WHEN: TODAY, THURSDAY, NOVEMBER 15TH AT 4PM ET
WHERE: CNBC'S "CLOSING BELL WITH MARIA BARTIROMO"
Following is the unofficial transcript of a CNBC interview with Erskine Bowles and Alan Simpson, Co-Chairs of President Obama's Deficit Commission today, Thursday, November 15th at 4PM ET on of CNBC's "Closing Bell with Maria Bartiromo." Embeddable video clips of the interview can be found on CNBC.com.
All references must be sourced to CNBC.
The two, of course, chaired President Obama's debt commission. But two years ago, when the plan was presented, it was all but ignored by those in power. Joining me now, the two architects behind the plan, former Republican Senator Alan Simpson and former chief of staff for Democratic President Bill Clinton, Erskine Bowles. Gentlemen, it was wonderful to have you on the program.
VARIOUS: Thank you.
MARIA BARTIROMO: Thank you so much for joining us. I want to first get to this. Have either of you or together both of you been asked to participate in any way in these fiscal cliff negotiations?
ERSKINE BOWLES: Well, I've talked to-- most of the members of the White House. I've met over the last couple of days with-- what's called "The Gang of Eight," four Republican senators and four Democrat senators. And I will update Al on that, just as soon as it ends.
MARIA BARTIROMO: Okay, so Senator, you have not been involved in these talks so far?
ALAN SIMPSON: He's-- he's an hour away. I'm-- I'm all day away. I live in Cody, Wyoming. So today we're two and a half hours late gettin' out of Denver. And-- I have my-- get my good threads on later. But no, Erskine is-- is the numbers guy. He's done this before. He's the last human being on Earth to balance the budget in 19-- in 1996. And he knows the game. And he furnishes it back to me. And he has my proxy at every occasion.
ERSKINE BOWLES: But we work on it together.
MARIA BARTIROMO: I guess-- we're-- we're all tryin' to figure out why it is that the plan has gotten blown off. I mean-- for-- for, you know-- a bad choice of words maybe. But everyone-- that I have spoken with believes that your plan had the most credible way to actually get our arms around-- around the debt and deficit of this country. So why do you think--
ERSKINE BOWLES: Because the problems are real, the solutions are all painful, and there's no easy way out. And these guys who are runnin' for public office-- worship that great god of reelection and haven't been focused, I believe, on what's really right for the country. And if, in fact, you focus on what's right for the country, you're always gonna come down to solutions that reforms the tax code and makes the entitlement programs sustainably solvent.
ALAN SIMPSON: We-- we've irritated everyone in the U.S. We knew that. They were gonna savage us. And they've done a beautiful job. And they're out there. And they're not gonna quit. It doesn't matter who the hell they are, they're gonna savage this plan.
MARIA BARTIROMO: Unbelievable. So Senator, let me ask you, because earlier this week, you said basically, "Don't count on a fiscal deal-- before automatic spending cuts and the tax hike take effect on New Year's Day. Why are you so pessimistic?
ALAN SIMPSON: Well, I used to be rather hopeful. And-- but when you see the same statements come up that came up before the campaign, that come up after the campaign, you can't be hopeful. I mean, taxes and entitlements, no-- no taxes on the rich. I mean, the rich want to be taxed, I don't know why then we don't tax them. And-- and you could tax the rich into oblivion and it'll run the country for about five months. I mean, who is kidding who?
MARIA BARTIROMO: Well, I mean, yesterday President Obama made it clear that he not only wants to tax the rich, he wants to raise tax rates, but he also wants to close loopholes. You know, the-- the closing of the loopholes is-- is part of your plan. And so let's talk about that. But then reducing rates, as well, is part of your plan. So wh-- why do you-- why do you differ in terms of what the president said yesterday? He came out with the number $1.6 trillion was the report, before he even took to the podium, which is double what he was talking about with Boehner last year. So talk to us about what-- how your plan works, in terms of-- closing loopholes and actually lowering rates.
ERSKINE BOWLES: Yeah, the-- the interesting thing is if you look at the amount of income tax that is paid to the country, it's about $1.3 trillion. $1.1 from individuals, $200 billion from corporations. And people always ask me, "How can our marginal rates be so nominally high and us net such a relatively little amount of money?" 'Cause remember, we're spending $3.6 trillion.
And the reason is we have $1.1 trillion of backdoor spending in the tax code. That's for deductions for credits. And what we said is, "Look, let's start by wiping out all of those. Let's broaden the base, simplify the code. Let's use 92% of that money that we're usin' from getting' rid of the tax expenditures to reduce income tax rates and 8% of the money or about $100 billion a year to reduce the deficit." Eight-- $100 billion a year over ten years is where our $1 trillion of our $4 trillion comes from in our deficit reduction plan.
ALAN SIMPSON: And if we want to put somethin' back, what rate are you gonna change, when we d-- give these extraordinary rates, 8%, you know, 0 to 70 grand to 14% from 70 to two thou-- 210. 14% over that, take the corporate rate to 26% and 36% and go to a territorial system, where you don't hit 'em twice when they bring the scratch back. And if you can't do that, this is-- you can't tax your way out of this. You can't cut spending your way out of this. You can't grow your way out of this. So grab hold, it's gonna be a rocky, rocky road.
MARIA BARTIROMO: So you're saying just closing the loopholes alone brings you at least a trillion.
ERSKINE BOWLES: Yeah, if you're-- if you're willing to wipe out all of 'em, and that may not be politically feasible, but you can definitely solve the problem by broadening the base, simplifying the code, and getting rid of the tax expenditures.
MARIA BARTIROMO: Yeah, you know, I just-- the-- both the president and John Boehner, the speaker of the House, seem to be drawing lines in the sand. And so-- so this is why people are now becoming like Senator Simpson and sort of giving up a bit on a deal before year end. But they're drawing lines in the sand over raising tax rates on the rich. I want you to listen to what they both said yesterday. I'd like to get your reaction. Listen to this.
(VIDEO NOT TRANSCRIBED)
MARIA BARTIROMO: What's your reaction?
ERSKINE BOWLES: I'm-- I'm actually-- more hopeful than Al is.
ALAN SIMPSON: You used to be more depressed.
ERSKINE BOWLES: I did. I did used to--
ERSKINE BOWLES: --be more depressed. But, you know, I haven't spent the last couple days here. I actually am more hopeful. You know, I think this is a magic moment. We got a Democrat president, who is in his second term, who has been willin' to put entitlement programs on the line. We got a speaker, a Republican, who really gets it, who understands that we have to have some additional revenue.
We've got over half the Senate, and half of those are Republicans, half of 'em Democrats, who have embraced a balance plan like we've proposed. And we've got this fiscal cliff, which will force action. And I think they are pretty much saying the same thing. Both of them are saying we have to have revenues. The president says, "Look, I want that revenue to be real. And the only way I know for sure to make it real and come from the top 2% is to take rates from 36% to 39.6%."
The speaker on the other hand is sayin', "There's a better way to do it. And that better way is by reducing this spending in the tax code." And I think he's probably willing to confine it to the top 2%. So what we have to do is find that middle ground where we make sure that the president knows that we're gonna get that money, but we're gonna get it in the most productive, economic way we can.
MARIA BARTIROMO: And-- and the speaker's point is basically you don't want to be raising tax rates now at such a fragile time in the economy. We've already watched the stock market sell off, you know, 5% in the last week-- because of this uncertainty over where the-- their tax rates are going.
ALAN SIMPSON: Yeah, I-- I'm-- I am really worried that we won't get to a deal. You know, I know we can get to a deal. I know how to get to the deal. We get there by taking-- some of the money from revenue and some of the money from reducing the spending in the tax code and by cutting defense and non-defense and other mandatory spending.
You know, that's how we get there. I think that's pretty easy to-- to understand. What's worrisome is if we get over the cliff, we don't have a deal, and the market doesn't anticipate that we're actually gonna be so stupid as to go over the cliff, and I think you'll see the market really crash. And I think you'll see the rating agencies downgrade our credit again. You'll see Fitch and Moody's join S&P. I think you'll see corporations lose confidence that we know what we're gonna do, where we're gonna go. I think you'll see 'em slow down hiring. I think you'll see 'em stop capital expenditures, capital go on strike. It will be a hell of a mess.
MARIA BARTIROMO: This is not where we want to go?
ERSKINE BOWLES: No, it's not where-- we don't want to bet the country, especially when there are alternatives to get it done ...
MARIA BARTIROMO: It upsets me that you think-- you're worried that we're not gonna get a deal. Because that's how-- that's how I felt.
ERSKINE BOWLES: Yeah, I think there's about a one third probability we'll get a deal in lame duck.
MARIA BARTIROMO: A third?
ERSKINE BOWLES: About a one third that we'll go over the cliff and be able to reach a deal right afterwards and that'll be okay. But there is that one third chance that we won't. And we'll end up in chaos.
ALAN SIMPSON: The markets for weeks and months have felt that no one would be dumb enough to let this happen. And now they can see that it is indeed possible, be as dull-witted as possible that this could happen. And now they finally shored up. They were playin' it all to be done. No one would ever let this happen. There-- it can't possibly happen. Well, Merry Christmas.
MARIA BARTIROMO: You're absolutely right. Merry Christmas. All right, we're gonna take a short break, gentlemen. We've been talking a lot about taxes. We're gonna get into the other side of the-- ledger--
ALAN SIMPSON: 'Cause that's a bigger issue.
MARIA BARTIROMO: --when we come back. We're gonna talk about spending as well as tax rates and get some clarity on this issue. Stay with us. We've got this exclusive with Erskine Bowles and Al Simpson. Back in a moment.
MARIA BARTIROMO: Welcome back to this special edition of The Closing Bell. I am back with our exclusive interview, Erskine Bowles and Senator Simpson, the gentlemen behind, the architects of the debt reduction plan for America that everyone talks about and has the most credibility out there. Gentlemen, we were just hearing about tax talks from the president and from John Boehner.
And we've been talking a lot about tax rates. It seems that that's dominating the conversation. But what about spending? I mean, are we talking about a very small number in terms of revenue that you can actually get from the so-called wealthy, more than $200,000 or $250,000? In-- in the overall scheme of things, is that going to move the needle on our debt? And shouldn't we also be talking about spending cuts?
ERSKINE BOWLES: Well, they're talkin' about getting' somewhere between $80 and $100 billion a year, which is no small number from revenue. But when you consider the fact that we have a $1.1 trillion deficit, you can see, "Oh, that's not gonna solve our problem. We must also reduce spending if we're gonna put our fiscal house in order."
MARIA BARTIROMO: Senator?
ALAN SIMPSON: Well, people are always saying-- Erskine and I love to ask 'em, "Well, what should we cut? What spending would you like cut?" And they say, "Waste, fraud, and abuse, all earmarks, foreign aid, Nancy Pelosi's aircraft, all compensation for Congress." And that won't get-- that's-- nothing. That's a…belts. It's about 4% of where we are. You get spending cuts by going into the entitlements programs. These things are on-- health care, it doesn't matter what you call it, is on automatic pilot. All you gotta do is look at the demographics and-- and-- and the fact that all these things are happening, health, obesity--
MARIA BARTIROMO: Will they do it? I mean, M--
ALAN SIMPSON: You're takin' care of 'em all.
MARIA BARTIROMO: Medicare and Medicaid, how realistic-- are we actually gonna get some cuts here? I mean, obviously, these are the biggies, and Social Security.
ALAN SIMPSON: Better get realistic.
ERSKINE BOWLES: We have to--
ALAN SIMPSON: I mean, it-- you can't do it.
ERSKINE BOWLES: We spend twice as much as any other developed country in the world on health care, twice as much. And, you know, that might be all right if, you know, our outcomes were twice as good as anybody else's. But they're not. We rank somewhere between 25th and 50th in such important measures as infant mortality, life expectancy, preventable death.
And anybody who doesn't think those 32 million people who don't have health care insurance don't get health care, they get health care today, but just get it in the emergency room at five to eight times the cost of in the doctor's office. And that cost doesn't go away. It gets cost shifted. They get cost shifted to the taxpayers in the form of higher insurance costs and higher premiums and higher taxes.
ALAN SIMPSON: You don't-- you don't have to have a brain to know that when you take care of a preexisting condition in a three-year-old child that lived to be 60, when one person in the United States weighs more than the other two, that's a statistic, diabetes A and B, booze, drugs, and dope. And-- and you think these guys are in a preventive health program, the drinks are on me. And then you got to do TORT reform. You gotta do somethin' with doctors. You gotta have hospitals keep one set of books instead of two. And a guy that could buil-- buy this building gets a heart operation and doesn't even get a bill. What kind of a system do you think is happening there?
ERSKINE BOWLES: We spent 10% of the budget in 1981 on health care. Today we spend 25% of the budget on health care. By 2020, we'll be spending a third. And it won't be long before all we'll be able to do in this country is take care of a couple of old kooks like me and Al, you know, and buy a few tanks.
MARIA BARTIROMO: You know, this is a really important-- that is a scary number. And I-- and I think when we talk about Medicare and Medicaid, you know, Americans get it. The people buy in. We can point out the crowd that are-- that is around us right now, everybody. Everybody here wants to hear your proposal. Show the crowd that are watching us, because when you talk about Medicare and Medicaid, it seems like the politicians are afraid to touch it. And yet America realizes the demographics have changed. We're living longer. Things have changed in the country and yet these entitlements haven't at all.
ALAN SIMPSON: You-- you can't even touch Social Security. Let's say don't touch it. That'd be a terrible thing to do. Don't touch it and in the year 2031, you're gonna waddle up to the window and get a check for 25% less. Why is that? Because life expectancy is 78.1. And when they started, it was 63. Who is kidding who?
ERSKINE BOWLES: Social Security is $900 billion cash negative over the next ten years. Social Security will go broke in 2031. And as Al says, when you waddle up to the window to get your Social Security check, you're gonna get 25% less than the scheduled payments. What we want to do is make the kind of changes you have to make to make Social Security sustainably solvent. The same thing with Medicare. Let's make it real. We in this country, people in my generation, have simply made promises we can't keep. Let's change it. Let's fix it. And let's make sure that we can deliver on what we promise.
ALAN SIMPSON: And disability insurance will be dead in the water in four years, gone, i.e. zip. Now, you know, what are we gonna do about it? Nothin'.
MARIA BARTIROMO: And-- and-- and yet, we keep kicking the can down the road. I want to talk about that and-- and what the implications are. We gotta get into the fiscal cliff. And also the Fed stimulus. When you came out with your plan initially, the Fed hadn't pumped all this money into the economy. So how do things change since then? We're gonna get back to that. But first, let me get back to headquarters. Because there's a lot of stock stories in the after hours. We want to bring them to you. Courtney Reagan with a quick market flash and then more with Bowles and Simpson.
(MARKET FLASH NOT TRANSCRIBED)
MARIA BARTIROMO: All right, Court, thanks very much, our special Rise Above Edition of The Closing Bell continues. You've got Alan Simpson and Erskine Bowles here with me in the house. Later we'll get a reaction from Aetna CEO, Mark Bertolini, on the debt. He's one of the most outspoken "fix the debt" CEOs out there. Wait till you hear Aetna's fiscal cliff contingency plan. We're back in a moment.
MARIA BARTIROMO: Well, you just heard him. Even U2 front man Bono is worried about the fiscal cliff, speaking before The World Bank yesterday, Bono expressed his concern about what automatic spending cuts would mean to domestic and international programs supported by the United States. Those cuts, of course, on the table.
Back with me once again, Alan Simpson and Erskine Bowles. Erskine, during the commercial break, you said, "Look, there are five things that we need to discuss." Health care we're talking about it. Defense, I want to get into it with you. Tax code, we're talking about it. Social Security and interest on the debt. There's a whopper. Let's talk about interest on the debt. The Federal Reserve tells us that rates are gonna be at rock bottom levels until 2013. Tell us about interest on the debt and how important this is.
ERSKINE BOWLES: To-- today, even at these low interest rates, we're spendin' about $230 billion a year on interest. If interest rates were at their median level they were in the 1990s or the first decade of this century, we'd be spending $650 billion a year on interest. Now let me just put kind of a relative perspective what $230 billion means.
That's more than we spend at the Department of Commerce, Department of Education, Energy, Homeland Security, Interior, Justice, State. In fact, it's more than we spend in all of 'em combined. And Maria, if we do nothing, by the year 2020, we'll be spending over a trillion dollars a year on interest cost alone. That's a trillion dollars we can't spend in this country to educate our kids or to rebuild our infrastructure or to do high value-added research.
And unfortunately, it is a trillion dollars that's gonna be spent principally in those countries that we're borrowing from. You know, that means will be building the infrastructure in Asia. It means we'll be educating those kids over there. And it means we'll be building their universities, so the research is done over there, so the next new thing is created over there, so the jobs of the future are there not here. That's crazy.
MARIA BARTIROMO: Well, I mean, I think I know the answer to this next question, but I mean, what is a better outcome for the long-term fiscal health of the country? Kicking the can down the road or-- or leaving the status quo on spending and taxing or going over the fiscal cliff. I mean, do we need to go over the fiscal cliff with the forced spending cuts and tax hikes to get things movie.
ALAN SIMPSON: Well, the sinister thing is is that there are leaders of both parties who think that would be to their advantage to go off the fiscal cliff. What a wonderful trait that is. That we can win more as Democrats if we let it go over. We can win more as Republicans. This whole game is about win or lose. It's not about America. It's about how do we make the Dems lose and how do we make the Republicans lose. People are sick of that.
And they're ashamed of it. And they're disgusted. And they show that time after time. But I can tell you, you can't believe what we've dug up. And when you get a vote from Dick Durbin of Illinois and a vote from Tom Coburn of Oklahoma, you get five Democrats, five Republican, one Independent, 60% of this group to vote for this, you know you're on the right track.
ERSKINE BOWLES: Maria, if-- if we go over this fiscal cliff and don't get a deal immediately, what's the economic effect next year? You know, we've talked about some of the qualitative effect. Quantitatively, you know, economic growth will be reduced by about 3%. We're only growing at 1.5%. That means by definition we're automatically back in recession. You know, another two million people will lose their job, unemployment will go to over 9%. Why would we do that? That's a bet of a country. Why would we do that when we know that we can come together and get a deal if we just put the partisanship aside.
MARIA BARTIROMO: So-- so let's look at the numbers for a minute, because assuming the Dems can deliver the Senate on-- on-- on the plan-- both-- both of you know how to count the votes. Be specific in terms of the internal head counts in the House. How do you actually get there?
ERSKINE BOWLES: Well, number one, you can't even do it in the Senate unless you-- and shouldn't do it in the Senate unless you get a bipartisan vote. You know, we've been goin' around. We've taken our little 64-page report that is in plain English, that uses words like "goin' broke." And we put it in legislative language. It's now about 650 pages. We've been socializing that around-- the Senate. We've probably got as many as 47-48 members of the Senate who have embraced this plan.
You know, 24 Republicans, 23 Democrats. We've got about 130 House members, again, about an equal number of Republicans and Democrats. But, you know, 130 isn't 218 in the House. And it's not 60 in the Senate, which is what you need. That's why we've got to have the leadership from the House and the Senate and from the White House agree to come together, put some of this partisanship aside, pull together, and reach some common sense solutions.
MARIA BARTIROMO: Have-- have you-- turned-- a little less optimistic over the last couple of days? Because I know your plan recommends $3 spending for ever-- for every dollar in tax increases. Assuming the recent statements from Obama and from Mr. Boehner-- Mr. Obama and Mr. Boehner are accurate, which we just heard them-- they're mov-- the Dems are moving away from that. I mean, the president and-- and the Democrats seem to be moving away from that. Why do you think that is? And is this important?
ERSKINE BOWLES: Well, let-- let's assume for a second the president is right and we need one and a half trillion of revenue. Now I think there's a better way to get there and a different way to get there. And the president-- you know, I think is open to some of these ideas. But if we're gonna have one and a half trillion dollars worth of revenue, I think we need about three and a half trillion dollars worth of spending cuts, real spending cuts.
And that would come from defense. It would come from entitlement programs. It would come from the other mandatory programs. That's what makes the most sense to take it from, because those are the areas that are really growing at an accelerated rate, faster than the rate of growth of health care. I think that's doable. I think we can find the votes to do that. Because I think the American people are way ahead of the politicians. And they realize we got a real problem in this country. And we gotta fix it.
MARIA BARTIROMO: What do you think, Senator? And-- and-- and want to talk about defense.
ALAN SIMPSON: Well-- you should talk about defense, because-- our defense budget's about $740 billion. And the defense budget of every other major country on Earth, including Russia and China combined, is $540 billion. You think we're all right? I don't know. I think so. But if you really want to di-- dig into it, we said, "How many contractors do you have?" You go around the world and say, "What do you do?" "Oh, I'm a contractor with the Defense Depart--" or it might be the guy that makes somethin' for 50 cents and sells it to 'em for two bucks.
So there-- we said, "How-- what's the range on contractors?" They said, "Well, it's quite a range. It's between a million and ten million." "We'd like an audit. Can we have an audit of who they are and what they do?" I'm sorry (UNINTEL PHRASE). I was a military guy. I was in for a couple of years in Germany. They have their own health care plans called military retirees. There are only 2.2 million of 'em. That's not a big cohort. Many of them never been in combat. They have disrupted their lives.
They have their own health care plan. The premium is 540 bucks a year and no copay and takes care of all dependents and costs 53 billion bucks. There's 61 Department of Defense schools still in America, …to care of dependents at Fort Bennett, Fort Lewis, ... And they're right next to a bus ride from a public school. And they all have a superintendent and principals and teachers. And the cost per student is 51,000 bucks a year. I mean, grab hold.
ERSKINE BOWLES: Admiral Mullen who was chairman of the Joint Chiefs of Staff when asked what our nation's greatest national security problem was, he didn't say the terrorists. You know what he said they were? These deficits. Because they will consume every dollar or resource that we have. Let me just give you one example of how crazy it is. Today the U.S. has a treaty with China. Excuse me, with Taiwan, that will-- you know, that we will protect them if they're invaded by the Chinese. There's just one problem with that. We'll have to borrow the money from China to do it.
MARIA BARTIROMO: Unbelievable. This is unbelievable. All right--we're gonna take a short break. We're gonna take a short break. When we come back, I want to ask you what about the Fed? Where does QE1, two, three, and maybe four play into all of this? Stay with us, more with Erskine Bowles and "Alan Simpson, stay with us.
MARIA BARTIROMO: Welcome back, once again our exclusive interview with Erskine Bowles and Alan Simpson right now here in Chicago. Gentlemen, I want to ask you. I mean, you both cofounded the Fix the Debt-- Group, which essentially pushes your plan-- from the debt commission. So it was largely the inspiration for us here at CNBC for our Rise Above Initiative-- which I know you're aware of, 'cause you've got the pins on. If-- if there was more leadership in D.C., would-- would we need to fix the debt and-- or-- or rise above?
ERSKINE BOWLES: Well, look, if we don't have leadership, we're not gonna get there, for sure. You know, if these two sides can't put that partisanship aside, as you say, and rise above partisanship and come together, we'll never get there. I think they will.
ALAN SIMPSON: We don't get much help from the leadership of either party.
MARIA BARTIROMO: So this is what I'm trying to figure out. Because if your report-- I mean, your report is so integral to this conversation. Everyone who we-- who we speak to brings up Simpson Bowles. The-- there's no doubt about it. So if it's so integral to the conversation and to the fix, how come you're getting blown off? I mean, what-- what's going on?
ALAN SIMPSON: 'Cause you're talkin' about everything. You're talkin' about home mortgage, interest. You're talkin' about employer deduction of employee health care. You're talkin' about EBIT, childcare. For heaven's sakes, parking for employees, oil and gas, every one of those constituents would like to blow us off.
MARIA BARTIROMO: Sacred cows?
ALAN SIMPSON: Oh, you betcha. And let me tell you, of the tax expenditures on the books, only 1% of the American people use 25% of 'em. And 20% of American people use 80% of them. And guess who's using that 20% of the people using 80% of that, because only 27% of the American people itemize. The little guys never heard of that stuff.
MARIA BARTIROMO: One-- one of the thorns in-- in your side, in terms of getting this-- getting this plan implemented has been Grover Norquist. Let's face it, right? So Grover Norquist--of the American Tax Re-- Reform has engineered-- I'm sorry, what-- what, Senator?
ALAN SIMPSON: Grover Norquist, if-- I've always said about Grover, he's wandering the Earth in his white robes. And-- and it-- it-- what can he do to you? He can't murder you. He can't-- he can't burn your house. The only thing he can do to you is defeat you for reelection. And if that means more to you than your country in extremity when it needs patriots instead of panderers, you shouldn't even be in Congress.
MARIA BARTIROMO: Well, he's engineering this plan to not raise taxes ever.
ERSKINE BOWLES: Look, th-- this is not a problem, you know, that we can grow our way out of. You could have double-digit growth for decades. So growth alone won't do it. It's not a problem that we can tax our way out of. Raising taxes doesn't do a darn thing to change the demographics of the country or to change the fact that health care grows at a faster rate than G.D.P.
And unfortunately, we can't just cut our way out of it, either. That's where Grover's wrong. You can't cut your way out of it without disrupting a very fragile economic recovery or without cutting the-- the payments that we made to the truly disadvantaged, you know, the income support programs. And you can't cut your way out of it without making severe cuts in those kind of things that we have to invest in like education and infrastructure and high value-added research that America has to invest in to compete in a knowledge-based global economy. So it's gonna take a combination of all those. That's why we came up with a $4 trillion plan that was $1 trillion-- of revenue comin' from reforming the tax code and $3 trillion of real spending cuts.
MARIA BARTIROMO: Right, and-- and it's broadening the base and lowering the rates.
ALAN SIMPSON: But he got those pledges out of people in the '80s and the early '90s when inflation was zip and unemployment was down and all the thing-- everything has changed since then. And he's still holdin' the hammer.
MARIA BARTIROMO: Everything's changed just in two years with the Federal Reserve. Is the Fed bailing out the White House and Congress with all this free money and this stimulus? QE1, 2, 3, and possibly 4 now?
ALAN SIMPSON: I think they ought to change that PM1, which is "print money number one." That's all it is.
MARIA BARTIROMO: Bottom line, if we do not get our house in order, what happens to America?
ERSKINE BOWLES: I think that if we do get our house in order, the future of America is really bright and we can compete with the best and brightest, wherever they are. If we don't, we're well on our way to becoming a second-rate power.
MARIA BARTIROMO: Second-rate power. Could the U.S. go bankrupt?
ERSKINE BOWLES: Absolutely. Absolutely, we could go bankrupt. You know, you can't go on with a trillion dollars of deficit--year after year after year. And don't forget, we only take in $1.3 trillion in tax income. And we could be spending a trillion dollars on interest alone by the year 2020. We can't go on like this.
ALAN SIMPSON: If we borrow $3,600,000,000 a day, today, tomorrow, the next day, every buck we spend, we borrow 41 cents…where are you? And the big bang theory of the universe was 13,600,000,000 years ago. That's-- that ain't even close to a trillion. And we owe 16 of those babies.
MARIA BARTIROMO: Unbelievable, very quickly, we're gonna go to the fiscal cliff? What do you think, Senator?
ALAN SIMPSON: Yeah, I think the parties think it's gonna be to their advantage, which is so sad, because they're bettin' their country.
MARIA BARTIROMO: And I know you said a third…third. Gentlemen, thank you very much. This has been an--
ALAN SIMPSON: Thank you, Maria.
MARIA BARTIROMO: --enlightening, valuable conversation for our viewers. We so appreciate it. Erskine Bowles, Senator Alan Simpson, we'll see you soon. Please come back soon.
VARIOUS: Thank you very much.
MARIA BARTIROMO: Reaction from Aetna's CEO, Mark Bertolini, who is preparing his company in case we do go over the fiscal cliff. We want to find out the contingency plan. Stay with us on this, up next.
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