Erskine Bowles, Former Clinton Cabinet Member, Tells ISU That Congress Must Fix the Debt Now

Erskine Bowles, a former member of President Bill Clinton's cabinet and former president of the University of North Carolina, peppered his sobering news on the nation's debt with a number of jokes in 's Great Hall Thursday evening.

He started his “Conversation on the National Debt” by saying that he asked former and current UNC basketball star Harrison Barnes, of Ames, and Marcus Paige, an incoming freshman of Marion, to come with him (they didn't) and that being a CEO of a university was a little like being the CEO of a cemetery.

“Lots of people are underneath you, but ain't nobody listening,” Bowles said to lots of laughs.

The true message he planned to deliver wasn't so funny.

If something isn't done to curb the deficit before the election, the country is poised to become a second-rate super power, he said.

“If we wait until after the election it will be too late,” Bowles said.

Bowles co-chaired the National Commission on Fiscal Responsibilities and Reform with Alan Simpson to explore the nation's debt problems in 2010. The Simpson-Bowles plan that the bi-partisan commission came up with would reduce the nation's debt by $4 trillion over the next 10 years and hopefully do a minimum amount of damage to the fragile economy.

The plan had been criticized by some for its deep program cuts. And it has stalled in Congress, despite the fact that a majority of Democrats and Republicans on the commission agreed with it because Bowles said no one in Washington D.C. wants to talk about reforms to Medicaid, Medicare and Social Security with an election approaching.

“If we don't get the politicians to wake up and put partisanship aside and pull together rather than pull apart we face the most predictable economic crisis in history, but fortunately for us it's also the most avoidable,” Bowles said.

The nation's debt can be hard to quantify so Bowles gave just one example.

100 percent of the nation's revenue in 2011 went to mandatory spending programs – Medicare, Medicaid and Social Security --- and interest on the debt.

“That means every single dollar we spent last year on two wars, national security, homeland security, education, infrastructure, high-value added research - every single dollar - was borrowed and half of it was borrowed from foreign countries. That is crazy. That is a formula for failure in anybody's book,” Bowles said.

He said the country has five challenges that anyone running for office should be talking about if they are honest.

The biggest challenge is health care. America spends twice as much on health care than any other country and people without insurance go to the emergency room where health care is much more expensive resulting in higher taxes and insurance premiums for everyone else, he said. By 2020 a third of the nation's budget will go to health care if nothing is done.

Number two is defense.

“We spend more on national defense than the next 15 largest countries combined," Bowles said.

America cannot afford to be the world's policeman he said citing a treaty to protect Taiwan in the event of a Chinese invasion as one example. 

“There is just one problem with that. We will have to borrow the money from China to do it. That is crazy,” he said.

Third is the tax code. “You couldn't design a stupider one,” he said.

They have proposed rate based tax code with just three rates for individuals, elimination of some tax credits and loopholes that they feel would create dynamic growth. The full plan is available online.

The fourth challenge is social security.

Though it's not tied directly to the budget the trust fund is $900 billion cash negative over the next decade. Social Security will go broke by 2033 if nothing is done and payments will be 25 percent less than promised, Bowles said.

The Simpson-Bowles plan restructures the system and raises minimum payments to 125 percent of poverty level with 1 percent annual bumps for people between the ages of 81and 86 because that's when most people's private pension plans run out, he said.

They also proposed raising the retirement age by one year in 40 years and one more year in 65 years, prompting hate mail and some death threats. 

Franklin Delano Roosevelt was a very smart guy, Bowles said. 

“When he put in social security the average life expectancy was 63 years. You got social security at 65,” Bowles said. “He was a very smart guy. Today the average life expectancy is 78 you get benefits at 62. We have an arithmetic problem.”

Finally the fifth challenge is compounding interest. Today, the nation spends $250 billion on interest payments. If nothing is done, those payments will escalate to $1 trillion a year by 2020. “That's $1 trillion we can't spend on infrastructure. That's $1 trillion we can't spend on education. That's $1 trillion we can't spend here at Iowa State to do high valued added research to create the next new thing in this country.” 

Instead it's $1 trillion that will go to a foreign economy and their jobs, he said.

A wide range of people,  including an civics class, attended the lecture. It was one of a number of activities surrounding ISU President Steven Leath's official installation as president. His ceremony takes place Friday morning.

Leath said the nation's deficit is a topic that is really resonating with people right now.

“What does this country do with it's debt?” he said.

Learn more about Simpson-Bowles on the web.