10 Questions with Alan Simpson:
‘The Great Milk Cow in the Sky Has Dropped Dead’
by Mary Branham
Former U.S. Sen. Alan Simpson served as co-chairman, with Erskine Bowles, of the National Commission on Fiscal Responsibility and Reform http://www.fiscalcommission.gov/, a bipartisan panel charged with studying and making recommendations on the nation’s fiscal challenges in this decade and beyond. The commission’s “Moment of Truth” report has drawn criticism and debate, but did not garner enough votes for consideration by Congress. He said people need to read the 67-page report. “It’s in English and it’s not written for academicians or journalists or politicians. It’s written for the American public,” Simpson said. Here is the expanded text of Simpson’s interview with Capitol Ideas.
The report states these problems have been long-standing and they’re not going to be easy to solve.
“That’s the essence of the issue. There are people already just tearing it to bits and that’s nothing new. This time it’s different. We’ve never had what we have now, the deficit of $1 trillion, $100 billion, together with a debt limit of $14 trillion. We’ve never had that.”
Why was it important for the commission to be bipartisan?
“It’s bigger than politics. It’s a huge thing that we’ve never dealt with before. We’ve never had these kinds of figures. Everyone we talked to are experts and we used the actuaries of systems—Social Security, Medicare and Medicaid. We didn’t go for any high blown bias on either side. We just pulled the actuaries in. And 115 groups testified they said, ‘It’s a serious problem here. My sakes alive.’ And before they left the microphone, they said, ‘Don’t touch ours.’”
Recommendations didn’t pass commission.
“To get a vote in the Senate first and then the House, we needed to have the 14 of the 18 (members of the commission). We knew we’d never get that. In fact, we were surprised that we got 60 percent of them—five Democrats, five Republicans one Independent--to buy this whole package. That’s a very difficult thing. … That’s the very interesting thing. This thing has people on its side already and now Mark Warner and Saxby Chambliss have formed a coalition, 25 senators involved, in buying the whole package. It isn’t going to go away. Groups are just going insane, … Realtors and Social Security and all those groups. They’ve just lost their marbles. They’ll spend a lot of bucks trying to kill it.”
What’s been the reaction from state officials?
“When Erskine and I spoke to National Governors conference in Boston, we received almost unanimous support in the sense that they said nobody has ever talked to us like this. Nobody has ever told us the plight we’re in. Nobody can tell you how much unfunded liability. Nobody can tell you what will happen to Social Security if you do nothing. Nobody can tell you how these tax expenditures draw down (will affect us). They’re really spending by another name.”
What role will the states play in addressing the problem?
“Many states have learned how to beat up and get it out of the feds. … We were all sent to Washington to bring home the bacon. Go get the money for the state, for the schools, for the highways, for the dams, for the crops. You name it. You go get it, and that worked. So we all got re-elected on that basis, but now the pig is dead; there ain’t no bacon to bring home.”
If some of these recommendations pass, what will states need to do to address the impacts?
“Our governor here (in Wyoming), very able, a Democrat, just retired. About two years ago he said, ‘Cut everything 10 percent and you agency heads figure it out. You know where it is.’ Nobody bitched; nobody said anything. They just went about their business. They know exactly where the dead weight is. Every agency, every group, small offices—they know who is there and who isn’t cutting it. That’s what he did and that’s what the states are doing. ... You can’t hope the federal government will stay alive so they can furnish money for the states.”
“When the balloon goes up and the foreign creditors and the Chinese and the private and public investors say, ‘Well we thought you guys would do something, but we see you didn’t do a damn thing. So we’ll tell you what gang, we want to move some of our money. Here’s a treasury bill, pay me.’ And the interest rates go up and a lot of things that will happen will be chaotic for the states, … much more than our recommendation.”
Does everything need to be enacted for it to work? Is it all or nothing?
“If it were all or nothing, it would be like swallowing a basketball, so I don’t think they’re going to do that. They’re going to probably go at it incrementally, just like they’re going to be forced to do with the ‘repeal’ of Obamacare. They’re never going to get that done as a flat-out repeal. They’re going to have to dig into it and maybe get rid of the forcing people to have insurance, which is in various lawsuits of attorney generals throughout the United States. It would be very difficult to pass it as a single element.”
What does Congress need to do about tax expenditures?
“We said, ‘Let’s get rid of those tax expenditures, home mortgage deduction except for $500 grand, and 12 percent unrefundable tax credit, which really helps the little guy. Everybody talks about the little guy, but of those 180 tax expenditures, we found that about 2 percent of the American people with the highest incomes used it. The little guy doesn’t know anything about some of those. He’d never heard of them. … We said look, that’s $1 trillion $100 billion a year. Get rid of all of them. And take $80 billion and put it to deficit reduction and take rest of it and reduce tax—what everybody’s been shrieking about for 20 years. Broaden the base, lower the rates, let’s get cracking.
“We found that the top 400 highest income earners in the United States pay an average of 16 percent income tax. They’ve learned how to skillfully use every one of those remarkable things for their own benefit. As Warren Buffett said, ‘My secretary pays more income tax than I do.’ Now that’s a fact. Those are the things we did with regard to tax reform. It’s all there.”
Are there things the states are doing that could apply to the federal government?
“You bet. Cut spending. You can’t do any better than that. That’s what the states have had to do. That’s what the federal government is going to have to do. It’s going to be painful. There’s no such thing as an easy way out of this baby. Nothing. The states have set the tone—balanced budgets, gotta do it, gotta cut. So we put in there we cut White House staff, congressional staff 15 percent. We freeze (hiring) for three years. … You can’t leave one giant jackpot of money and pretend it’s not going to affect the states. Either the feds get control over themselves, or the states, … they ain’t seen nothing yet.”
These problems have been going on and growing for quite a while. Why is it so difficult to address the problems?
“One of the reasons is that unfortunately those of us in politics have worshiped the great god of re-election. When you do that you’re stymied. Into your office is the head of the AARP of Wyoming or Pennsylvania.
“Erskine and I said we’re into this. … You get clobbered, but I’ll tell you we’re doing it for 14 reasons: He has eight grandchildren and I have six. Unless somebody gets off their ass and starts thinking about the younger generation, this is certainly not the greatest generation … we who are over 80 or in our late 70s.”
What does the growing partisanship do to the ability to govern and make the decisions?
“It’s a poisonous effect. It’s venom. We found the first few weeks of our meetings were simply sniping. The Democrats saying wait a minute now, how’d we get here in this mess. Well I’ll tell you how we got into this mess. The biggest spending president in history of United States before this was George W. Bush, which is correct. He never vetoed a single spending bill for six and half a years until he got to stem cell research, which didn’t have anything to do with spending. And then the Republicans sat there sat 3-2 seconds. Your guy is taking us down the road three to four times that. Finally Erskine and I just thought, ‘Hell, we don’t care if anybody signs onto this thing.’ With our age and life and our reputations, whatever, however ragged and taggerdy whatever we have as human beings, we’re just going to do a plan that is not a bunch of whitewash and a lot of mush, which is what all these things usually are. Just mush.
“So when we went around to the group, after we strung together these powerful points with a fine staff, they said, ‘God, I don’t think I can vote for that.’ We said, ‘We don’t care. You don’t have to. If we get two votes, it’ll just be us.’ That kind of surprised them and they began to look into it and they helped us craft it. There are people who didn’t like it at all, but at least they had the guts to put up a plan of their own. Finally we established trust. We didn’t agree, but we trusted each other.”
It all goes back to being able to work together and establishing the trust?
“We said, it’s time to be citizens, even patriots if you will. You’re not—now when
we are into this terrible fix—you’re not members of any organization. You’re not members of the NEA or the NRA or the AFL-CIO or the whatever, whatever the right and the left and all the rest. You have to give that up. You’re an American citizen and this is where we are right now. If you’re just a member of the National Association of Realtors or the municipal league … and that takes precedence over your duties and obligations and the gut feeling of how you’ve got to do things as an American citizen, we won’t get our way out of it.”
Are there hard truths that states have to realize about what they’re doing?
“States have been pushed to the wall by promises. In our remarks, we say it’s time to stop making promises you cannot keep. (It’s) time to say, ‘If you want it, you pay for it.’”
What will it take for people to accept that changes need to be made?
“People say where is the tipping point here when we suddenly slip? It won’t be two years or one. The tipping point will be coming in the next few months when they say you must increase the debt limit to $14 trillion, either 100, 200 or 300 billion … it’s rising at billions a day. A lot of the new ones will say, ‘Wait a minute. I’m not going to vote for that. I came here to cut spending.’ Say, ‘Great, let me tell you pal, you can’t avoid this. If you don’t vote to extend the debt limit then the full faith and credit of the U.S. could be in jeopardy and we might even have to shut down the government.’ And some of them are going to say, ‘That’s why I came here.’ And at that point, watch out.
“… At that point, then the moment of truth is very clear. You either do something significant with Medicare Medicaid, Social Security and defense or just walk out of the room, because anybody that tells you that (you can address the deficit without cutting those programs) is a phony a fake, a faker, total fakery. Can’t get it done. Everybody knows in their gut you can’t get it done unless you touch those four, so we’ll see where the heroes are. And don’t forget that embedded in the Congress are people who spent 10 months in this operation, about eight of them. (They) may not have voted for it, but they heard all the debate, listened to everything and they know damn well that this is unsustainable, unconscionable and totally predictable.”
What do state leaders need to know about what they need to be doing?
“They need to know the great milk cow in the sky dropped dead and that it’s over. If they’re waiting for the next injection of some kind of funding from the feds to get the states propped up, … they probably saw the last one go by with the last compromise, which added almost $1 trillion bucks to the deficit without any reduction in spending.”
What kind of response has the report received?
“We think we hit every nerve. If you didn’t hit every nerve you put out a bunch of mush. If the people of America are offended by it, pissed off with it, irritated, think we’re a bunch of fakes … I got a beautiful e-mail; it’s just a joy to read them, and phone calls, ah such pleasure.”
What do you think will happen if something isn’t done?
“The do-nothing will leave their children and grandchildren picking grit with the chickens in 40 years, 50 years, without question. Everybody knows this. Look at the trustees report. They’re unanimous telling us what is happening with Social Security. Look at disability insurance. It’ll be gone in eight years because everybody has learned how to get at that one too.
But the debt limit extension will be the moment of truth. If they don’t do something significant at the end of this year the creditors, who really might hope we go down in flames anyway, some of them, are just going to say I want my money. At that point, the slippage starts, the interest rates go up. Who gets hit the worst? The little guy that everybody always talks about.
All we can say is it’s the moment of truth and hang on tight, because the tipping point is not going to be two years or five or the next election. The tipping point is going to be this tremendously powerful debate which will come … before May simply because the billions go up every month.”