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It's 'Go Big or Go Home' on Deficit Reduction: Simpson and Bowles

Erskine Bowles and Alan Simpson proposed a new tax plan on Tuesday in hopes of finding a middle ground between Democrats and Republicans on deficit reduction. If accepted, the plan crafted by the co-chairs of the deficit reduction committee would cut federal spending deeply and reduce the federal budget by $2.4 trillion over 10 years.

"We learned the hard way with our commission, the harder we made (the proposal), the more support we got. It's either go big or go home. This is pathetic," Alan Simpson told CNBC's 'Squawk on the Street.'

As it stands, contentious budget issues have paralyzed the Capitol, and raised the possibility that deep spending cuts roughly $85 billion will effect on March 1.

"When this really stupid, stupid, stupid sequester goes into effect, we're going to start to feel how this government is really dysfunctional. People will see it really quick and get really angry with these people in Congress and the administration." said Erskine Bowles, "We are operating our government on a month-to-month basis right now."

"I give them all a C," Simpson said of Congress, "Everyone is at fault here."

Simpson and Bowles' plan would reduce spending through a combination of mandatory spending cuts, stronger caps on U.S. discretionary spending, using the Consumer Price Index for inflation-indexed provisions in the budget, and lower interest payments.

"The proposal also calls for a parallel process to make Social Security sustainably solvent and further actions to bring transportation spending and revenues in line and limit per capita cost growth in federal budgetary commitment to health care to about the growth rate of the economy," according to a summary of the plan.

Simpson, a Republican, and Bowles, a Democrat, co-chaired a bipartisan White House deficit reduction panel. Though widely praised, that blueprint ultimately fell short of necessary support from both Congress and the White House.

When it was said that Congress would weaken their proposal, he added "we said, no, we're not going to water it down at all, we're going to build on it and make it tougher."

Former Senator Simpson also criticized Congress for reflexively dismissing increasing revenue to help close the deficit. "Republicans have to get the wax out of their ears," he said. "We're not talking about a tax increase, we're talking about going into a system of tax expenditures that is costing us $1 trillion per year over the course of several years."

"If Grover Norquist is using the words 'tax increase' when we're talking about going into the code and taking those tax expenditures down or out, that's fakery," he said.

- Reuters contributed to this report.