How US Can Avert Fiscal Cliff: 'We've Got Some Hope'

The U.S. can avoid "going off the fiscal cliff" by slashing government spending—including drastic reductions in defense—and raising the retirement age to 68, the co-chairmen of the national debt reduction commission told CNBC Thursday.

Erskine Bowles
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Erskine Bowles

"We got some hope," Erskine Bowles said in an interview with "Squawk on the Street" from Sun Valley, Idaho.

"I think if I had to tell you the probability, I'd say the chances are we're going of the over thefiscal cliff—and I hate to say it—but I think that's probably right," Bowles said. "But we worked hard to try to get common sense to overrule politics, and that's a tough thing in Washington, as all can tell you."

Bowles, the former chief of staff for President Bill Clinton, and Republican former Sen. Alan Simpson led the bipartisan National Commission on Fiscal Responsibility and Reform. In December 2010, they issued a set of recommendations to reduce the nation's hemorrhaging debt.

But the Simpson-Bowles plan for sharp cuts in popular programs never gained enough support from President Barack Obama or Congress to be implemented, even in part.

"The problem is real," Bowles said. "The solutions are all painful. and there's no easy way out."

Bowles said he addressed American University graduates recently. "I said they ought to be mad at us, at our generation, for shirking our responsibilities and kicking the can down the road. We've got to face up to this. This is our generation's problem and we got to fix it," Bowles said.

Bowles was interviewed along with Simpson and Warren Buffett.

Simpson said he's been frustrated with their attempt to avoid the fiscal cliff, which the government faces at the end of the year when scheduled tax increases and spending cuts go into effect — at the risk of throwing the economy back into recession.

"Here in politics," he said, "You're entitled to be called fool, boob, idiot, screwball and all that, but never let them distort who you are. And when people try to nail me with being a bigot, or a guy that hates veterans and hates seniors and the cat food commission, that just steams me and I respond."

Said Buffett: "I think if you polled Fortune 500 CEOS, it would certainly be 80 percent (in favor of Simpson-Bowles). "I wouldn't be surprised if it's 90 percent, that would not only think it should be done. They think these fellows are heroes and so do I."

Bowles said the commission has the bipartisan support of 45 to 47 senators and about 150 House members, plus more than 100 Fortune 500 CEOs.

Bowles urged that federal spending be cut by about $3 trillion over the next decade in order to stabilize the debt. "We don't spare anything," he said.

"And we've got a social media campaign that we're working on, where we hope to get about 10 million signatures of people around the country to tell Congress, come on, let's put partisanship aside, and let's pull together and let's face this enormous fiscal problem that we have coming up," he said.

"I think that if we don't get these politicians to come together and we face the most predictable economic crisis in history. I think it's absolutely clear that the fiscal path we're on is not sustainable, and for me the best analogy is these deficits are like a cancer, and over time, they will destroy the country from within."

"The problem is so big right now that you have to make significant cuts in defense. You have to make significant cuts in the entitlement programs. You have to make significant cuts in the spending in the tax code if you're going to produce enough deficit reduction to stabilize the debt."

Simpson, who reiterated the recommendation to raise the retirement age to 68 by 2050, called the defense budget "madness." "Seven hundred fifty billion, $760 billion is the U.S.A., and the other countries, major countries of the Earth, including Russia and China, combined (to) spend $540 billion. Now, the only thing being hallowed out here is your brain."