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Here's Why the 'Fiscal Cliff' Hasn't Been Solved Yet: Bowles

Thursday, 15 Nov 2012 | 5:16 PM ET
CNBC

Washington hasn't been able to resolve the "Fiscal Cliff" because politicians "worship that great god of reelection and haven't been focused on what's really right for the country," Erskine Bowles, one of the architects of the Simpson-Bowles deficit-reduction plan told CNBC's "Closing Bell" on Thursday.

"The problems are real," said Bowles, the North Carolina businessman and co-chairman of President Barack Obama's National Commission on Fiscal Responsibility and Reform. "The solutions are all painful. There's no easy way out." (Read More: US Nears Fiscal Disaster: 'Washington Doing Nothing' )

Republican Sen. Alan Simpson, Bowles' co-chairman on the commission, said he isn't hopeful that a deficit-reduction deal will be reached to avoid the "fiscal cliff," the nearly $600 billion in automatic tax hikes and spending cuts that will be triggered at the end of the year.

"When you see the same statements that came up before the campaign come up after the campaign, you can't be hopeful," he said.

Simpson & Bowles: Fiscal Cliff, US Debt
Debt Commission co-chairs Alan Simpson and Erskine Bowles, discuss the odds of a deal on the fiscal cliff by years end. "I think there is a one-third chance that we will go over the fiscal cliff," says Bowles.

Bowles is a bit more optimistic. He sees a one-third chance a deal is reached in the lame-duck session and a one-third chance that a deal is reached right after the New Year. But he said there's a one-third chance political leaders do not reach a deal and "we'll end up in chaos."

"What's worrisome is if we go over the cliff and the market doesn't anticipate that we're going to be so stupid as to go over the cliff, you'll see the market really crash," Bowles said. That could lead to another credit rating downgrade and corporations would pull back on investment and hiring.

A solution to the country's fiscal problems requires a combination of new revenues and spending cuts, the two said. Bowles said their plan has both $1 trillion in tax revenue and $3 trillion in spending cuts.

"You get spending cuts by going into the entitlement programs," Simpson said.

Simpson & Bowles: Spending Cuts & Health Care
Debt Commission co-chairs Alan Simpson and Erskine Bowles, discuss tax rates, spending cuts, and how likely it is that cuts in health care could occur.

Right now, there are as many as 47 or 48 members of the Senate that have embraced the Simpson-Bowles plan, including 24 Republicans and 23 Democrats, the two said. They also have support of about 130 members.

But that remains far short of the votes need in both houses to get something passed. "That's why we have to have the leadership from the House and Senate and from the White House agree to come together put some this partisanship aside, pull together and reach some common sense solutions," Bowles said.

"We don't get much help from the leadership of either party," Simpson said.

Erskine Bowles also told CNBC off-air that he would not be the next Treasury secretary.

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