Bowles Interviewed in Kiplinger
Fiscal Commission co-chair Erskine Bowles was recently interviewed by Kiplinger's Personal Finance. Bowles discusses the long-term fiscal issues that Congress still has not addressed. The conversation is excerpted below; click here to read the full interview.
Kiplinger’s: How do you focus people’s attention on the country’s long-term debt issues when we’re lurching from crisis to crisis?
Bowles: We’ve been working to make sure that people understand the long-term effects of federal deficits. We will see a drop in these deficits over the short term as the economy improves. But you just can’t stand against the march of an aging population and the effect that’s going to have on our entitlement programs, which are all growing at a faster rate than the economy. And we will still be left with record high debt levels. If the country sticks its head in the sand and chooses to ignore the big problems, sooner or later the markets will wake up and demand that we take action.
Are you suggesting it’s going to take some kind of financial crisis?
I think at some point the markets will look at our country and say, Whoa, you guys have a dysfunctional government, you’re addicted to debt, clearly the fiscal path you’re on is not sustainable over the long term, and you have no plan—nothing—to deal with it. And you haven’t even had a budget for years. We’re operating the largest economy in the world on a month-to-month basis. That’s just crazy!
How much economic growth have we lost because we haven’t had a budget in years?
In my opinion, it’s been substantial. There’s been an enormous loss of confidence. Think about the debt-ceiling crisis we just went through. They reached a deal at the eleventh hour that got us all the way out to February. Do you think that builds up confidence and credibility? I don’t think so. My best guess is that in this next round of budget negotiations, we won’t do anything meaningful to reform the tax code so that the U.S. is globally competitive, or reform entitlement programs in a manner that will slow the rate of growth in health care spending—which we must do—or make Social Security sustainably solvent so it will actually be there for the people who need it.
When you’re talking about entitlements, you’re talking about at least slowing the growth of Social Security and Medicare, correct?
If you just look at the basic arithmetic, we have to slow the rate of growth of health care spending on a per capita basis to the rate of growth of the economy or somewhere close to it. If we don’t, the country will pay an enormous price. And we have to slow the rate of growth in Social Security or everyone is going to have to take a big cut. I think the actuaries say that happens in about 2033, and my best guess is that it’ll be sooner. So if we do nothing and our interest costs continue to rise, there won’t be any money for the other programs that both liberals and conservatives love.
No one doubts the numbers, but do we have the political will to deal with this situation?
As I wrote in our report, the problem is real and the solutions are painful, but none of us has clean hands. All of us in my generation created this problem, and we have a responsibility to clean it up. If we don’t, we will be the first generation to leave the country worse off than we found it.