Erskine Bowles, the former Democratic White House chief of staff who has returned to Washington this week to act as something of an informal envoy between Republicans and the White House in negotiations over a deficit reduction deal, said Wednesday that he believes there is only a one-in-three chance of an agreement before the nation goes over the so-called “fiscal cliff” at the end of December.
Speaking at a breakfast sponsored by the Christian Science Monitor alongside former Sen. Alan Simpson, with whom he co-chaired a presidential commission on debt two years ago, Bowles said his pessimism stems from the pace of negotiations so far, as well as the remaining gulf between the parties. Congress now has just 10 legislative working days left before the new year, and it has been 12 days since President Obama met face-to-face with House Speaker John A. Boehner (R-Ohio).
“I’m really worried,” he said. “I believe the probability is that we’re going over the cliff, and I think that would be horrible. I think it would be devastating to the economy.”
That fear exists, he said, despite emerging from meetings with President Obama and top White House officials Tuesday convinced the president is anxious to find a serious solution.
He said he was told by Obama and other White House aides that they are willing to show “flexibility” on a key difference between the two sides — whether tax cuts enacted under President Bush must be allowed to entirely lapse for those making more than $250,000 a year.
He said he was told the White House believes rates must rise for upper-income earners, to ensure a deficit reduction deal includes a guarantee of new tax dollars collected from those most able to afford it. But the top rate, he said, need not rise all the way from 35 to 39.6 percent — the level of the top marginal rate under President Clinton, when Bowles served as White House Chief of Staff.
“Their belief is that the only way you can make it real is to have it come in the form of higher rates. But it all doesn’t have to come out in the form of higher rates. Some of it can come in the form of deductions and credits,” Bowles said.
Despite that flexibility, Bowles said he was concerned that there has not yet been a serious enough discussion of the other half of big balanced debt deal — reforms to slow the growth of Medicare and Medicaid, the leading drivers of future debt.
As part of his efforts with the group Fix the Debt, which is urging major Congressional action to curb red ink, Bowles met Tuesday with corporate leaders and White House officials. He is meeting Wednesday with top House Republicans.
His comments come as some members of both parties have counseled that the consequences of going over the cliff — allowing taxes to rise on schedule for nearly all Americans and automatic budget cuts to take effect — would not be as severe as some economists have warned and could, in fact, make getting a deal between the parties easier.
Bowles said he now believes there is a one-in-three chance that political leaders will allow the nation to go over the cliff briefly, crafting a quick deal early in January in response to the crash in markets and consumer confidence that would quickly follow.
But he projected a one-in-three chance, also, of a protracted stalemate in January. “I think that will lead to chaos,” he said.
Simpson said those in both parties who are contemplating continuing their stalemate into January to gain political leverage would be choosing their parties over their commitment to the country’s well-being.
“The sad part, when you have leaders of both parties, casting out in the water the bait that says maybe it would help the Democrats if we went off the cliff, and the other side, maybe it would help the Republicans if we went off the cliff. I’ll tell you ladies and gentlemen, that’s like betting your country,” he said.