A crisis will strike the U.S. economy within two years if politicians don't roll up their sleeves and address fiscal spending like they did in the 1990s, warns former Sen. Alan Simpson.
Simpson, a Republican who co-chaired President Barack Obama's National Commission on Fiscal Responsibility, says the United States faces "the most predictable economic crisis in history" by 2013. His remarks echo comments made by his partner in studying deficit reduction, Democrat Erskine Bowles, according to CNS News.
The tipping point "will come when the rating agencies find out we
have no plan" to seriously address federal spending and the national debt, Simpson says.
Ratings agencies such as Standard & Poor's and Fitch have said the United States could lose its top-grade ratings if it cannot manage its debt burdens and ensure timely payments to bond holders.
Simpson, along with Bowles, former President Bill Clinton's chief of staff and co-chair of the spending committee, have warned that fiscal deficits must narrow if the U.S. economy is to recover at a more adequate pace.
Simpson says Bowles reached across the aisle to craft policy and acted in the interest of the country, and not just in his political party when in office.
"How do you think he did the balanced budget in '96?" Simpson asks.
"He did that by visiting with Trent Lott, Newt Gingrich, Dick Armey. He said, 'You owe me one.' That’s how I got that done. Days and weeks in a room with Newt and Armey to get the balanced budget in ’96."
Earlier this year, Simpson told the Senate Budget Committee that the United States was headed toward financial disaster unless spending was curtailed.
"This debt and these deficits that we are incurring on an annual basis are like a cancer, and they are truly going to destroy this country from within unless we have the common sense to do something about it.”
A group of three Republicans and three Democrats, known as the Gang of Six, are studying ways to hammer out a spending solution.
Sen. Tom Coburn, R-Okla., recently pulled out of the group although the remaining five members, Democrats Mark Warner (Virginia), Kent Conrad (North Dakota) and Dick Durbin (Illinois), and Republicans Saxby Chambliss (Georgia) and Mike Crapo (Idaho), continue the task.
"Members of both parties and both houses must publicly support the work of the Gang of Six," Bowles and Erskine have said, according to Politico.
"This is the time for heroes. The country is ready for leaders in Washington to put politics aside, pull together — not apart — put national interest ahead of political interests and put the next generation over the next election."
The Gang of Six has pinpointed $4.7 trillion in spending cuts and revenue increases over the next decade.
That figure, Chambliss says, could climb to $6 trillion when factoring in the tax and other revenues coming from greater growth.
A concrete deal could likely come to around $4 trillion, The Associated Press reports, which would include $1 in higher taxes in exchange for every $3 in cuts made to government spending and benefit programs.
That would at least slow the growth of the country's $14.3 trillion debt, which has hit its uppermost limit as determined by Congress although it remains under consideration for an upward revision.
White House officials have said that not raising the $14.3 trillion debt limit could be disastrous for the U.S. economy because it would throw the country into default.
Republican lawmakers have said they are willing to raise the ceiling but are demanding hefty spending cuts in return.
Democrats say they'll stand tough on spending cuts to Medicare despite Republican willingness to scrap some special-interest tax breaks and kill an annual $5 billion ethanol tax subsidy.
"We will not allow cuts to seniors' benefits," says Sen. Chuck Schumer, D-N.Y., according to the AP.
Republicans, meanwhile, might have to reconsider their tax policies.
"There will have to be taxes. You can't run a country without taxes. Ronald Reagan increased taxes eleven times," Simpson tells CNN.
Vice President Joe Biden, who has taken a leading role in hammering out spending solutions for the White House, remains optimistic that all sides will agree on a way to cut the deficit by $2 trillion over the coming years.
"I think we we're going to be in a position, hopefully by the end of the month, by the Fourth of July recess, we have something to take to the leaders and actually begin to get down to the implementation piece of the kind of legislation," says Biden, according to the AP.
"That's the goal."
While Biden deserves praise for working on solutions, Obama does not, Simpson says.
"What's really disappointing is to hear him talk about bipartisanship all over the place at the big forums and then gets into an intimate fundraiser where he just rams it to Ryan and the Republican party. That's not right," referring to Wisconsin Rep. Paul Ryan, who opposes some of the president's budget proposals.
"It's sure poisoning the well," Simpson tells CNN.
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