUGGESTING THAT WE COULD MISS A DEBT PAYMENT, BECAUSE I HEAR MEMBERS OF THE ADMINISTRATION USE THE PHRASE DEFAULT ON OUR OBLIGATIONS. WE KNOW PERFECTLY WELL YOU CAN PRIORITIZE WHAT YOU USE TAX REVENUE FOR. YOU CAN SAY THE WORLD DOESN'T HAVE TO WORRY. WE'LL MAKE EVERY INTEREST PAYMENT, JUST CALM DOWN, AND WE'LL FIGURE OUT THE REST. SHOULD THEY MAKE IT CLEAR TO THE WORLD THAT THEY WILL PRIORITIZE IN THAT WAY?

BOWLES: HEY, LOOK. IT IS ABSOLUTELY CRAZY TO EVEN CONTEMPLATE HAVING A DEFAULT ON OUR OBLIGATIONS OR ON OUR LOANS. THAT'S, YOU KNOW, ANYBODY WHO IS IN BUSINESS WOULD TELL YOU THAT. WHAT WE OUGHT TO DO IS BEGIN TO NEGOTIATE NOW TO REALLY BRING DOWN OUR SPENDING. WE TALKED ABOUT REVENUE A LOT IN THE LAST SEVERAL MONTHS, BUT WE HAVEN'T TALKED NEAR ENOUGH ABOUT, YOU KNOW, REALLY REDUCING THE COST OF OUR ENTITLEMENTS, SLOWING THE RATE OF GROWTH OF HEALTH CARE TO THE RATE OF THE GROWTH OF THE ECONOMY, MAKING SOCIAL SECURITY SUSTAINABLY SOLVENT AND REALLY STABILIZING THE DEBT SO THAT IT'S -- WE CAN PUT IT ON A DOWNWARD PATH THAT'S A PERCENTAGE OF GDP.

GRIFFETH: BUT YOU KNOW THE POINT OF VIEW OF THE PRESIDENT. HE WAS RE-ELECTED ON THE PLATFORM THAT HE HAD ESPOUSED DURING THE CAMPAIGN WHICH IS EXACTLY WHAT HE'S TRYING TO GET THROUGH CONGRESS RIGHT NOW WHICH DOES NOT INCLUDE AS MUCH – AS MANY SPENDING CUTS AS THE REPUBLICANS OR YOUR COMMISSION WOULD LIKE TO SEE AT THIS POINT. IS HE MISLED ON THAT? I MEAN, THE AMERICAN PEOPLE DID RETURN HIM TO THE WHITE HOUSE?

BOWLES: I THINK THE PRESIDENT IS GOING TO HAVE TO MOVE OUT OF HIS COMFORT ZONE AND MAKE SOME CUTS BEYOND THOSE WHICH HE WOULD LIKE TO DO. I THINK PARTICULARLY AS IT RELATES TO THE ENTITLEMENT PROGRAMS AND HEALTH CARE, WE'RE GOING TO HAVE TO REDUCE THAT COST OR IT WILL VIRTUALLY BANKRUPT THE COUNTRY.

CARUSO-CABRERA: HOW FAR DO THE REPUBLICANS GO BECAUSE IT WAS VERY CLEAR DURING THIS LAST DEBATE THAT THEY WERE GOING TO BE BLAMED IF THE COUNTRY WENT OVER THE CLIFF. HOW FAR DO THEY STAND THEIR GROUND AT THE BITTER END, AND DO THEY -- SHOULD THEY SAY, YOU KNOW WHAT, WE'LL TAKE THE SEQUESTER IF YOU'RE NOT WILLING TO DO THE CUTS IN SPENDING THAT ARE REQUIRED.

BOWLES: MICHELLE, AREN'T YOU JUST SICK AND TIRED OF THIS BRINKSMANSHIP OF GOING FROM CRISIS TO CRISIS.

CARUSO-CABRERA: YES.

GRIFFETH: AREN'T WE ALL.

BOWLES: WHY DON'T WE ACT LIKE GROWNUPS AND START TO NEGOTIATE TODAY AND SEE IF WE CAN FIND THAT COMMON GROUND.

GRIFFETH: YOU KNOW THAT. WE KNOW THAT. MANY. PEOPLE OUT THERE KNOW THAT, BUT IT'S NOT GOING TO HAPPEN, LET'S FACE IT. WHAT LEADS YOU TO BELIEVE THAT ANYBODY IN CONGRESS, IN THIS NEW 113th CONGRESS, IS GOING TO ACT ANY DIFFERENTLY THAN THEY DID IN THE 112th CONGRESS?

BOWLES: BECAUSE I KNOW IT CAN BE DONE BECAUSE I'VE DONE IT. PRESIDENT CLINTON SET ME UP TO NEGOTIATE THE BALANCED BUDGET AGREEMENT WITH NEWT GINGRICH. NOBODY BELIEVED IT COULD BE DONE. PARTISANSHIP WAS AT AN ALL-TIME HIGH BECAUSE THEY WERE IMPEACHING THE PRESIDENT. BUT WE GOT IT DONE BECAUSE WE DECIDED WE WOULD PUT THAT PARTISANSHIP ASIDE AND PULL TOGETHER RATHER THAN APART AND PUT THE COUNTRY FIRST AND THAT'S WHAT WE'VE GOT TO DO NOW.

GRIFFETH: IT FELL TO VICE PRESIDENT BIDEN TO NEGOTIATE THE DEAL WITH MITCH McCONNELL THE OTHER NIGHT IN THE SENATE. ARE YOU SAYING THAT MAYBE IT'S THE VICE PRESIDENT'S JOB TO BE THE MODERATOR IN ALL OF THIS AND FIND THE MIDDLE GROUND THAT'S NECESSARY?

BOWLES: NO, BUT GENERALLY YOU DO HAVE A GO-BETWEEN ANY TIME YOU DO A DEAL. THAT'S WHY YOU HAVE THE WHOLE INVESTMENT BANKING PROFESSION. GOOD LORD, YOU USUALLY HAVE A GO-BETWEEN TO BRING THE TWO SIDES TOGETHER TO PUSH THEM EACH TO GO A LITTLE BIT FURTHER THAN THEY WOULD NORMALLY AND SO YOU CAN REACH A PRINCIPLED COMPROMISE.

CARUSO-CABRERA: SIR, THE PRESIDENT ALREADY CAME OUT AND SAID HE'S NOT NEGOTIATING OVER THE DEBT CEILING. HE'S JUST NOT GOING TO DO THAT.

GRIFFETH: NOT GOING TO HAPPEN.

CARUSO-CABRERA: SO I DON'T UNDERSTAND WHERE WE EVEN BEGIN. DOESN'T SOUND LIKE HE'S COMING TO THE TABLE AT ALL. HE ALREADY GOT A TAX HIKE.

BOWLES: DON'T FORGET, WE STILL HAVE THIS SEQUESTER SITTING OUT THERE. IT'S COMING DUE IN TWO MONTHS.

CARUSO-CABRERA: THAT'S MY QUESTION. IF THE CUTS AREN'T BIG ENOUGH TO MAKE THE BALANCE SHEET OF AMERICA HEALTHY, SHOULD CONGRESS OR THE REPUBLICANS OR WHOEVER IS SO ADAMANT ABOUT SPENDING SAY, YOU KNOW WHAT, WE'RE GOING TO TAKE THE SEQUESTER AND THAT'S IT.

GRIFFETH: ESPECIALLY WHEN YOU CONSIDER THAT THERE ARE THOSE ON WALL STREET, WHO HAVE SAID, LET'S GO OVER THE CLIFF. HOWARD DEAN HAS SAID THIS AS WELL BECAUSE THE RESULTING RECESSION THAT MIGHT HAPPEN IS WORTH A COUPLE OF QUARTERS. ALAN GREENSPAN SAID THE SAME THING, A WORTH OF COUPLE OF QUARTERS OF RECESSION TO GET OUR HOUSE IN FISCAL ORDER AGAIN. DO YOU AGREE?

BOWLES: LOOK. I NEVER BELIEVE THAT ACROSS-THE-BOARD CUTS ARE A SMART WAY TO BRING A BUDGET DOWN. YOU WANT TO GO AND SEARCH AND CUT THOSE THINGS THAT REALLY NEED TO BE CUT. IF YOU LOOK AT THE SEQUESTER, THE THINGS BEING CUT IS THE DISCRETIONARY SPENDING. WHAT WE REALLY NEED TO FOCUS ON ARE THE ENTITLEMENTS BECAUSE THAT'S WHERE WE HAVE GROWTH FAR BEYOND THE GROWTH OF GDP SO I'D MUCH RATHER SEE US FOCUS ON THE ENTITLEMENTS, BRING DOWN THE COST OF HEALTH CARE AND MAKE SOCIAL SECURITY SUSTAINABLY SOLVENT AND DO SOMETHING ABOUT THE DISCRETIONARY SPENDING.

CARUSO-CABRERA: CAN YOU EXPLAIN SOMETHING TO ME THAT I DON'T UNDERSTAND, THAT WE HAVE DEMOCRATS ON REPEATEDLY AND I SAY TO THEM, YOU KNOW, ENTITLEMENT SPENDING, I THINK EVERYBODY AGREES IS THE PROBLEM. WOULD YOU MEANS TEST SOCIAL SECURITY? WOULD YOU MEANS TEST MEDICARE? WE HAVE BILLIONAIRES ON WHO GET A SOCIAL SECURITY CHECK. I DON'T SEE WHY. MEANS TESTING FOR PEOPLE WHO ARE UNDER 50, AND REPEATEDLY WE HAVE DEMOCRATS WHO SAY ABSOLUTELY NOT, NO WAY. WHY?

GRIFFETH: SETS A BAD PRECEDENT. THEY HAVE EARNED THAT RIGHT.

BOWLES: LOOK, HERE'S ONE DEMOCRAT WHO WILL SAY IT'S SOMETHING WE'VE GOT TO DO.

GRIFFETH: YEAH.

BOWLES: WE'RE GOING TO HAVE TO LOOK AT THINGS LIKE MEANS TESTING. WE'LL HAVE TO LOOK AT MORE COST-SHARING AND LOOK AT THINGS LIKE AGE. WE'LL HAVE TO LOOK AT THINGS FOR PAYING FOR QUALITY, NOT QUANTITY. WE'LL HAVE TO LOOK AT THINGS LIKE TORT REFORM. THOSE ARE THINGS THAT WE'VE GOT TO PUT ON THE TABLE IF WE'RE GOING TO BE SERIOUS ABOUT BRINGING DOWN THE COST OF HEALTH CARE.

GRIFFETH: I KNOW YOU SAID THE OTHER DAY THAT YOU ARE READY TO LEAVE PUBLIC SERVICE. YOU WANT TO GET BACK TO YOUR GRANDKIDS AND LIVE A PRIVATE LIFE AGAIN, BUT I NOMINATE YOU TO BE THAT INVESTMENT BANKER TO MEDIATE THAT WHOLE THING. WOULD YOU PLEASE?

CARUSO-CABRERA: HERE HERE A SECOND.

BOWLES: I'VE DONE THAT ONCE BEFORE. SOMEONE ELSE'S TURN.


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