11:21 PM EST, November 15, 2012
The nation stands about a third of a chance of avoiding a risky plunge over the fiscal cliff by year end, one of the authors of the U.S. debt-cutting Simpson-Bowles plan told an audience of about 4,000 financial advisers in Chicago tonight.
Yet, with only 48 days left for Republicans and Democrats to work out a deal that lays the groundwork for cutting the nation's $16 trillion debt, Erskine Bowles said there is also a third of a chance that the nation could go over the cliff at the end of December and suffer serious economic consequences.
Speaking before the Schwab Impact conference, along with the co-author of the so-called Simpson-Bowles Plan, Bowles implored the audience of financial advisers to contact political leaders and insist that they compromise on a deal.
"The whole history of America is compromise," added Alan Simpson. "If you can't learn to compromise you shouldn't be a legislator and you should never get married."
Bowles, a Democrat who was chief of staff under former President Bill Clinton, and Simpson, a Republican and former Wyoming Senator, emphasized that the nation is on a dangerous path. They urged people to sign a petition at www.fixthedebt.org.
Eventually, Simpson said inaction will lead to a "tipping point," when investors in U.S. bonds decide "the country is totally dysfunctional" and won't implement the tax increases and spending cuts essential for reducing the debt. When that happens -- maybe in "two years, two months or two days," he said, "it will be a disasterous thing."
Since the nation can't function without borrowing money, it will have to pay higher interest and the costs of higher interest will make the debt more impossible to handle long-term.
"There is no question the fiscal path is not sustainable," said Bowles. "It's like a cancer that will destroy from within."
Also at the conference, former defense secretary Robert Gates said the nation's financial weakness could become a national security concern. Shoring up the nation's finances, he said, will enhance the nation's power in the world.
Bowles said prior to the presidential election there was "zero progress made" to fashion a debt-cutting plan that would be supported by President Barak Obama and Congress. But since then, he said, he has talked with the president and political leaders including House Speaker John Boehner. Those talks have suggested some progress is possible, he said, but he faulted Congress for leaving Washington, D.C. for the Thanksgiving holiday and devoting too little time to averting a potential recession-causing fall from the fiscal cliff.
"This is ridiculous," he said. If a business was facing such dire possibilities, he said, "everyone would be there working full-time" to find solutions and avert a crisis.
Meanwhile, both Simpson and Bowles said the American people do not seem to fully appreciate what the nation is going to have to do to shore up the country's finances. Simpson said people suggest getting rid of wasteful spending, and cuts like aid to other countries. Yet, both Simpson and Bowles said the size of the nation's deficit is so huge it cannot be repaired without cuts in Social Security and Medicare and major tax reform.
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