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Former U.S. Senator Alan Simpson: WAKE UP AMERICA! U.S. headed for a train wreck
02-24-2012, 06:41 PM,
#1
Former U.S. Senator Alan Simpson: WAKE UP AMERICA! U.S. headed for a train wreck
Former U.S. Senator Alan Simpson: WAKE UP AMERICA! U.S. headed for a train wreck

Alan Simpson: US Budget Deficits Heading For a Train Wreck
Bi-Partisan Support Building in Congress for Simpson-Bowles Initiative

James J Puplava CFP with Alan K Simpson

JIM: Joining me as my special guest today is the former senator from Wyoming Alan Simpson.

Senator Simpson headed up the Simpson-Bowles Commission, which was given the task by President Obama of trying to figure out a way to get out of the mess that we've dug ourselves in with our national debt.

Senator, it’s been roughly 14-15 months now since the Simpson-Bowles Commission came out. Can you kind of bring our listeners up to date in terms of...it seems like there is growing support within Congress, but this is also an election year. So why don’t you tell us. There is support, but is anything really going to be done?

SEN. SIMPSON: Well, you have to give people heart. And you know, the reason ours sticks in the throat of so many is because it is very specific and it slaughters every sacred cow in the pasture and people don’t like that. They laughed when we came out with it anyway and, "Oh, these guys are crazy." But now they see people talking about [it].

You can’t get there unless you deal heavily and painfully with Medicare, Medicaid, the solvency of Social Security, defense — we’re not hollowing out the defense budget. The defense budget of the United States is about $760 billion and the top 14 countries in the world are less, including Russia and China; $540 billion is the figure for all defense in the largest 14 countries other than us, and ours is 760. I mean, don’t let anybody tell you we're hollowing out anything unless it’s your brain. [2:14]

JIM: You know, I’m just looking at it, we had the debt ceiling debacle in August where there’s $1.2 trillion in automatic spending, but if you take a look at the avalanche of borrowed money, it’s like — I think the figure is $20.1 trillion by 2022; 81 percent of GDP. And even the president’s new budget, if you take a look at that, we're going to be looking at interest costs of something like $150 billion by the year 2022, and that will go to 15 percent from 6 percent. So apparently, the window of time in which we can act and do something is running out. [2:56]

SEN. SIMPSON: Well, I — to answer that first question. Have heart because we have about 51 US Senators, equal Democrats and Republicans; probably 150-160 House members, equally divided, who are ready to go. And we’re putting this entire — being drafted right now and we’ve been being drafted for the last month — to put it into legislative language, so that the ancient ploy is, Well, it looks pretty vague. If I can see something on it?

Well, they’re going to see something on it because it will be in legislative language. Then we’ll submit it to the full Congress and we’ll let them start messing around with it and say, Look, if you don’t like this, what amendment would you add to it, but let’s just not sit here and gripe.

And so this is very helpful, but those figures, bless you, you’re right on target. It is totally unsustainable. We’ll be paying a trillion bucks in interest if we sit like this. [3:50]

JIM: You know the thing that really surprised me, Senator, was the payroll extension tax. We talk about Social Security as a sacred cow in American politics.

SEN. SIMPSON: Oh boy! You’re so right. People keep going, Let ‘em know what’s going on.

This is good. Go ahead.

JIM: You’re taking and reducing the Social Security tax by one-third on the one hand, and then you're turning around and telling people that you’re for maintaining Social Security. How can you do that when now Social Security is running a deficit and you just reduced payroll taxes by a third for a one-year extension? What are you doing to the program? You're crippling it. [4:30]

SEN. SIMPSON: Oh, I tell you, yours is a clarion call. And you know why nothing’s happening? The AARP, they are caught. Let me tell you. They know damn well that the worst possible thing is happening right now.

If you go back and look at the whole history of AARP, other than one of the founders having been a felon, he got the schoolteacher to do the front work and he got indicted about three times; that’s a great organization way back in its history. Anyway, those people are marketers.

The hierarchy of AARP are not patriots, they are marketers. And they have said all through their history that the lodestone, the bloodstream of Social Security is the payroll tax and it must be maintained. Well, where are they? I haven't heard one peep out of the AARP or any of those senior groups when they’ve taken the bloodstream, the gold flow and knock it down from 6.2 to 4.2 is absolutely absurd. They are going to have to go get the money. And when they try to put it back, it’ll be called a tax increase by Grover Norquist and his happy band of warriors. [5:35]

JIM: Well, you know, I’m just looking at the president has come out with his budget and I’m taking a look at the way the CBO looked at it and he has some things out there about getting rid of some tax expenditures, but as Governor Mitch Daniels said, There are smart ways and dumb ways to get money from the rich, and this isn’t one of the smart ways.

I mean the Commission basically got rid of tax expenditures, but in exchange for that, you broaden the tax base and you lower tax rates where it is economic or, let's say, a billionaire or a millionaire has an incentive to go out and invest and do things. It doesn’t seem like the budget that the president is proposing is going to do that. [6:23]

SEN. SIMPSON: Well, it’s a start. Let’s give him some start.

And then of course today, they’ve done a nice little thing which is part of what we've suggested, they recommend taking the corporate tax down from 28 percent; we recommend 26. Take it to 28 from 36.

And so talking with Geithner yesterday, who called Erskine and I and said, you know, we’re going to adapt this portion. I said, Well, there’s a lot left to adapt and adopt.

But you’re going to see a lot of piecemeal stuff here because this thing is like a stink bomb in a garden party: You can’t get away from the fact that you have to do something with Medicare. Medicare is the mastodon in the kitchen. And it doesn’t matter whether you call it Obamacare or Elvis-Presley care or I-don’t-care care, it can’t possibly work.

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http://www.financialsense.com/financial-sense-newshour/guest-expert/2012/02/23/alan-k-simpson/us-budget-deficits-heading-for-a-train-wreck
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