By Erik Wasson - 03/09/11 01:04 PM EST
The former co-chairmen of President Obama’s debt commission chastised Democrats and Republicans alike on Tuesday for pursuing spending plans that they say will do nothing to improve the country’s long-term fiscal situation.
The two chairmen said neither Obama’s 2012 budget proposal nor the GOP’s plan to cut $61 billion this year would ward off a future economic crisis fueled by spiraling debt.
Simpson said with the current plans on the table, foreign governments within two years will likely realize the U.S. has done too little to address the deficit and start selling off their U.S. debt.
Co-chairman Erskine Bowles, a former chief of staff to President Clinton, said Obama’s 2012 budget doesn’t do nearly enough because it does not tackle entitlements or defense spending.
He also derided the Republican plan to cut $61 billion in total from spending this year.
Noting that the GOP proposal would only cut 1.6 percent of the budget, Bowles said: “1.6 percent is nothing. I could cut 1.6 percent of my budget tonight!”
“I think we face the most predictable economic crisis in history,” Bowles said.
Bowles said lawmakers can’t simply tax or cut their way out of the fiscal crisis.
To tax your way out, Bowles said, the top marginal income tax would have to be 70 percent, and the corporate tax would have to be 80 percent.
“What kind of country are we going to have? You are not going to have businesses started,” Bowles said.
He said that in the absence of reforms to Medicare and Medicaid, “you have to cut everything else by 65 to 75 percent. … That is not going to happen.”
Bowles criticized the GOP for focusing its budget cuts on non-security discretionary spending and for making cuts too quickly. He said the cuts proposed by Republicans would hit vulnerable people “disproportionately.”
He noted that under the debt commission plan, spending would not be brought down to 2008 levels until 2013. The GOP plan would bring spending to 2008 levels by 2012.
Bowles said one of the ironies of the U.S. fiscal situation is that the country is reliant on China for financing — even if a conflict arises over Taiwan, which the U.S. has pledged under a treaty to defend from a Chinese invasion.
“To pay for that, you would have to borrow the money from China,” Bowles said.
Senate Budget Committee Chairman Kent Conrad (D-N.D.) said at the hearing that the effort by the so-called “Gang of Six” to put the debt commission recommendations into legislation is proceeding.
That effort, similar to the debt commission plan, would seek to cut $4 trillion over the next decade.
“If we can reach some kind of agreement in the Senate, we hope it can provide more momentum” for a deal with the administration and the House, he said.
Later, Conrad said that he remains optimistic the plan will appeal to House freshmen who are pushing for deep cuts to spending.
Senate Majority Whip Dick Durbin (D-Ill.) said that the group is not close to releasing a proposal and noted that the work is very difficult and becoming more so as the 2012 elections approach.
Democrats are being hounded by interest groups on the left that do not want to see Social Security included in a deficit-reduction package, Durbin said. But excluding Social Security will make it harder to get Republicans onboard, he added.
Sen. Lindsey Graham (R-S.C.), who wants to be part of a bipartisan debt deal, said he will release a Social Security reform bill Wednesday and said the deficit reduction effort must include the program.
Sen. Mark Warner (D-Va.), another Gang of Six member, said the group would meet later Tuesday to continuing hammering out a solution.
“The current debate around the [continuing resolution], as important as it is, pales in comparison,” he said of the 2011 spending bills.
Conrad said the debt commission’s plan is better than the roadmap put out by House Budget Committee Chairman Paul Ryan (R-Wis.). That plan leaves the U.S. with gross debt of 120 percent of gross domestic product, he said.
“The Ryan Roadmap is not, I don’t think, a place we want to go,” Conrad said.
Ryan’s Roadmap could become the basis of a House GOP 2012 budget resolution.