Bowles on CNBC: "We're Going Over the Fiscal Cliff"
Becky Quick at CNBC Interviews Warren Buffett, Alan Simpson and Erskine Bowles, in Sun Valley, Idaho, July 12, 8:03 am:
Becky Quick: We are in Sun Valley as you mentioned and we are joined by our dream line-up this morning, Warren Buffett, who has been with us for the last half hour and joining us and sitting down with us right now are former Senator Alan Simpson and Erskine Bowles, former chief of staff for President Clinton, two gentlemen we have been hoping to get on the program for an incredibly long time, because of Simpson-Bowles, Bowles-Simpson and everything that's happening with the fiscal cliff.
Gentlemen we thank you for agreeing to sit down with us this morning. thank you. warren buffett can attest to this, but when we go around and talk to ceos, it is almost universal among them when they say if they had a chance and could vote for bowles-simpson or simpson-bowles, they would put this in immediately and they can't understand why this hasn't happened already.
Warren Buffett: it's not limited to ceos either. but i think if you polled fortune 500 ceos, it would certainly be 80%. i wouldn't be surprised if it's 90%, that would not only think it should be done. they think these fellows are heroes and so do i.
Beck Quick: what we'd like to say is first of all, thank you for the work you've already put in to this point and ask you what you think can happen, because the fiscal cliff is coming, it's a huge issue. to this point no one has listened to your advice and taken you up on this. how much more of a desperate situation are we now than when you first came out with the proposals?
Alan Simpson: here i am, these are the numbers guys. i do the color. erskine can tell you but let me tell you, this is a giant among pygmies on this kind of thing. People are not dealing with it. he strung the original package together with his patience and his brilliance because he was the last guy balancing the budget so ship them out a little bit.
Erskine Bowles: i'm not saying. doesn't get any better than that.
Alan Simpson: oh, no.
Warren Buffett: let me say something about these two, they sat down with republicans and democrats and they were given a charge to come up with a plan that got it down to 3% of gdp and they got it below that, got a majority of the republicans to vote for it, got 11 out of 18, they did exactly what they'd been asked to do, and they came up with a plan, no plan is perfect. you know, everybody comes up with a little different one but everybody knows that we need something done, and they did their job and congress has not done its job.
Erskine Bowles: we got some hope. you know, i think if i had to tell you the probability, i'd say the chances are we're going of the over the fiscal cliff and I hate to say it but i think that's probably right, but we worked hard to try to get common sense to overrule politics, and that's a tough thing in washington, as al can tell you. we've been around the senate and the house. we probably have as many as 45 to 47 senators, equal number of republicans and democrats, who are in support of our efforts. we've got about 150 house members again relatively equal. we put together a ceo fiscal leadership council, which is, has over 100 fortune 500 ceos who are actively working to try to influence congress to do something that makes just plain common sense, 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.
Becky Quick: with all that on your side, why do you think that the odds are we do go over the fiscal cliff?
Erskine Bowles: because it's politically painful. it's really tough to get beat.
Warren Buffett: and it's not going to get less painful in the future. that's the other thing about it. if you had some kind of a disease you might not want to have somebody open you up and cure it but if you knew it was going to get worse next week, next month, next year, you'd face reality.
Erskine Bowles: the problem is real. the solutions are all painful. and there's no easy way out, but i was talking, warren, a couple of weeks ago, to american university's graduates and i just threw away what i was supposed to say and 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.
Becky Quick: senator, you've been criticized for coming out and speaking your mind on some of these topics.
Alan Simpson: if i could do it with less earthiness, it would be good.
Warren Buffett: no, no, give us a little earthiness. i'm waiting for that.
Alan Simpson. i know, you bait me. i've known this fine gentleman for years. he says, tell me that joke about the coast is clear. i do tell it to him, but i do -- it's frustrating for me, here in politics, and i loved it, you're entitled to be called ool, boob, idiot, whatever, but people try to nail me with a guy that hates veterans and hates seniors and the cat food commission, that just steams me and they say are you thin skinned? i say hell yes but i just punch back and never lost an election because an attack unanswered is an attack believed and when people lay that stuff on me that's distorting my persona, i fire back, and i could do it but i grew up with irrigators and they had a terrible vernacular.
Becky Quick: what's your joke about the coast is clear?
Alan Simpson: it's quick, this couple hit the sack, 3:00 in the morning the phone rings. guy answers and says how the hell do i know? that's 2,000 miles from wyoming. hangs up, his wife says who was it? he says some nut called and asked if the coast was clear, i don't know.
Warren Buffett: he's just warming up, folks. believe me.
Becky Quick: mr. bowles you're the numbers guy. tell us how bad this number is when we go over the fiscal cliff.
Erskine Bowles. Aw, look. i think 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. here's an easy way to understand it from a math viewpoint. if you take last year 100% of a revenue that came into the country, every nickel, every single dollar that came into the country last year was spent on our mandatory spending and interest on the debt. mandatory spending is principally entitlement programs, medicare, medicaid and social security. every single dollar we spent last year on these two wars, national defense, homeland security, education, infrastructure, high value-added research, every single dollar was borrowed and half of it was borrowed from foreign countries. that is crazy, crazy. it's a formula for failure in any organization.
Becky Quick: and right now we are faced with the benefit of incredibly low interest rates. what happens as interest rates start to climb?
Erskine Bowles: we're spending right now $250 billion a year on interest, at these incredibly low rates. that's more, to put it in perspective than we spend at the department of commerce, education, energy, homeland security, justice, interior and state combined, and if interest rates were at their average level in the 1990s over the first decade of this century we'd be spending over $650 billion.
Becky Quick: senator, warren buffett has said that part of this is the problem that congress didn't act on this and didn't pick it up but the president also didn't act and didn't follow up with what he had set out. who do you blame for where we are right now?
Alan Simpson: well we try to stay away from the blame game because people will often say how did we get here? it's easy how we got here. we were told to bring home the bacon for the last 70 years. go get the highway, go get me some money, go raise this, do this, do this, and you got reelected by bringing home the bacon, and now the pig is dead. but let me tell you what happened. the president would have been torn to bits, his base would have said you are dealing with entitlements. you're dealing with medicare and you promised you'd never hurt we poor seniors and never do anything to all this vulnerable population. well, you know, that was his promise, and anything he would have done at that time would have been rejected unanimously by republicans. if he had said, i'm for this, it would have gone to the house or the senate and they would have said if he's for this, boy, we're going to nail him and just vote against it for no other reason than that.
Becky Quick: so in other words we cannot do politics as usual. this has to be a whole new way of looking at the situation.
Alan Simpson: and one of our members, dick durbin, give him a lot of credit. durbin voted for this and tom corbin, two fine men with totally everyone ideology and philosophy on politics and durbin kept saying where is the tipping point and that's the key. because when the tipping point comes and the guys who gave us money want more money for their money, inflation will kick in and all these things and interest and guess who will be hurt the worst? the little guy, that everybody talks about, day and night, what fakery, what phoniness.
Becky Quick: i tell you what, when we come back, we have to slip in a quick break, gentlemen, but when we come back we'll talk about some solutions, some of the specifics that you laid out, and get into some of those details. right now, andrew i'll send it back over to you.