Erskine Bowles, the Clinton administration official and current advocate for fundamental budget reform as part of the Simpson-Bowles Commission, told reporters this morning he was “really worried” about the nation’s economy because of Congress’s slow progress on avoiding the “fiscal cliff.”
“I believe the probability is that we are going over the cliff and I think that will be horrible. It will be devastating to the economy,” he said at a breakfast hosted by the Christian Science Monitor this morning.
He added later that he believed there was only a “one-third” chance Congress would make a deal in time to avoid it. (Read more about the breakfast in Paul Bedard's Washington Secrets.)
If we do go over the cliff, Bowles predicted that we will see economic growth slowed by 3-5 percent, which is “obviously enough to put us back in a recession.” It would also throw another two million people out of work, bringing unemployment up to nine percent.
Bowles said that in recent meeting he had with business leaders they told him they were already slowing hiring and putting off capital expenditures. This will eventually erode consumer confidence as well, he warned. He saw another credit downgrade in the U.S.’s future too, absent a deal.
A major part of the problem in terms of getting the budget under control, he warned, is that there has been “no serious talk” about entitlement reform.
“There has been a lot about the tax side of the equation. We need to talk more about the spending side of the equation,” Bowles said, adding later:
It particularly bothers me because I think it is a ‘magic moment.’ What I mean by that is, God, if we are ever going to get a deal done, now is the time to do it. We have a second-term incumbent president who is willing to put entitlements on the table. We have got a Republican Speaker who is willing to put revenues on the table. We have got at least half of the Senate – an equal number of Republicans and Democrats – who have said we ought to have a balanced plan. And, most importantly, to get something done around here in this town, you have got to have a crisis. And we’ve got one. We’ve got a real crisis in this fiscal cliff. And it would be insane to breach this fiscal cliff. Yet I think there is only a one-third possibility that we will get something done before Dec. 31.