 But I think it's significant that the Committee for a Responsible Federal Budget has decided to hold its meetings at a hotel called the Liaison. I noticed when I arrived here tonight that there was something about there trying to brighten up their image, perhaps. To be serious, or not so, I am really honored to be part of the program tonight. I'm sorry I was not able to participate today, but I understand you had some very interesting and enlightening and lively discussions. I'm sorry that tonight we have two such shy and retiring individuals to have a conversation with, but we're going to do the best we can to try to draw them out. Let's just jump right into it, Senator Simpson and Mr. Bowles. I did that today. I need to say, really, I told Jean I apologized to him because the Committee worked for a year and a half on just those kind of people to take care of him. You're referring to Jean Sperling. Yes, and my mind snapped. I had to go to the bathroom and I was hungry. It was the first time, though. And if Erskine had been there, it would not have happened because Jean Sperling is one of his best long-time friends, and because you weren't there, it would have caused me pain. No, anyway, I told him I'm sorry that I cared as much as he did, and I think he understood. But after this is over, Erskine and I will have a little belt and we'll call him. All right. Well, I think we just made some news. I'm going to quit. All right. What I want to start out with is the Simpson-Bowles Commission issued its report in December. So here we are six, seven months later. What has happened? Erskine Bowles, I'm going to start with you. Has anything moved on the surface? It looks like there are talks going on here and talks going on there. Congress has not done very much. Where does everything stand? Well, Judy, I think we've made a lot of progress, and not just in the Sonny and Sher show here. But as you know, the President came out with his budget in February, and I think when he did, there were not many people who took that budget very seriously. And subsequently to that, there were 64 senators who wrote a letter to the President asking him to come forward with a more balanced plan that had serious bipartisan support. And it was 32 Republicans and 32 Democrats. We had, I think, every head of the CEA, the Council of Economic Advisers, since President Reagan, including Christy Romer, sent a letter to him, also encouraging him to take that step. And then we had a number of other former dignitaries, some of who are here tonight, that included most of the former Secretaries of the Treasury, including George Shultz and Jim Baker and Bob Rubin. So I think we've had a lot of outside people encourage the President to take a step, and he did. I think Paul Ryan has put a budget out there, but I don't think it surprises anybody who knows Paul. Paul is, I think, the most sincere, honest, straightforward guy I've ever had a chance to work with. He's better at numbers than anybody I know. And he's put forward a budget that's very serious, that's honest and straightforward and reflects his viewpoints and his principle, and it does have $4 trillion of deficit reduction. The President came forward with his plan. It's not a budget, but it's a budget framework. And in that framework, he said the words, $4 trillion. And that's a big deal. As you remember, when we were trying to get President Clinton to say the words balance budget, he originally said balance budget in 10 years, and then he said seven years, and then he said four years, and then we got there. And for President Obama to say $4 trillion in deficit reduction and have the left not go completely crazy. Now if you look at his budget, it's $4 trillion, not over 10 years, but over 12, and it's very heavily back in loaded, so it's really more like a $2.5 trillion budget deficit reduction plan. And it doesn't really stabilize the debt. It gets the debt to about 77% of GDP, and it also never gets to primary balance. But it has a failsafe provision in there that kicks in in 2014. So I think there's been a lot of movement there. The gang of six, which have become five guys, which hopefully could become 25 guys and gals in the not too distant future. What are you referring to there when you say it could get larger? It could get larger. I think it will get larger. They've had a group meeting, 20, 25 additional members of the Senate, bipartisan again. And basically what they've done is taken the plan that our commission came forward with. They've put it in legislative language. I think they've made it better. They've moved it marginally to the right. They're now at approximately $4.7 trillion in deficit reduction. Over what period of time? Over this decade, so over a 10-year period. So I think it's a very responsible effort, and I think it's a very balanced plan. It's still about one-quarter revenue and three-quarters spending. Does that view of a sense, Senator Simpson, that the gang of six or gang of five is promising? Is doing work that's promising right now? Pray for them. I really mean it. These guys, well, several have been with the commission since we started. So they've been thoroughly immersed. But literally, Joe Biden is a very close friend of mine and got me into this marvelous adventure. But I'll tell you, he's not going to come out of there with nothing. And when he comes out with whatever he comes out with, we don't care if it's our guideline or whatever, as long as they do, as long as they have a plan. Now you heard today- Now you're talking about, just to clarify, you're talking about the debt ceiling talks now, which are separate from the gang of six, right? Well, they are involved. The gang of six is involved with the debt and the deficit, and they're trying to keep, as Jack Blue said today, keeping it separate from the raising of the debt limit. But they won't. But it's a nice idea, but there's about a hundred and some House members who say that's what I've been waiting for. And I ain't voting for that piece of stuff unless I get my cuts in spending. And if they're not good enough or significant enough, what was said today, the bonds as Erskine said, the markets will respond. But all we have to do is do a plan, and Joe will get that done with this. I don't know what it'll be. And the reason they're not dinging on Great Britain and France and Germany right now is because even though they don't like it in their nation, it's a plan. We have no plan. And if we come out of this turmoil with no plan, those three rating agencies will do what they said. Well, help me understand something. My sense was that what the Biden group is working on is something in the short term to get us past this debt limit crisis. But what you all would have been focusing on is something much bigger than that. Yeah, it's kind of really hard to separate the two. And a lot of people don't like the fact that this debt limit crisis is coming up. I think it's actually a good thing because it forces people to act. And you need a sense of urgency, at least that's been in my experience here in Washington, to get something to really happen. And yes, they are focused on some short term reductions in spending and maybe something on the revenue side. But my best guess is they'll combine that with some long term framework that'll talk in the area of this $4 trillion, which has become the magic number. Judy, to me, it's hard as an outsider to understand why the people here in Washington wouldn't act. We've had enough warning signs. Al was talking about Moody's and Standard & Poor's. But if you look at the markets, just today, the credit default swap market, which basically talks about providing insurance against the default on the Treasury's debt, we're paying a higher premium for that insurance on U.S. debt today than they are the debt of Mexico, of Panama, of the Philippines. And it's crazy. And if you look at the work that the economists are doing today, we saw some work the other day where some very responsible economists have come forward and said, if your gross debt exceeds the size of your economy, then you're going to suffer a 1% loss in economic growth. That's real money. The USA today had an article on the front page about the $61 trillion of unfunded liabilities. We've got deficits of over a trillion dollars as far as I can see. How much more warning do we need that we've got to do something responsible? But meanwhile, Senator Simpson, you have Democrats who say, don't touch Medicare. We don't want any tangible, significant change in Medicare. You've got Republicans who say, I'm not going to have anything to do with revenue increases. So how does that get worked out? It's fortuitous, as Erskine says, that this other thing is coming up by August 3rd, 2nd, or whatever. Or before they go home for the August recess, as I think Barry said today. That'll be a date. They can't slip at this time. The economy has changed. Everything has changed. But I'll tell you, when the drop-dead moment comes, there will be revenue in that package. There will be, and I can't tell you the spread, because you can start talking with numbers, and you just say, this is the first time you've done this, but there's one number we can tell you that we are paying less in taxes now than we have since the Korean War, if I'm not mistaken, 15% of GDP, and the historical rate is 19 for 20. I guess they're going to do like Jerry Brown in California. He says, OK, no more taxes. Well, what's Plan B, like DeSoto, burn the ships when it hits the shore? And that's what we're going to do. If the people of America then realize that everything they love in discretionary spending is going to be crushed automatically by our inability to do anything with Medicare, then here we go. I'm going to begin this. I'm going to play devil's advocate, because I've talked to Grover Norquist. I've talked to other conservatives who say there is no way that a Republican is going to support any revenue increase and not face the wrath of God from Republican voters. And there's no way we're going to have any kind of long term, fiscally responsible plan that puts our fiscal house in order if we don't touch the entitlements. We had $450 billion of cuts in Medicare in our proposal. Medicare will go broke. We made promises we can't keep. Social security absolutely will go broke. We're going to have to make cuts in Medicare and social security, and we're going to have to have some revenue. And you can do it by doing something smart. We have the most anti-competitive, inefficient, ineffective tax code that you can imagine. If you're willing to broaden the base, simplify the code, and get rid of some of or eliminate some of these tax expenditures, which are really just spending by another name, they're $1.1 trillion of them. You could actually take rates to 8% up to $70,000, 14% to 210, and have a maximum rate of $23,000. And you could take the corporate rate to 26% and go to a territorial system that would allow you to bring all that $2 trillion worth of cash, which is an American corporation's overseas, and bring it back to this country to create jobs here. Who takes a hit under that scenario? I mean, I keep hearing that whatever happens, the pain has got to be spread broadly. It's nothing's going to happen. Well, the biggest hit if you reform the tax code goes to people like me, because I'm the one that's able to take advantage of these tax expenditures. You mean the really rich? Well, you and I itemized the deductions. So we have advantage of the mortgage interest deduction. Well, less than 23% of the people, 24% of the people, are the only ones that actually itemized. So they don't get any advantage of the mortgage interest deduction. You and I are one through to get an advantage of it. And what does a Medicare compromise look like, Senator? What about the Medicare compromise? What would that look like? Well, I tell you, there is a way to solve that. And it's a beautiful thing. And let me share it. You cut physicians and providers money. You make the beneficiary put up more co-pay. And you begin to affluence test those who receive Medicare. And you make the hospitals keep one set of books instead of two or three. And you quit the gimmickry between Medicaid and Medicaid between the states. Those are easy things. But you don't do the Paul Ryan route, is what you're saying. Well, basically what Paul did is not something that it's hard to understand. A premium support plan is basically a defined contribution plan. And lots of businesses in this country found out they couldn't afford a defined benefit plan because they couldn't control their costs. So they went to a defined contribution plan and passed the increased cost of the growing cost of the benefits onto the beneficiary. That's basically what he's proposed. If we can't with the Affordable Health Care plan and with the additional $450 billion of cuts that we've suggested in our plan, if that doesn't slow the rate of growth of health care to GDP plus 1, which is what you have to, then you're going to have to look at more drastic steps. Some of those more drastic steps would include things like block granting Medicaid. It would include raising the Medicare retirement age. I mean, eligibility age. It would include things like a premium support plan. It would include things like a robust public option. It would even include things like a single payer plan. But we have to get the cost of health care under control because you're right. You can't control this budget unless you do. I heard a senator say today that his worry, this is somebody who's on your side. That his worry, though, is that what's going to happen is there will be a short-term agreement put together by the Biden group, I don't know about the gang of five or six. And it'll be just enough to get the country through November 2012, but it won't be the long-term agreement that the two of you want. But that's his fear. That's a legitimate fear. Probably. That might well be. But all of them agree, and all of you agree, all of America agrees that won't get it done. It'll get it done so they can get through the election. It's interesting to me, the guys that came here and said, I don't care if I ever get re-elected. I'm just going to go out there and hammer them. All are having PAC meetings and fundraisers. That's really curious, I think. What are the, before I ask, I want to ask you about benchmarks along the way. But one of the arguments we're hearing now is that with the bad economic report that's come out recently about jobs, just across the board, not good news about housing, that if there are serious drastic cuts in government spending, wherever they are, it's going to be a further drag on this recovery, which is already struggling. You know, we actually took that into account. Our number one principle was that we didn't want to do anything, and it ain't stupid. And by that, we expanded upon it and said we didn't want to do anything that would disrupt a very fragile economic recovery. So the spending cuts that we recommended, we have significant spending cuts in 2012, but we don't get back to pre-crisis levels of spending until 2013 when we get back in real terms to the levels we spend in 2008. And the reason we did that is we didn't want to do anything that did disrupt what we called a very fragile economic recovery. Some people argue with us about that for some period of time. They said originally that during the early part of this year that we had factory production was going up, retail sales were going up, existing home sales were going up, banks were starting to lend a small business, investor sentiment was going up. So it looked like the recovery was going to be strong, and we had increases in employment. But Alan and I felt, and I think the members of our commission did, is yes, that's true. But we do have a fragile economic recovery. If you think about the things that are going to drive the recovery, the consumer is still 2 thirds of GDP, and the consumer is very leveraged. This consumer has about $13 trillion worth of debt, half of it's floating. That's 120% of disposable income. If interest rates start to go up since half of it's floating, that's going to have the same effect as the rising gas and food prices do. The capital markets are on strike, the corporations are, because they don't have any consensus of where the economy is going to go, what the government's going to do. The construction industry is still on its backside, and it's hard to think of a recovery when you have a construction industry in a slowdown period. And the government, the feds up here have already done everything they're going to do. State and local governments are cutting their budgets right and left. They're not spending money. So where the stimulus is going to come from, and even before these bad economic numbers that came out last month, and I don't think one Robin makes a spring or one month's numbers make a trend, but even at the old numbers that people were happy about that were the increase in the employment, it'd take till 2019 before you got back to pre-crisis levels of employment, even at that level of increase. So it is a fragile recovery. And yes, you could do the cuts in 2012 that some people call for, but we thought that was a risk you don't want to take. You don't want to bet the country. And so we took about $60 billion of a cuts in 2012, and we took the vast majority of them in 2013, not to disrupt a very fragile recovery. So Senator Simpson, nothing has happened in the health of the economy to cause you to make a material change in the recommendations. No, we really, we like the gang that learned too much. We've sat there for over a year, and to think we got a vote of five Democrats and five Republicans and one independent, and we always, the discussion that was, where is the tipping point? How far do you go? What is that? But whatever the figures were then or now, all I know is I was here for 18 years, I never saw any single prediction of any percentage that was correct in the whole 18 years, not one. Next year's GDP, let's see, next year real growth will be this, nothing ever panned out. Nothing, nothing, not one single statistic. So if you torture statistics long enough, eventually they'll confess, and I've watched that, and boy, this town is filled with people and deadlines, deadlines, you know, we'll have this done by whatever, forget deadlines, but it's just, it doesn't matter whether you use old numbers or new numbers, this is a behemoth, and we're not trying to be alarmist, and it's just, it's there, we've seen it. The Defense Department, don't touch the Defense Department, well you have to. We said, how many contractors do you have? And they said, well it's quite a range, it's between a million and 10 million. Very, very narrow range. And then one of the witnesses says, we're a told Conrad, our programs are unauditable. We have no way to determine the audit. And Ike was right about the industrial military complex, these military retirees go right into that system, and Merry Christmas. All right, I think we've only got a few more minutes. I wanna ask you both as we wrap this up. What do you look for? I mean, do you have benchmarks in your mind? Are you, I mean, we're obviously looking at the debt limit in early August, but what needs to happen in the coming weeks? Today is June the 14th, what needs to happen by the end of June? What needs to happen by the end of July in order for you to see that something is gonna come out of all this work that you've put into this? You know, Erskine and I started this, they said, why are you doing this, which meant to me at your age? But not with Erskine, look at him charming. And rested me on frayed edge. We thought we were doing it for 15 reasons, his nine grandchildren and my six. Then suddenly we realized we were doing it for our children. And now we realize that we're doing it for you people and us, that's how bad this is, this baby is here. I have a view of the tipping point that is earlier than Erskine's. We're not Greece, let's just all admit we're not Greece or Italy or Ireland and all that, but when the three credit agencies raised their head like this, that's never happened and Jack Lew tonight couldn't have been more clear, a wonderful guy to work with, as is Bill Daley's hurling all of them, I worked with him, but boy I'll tell you, if anybody can't see what's happening when, you don't do the plan, they see the turmoil and the people that hold our paper say, I want some money for this paper. It's got all sorts of things around it guilt and I want money for it. Or the other one, you do pass the debt limit and they say we saw how anguishing that was for you, so we're gonna loan you more money, but we'll want more interest. So pick your poison. If you know Judy, I'm a reader of history and the thing that scares me the most is not the 30s. But think about 1918 in the Weimar Republic. What happened? Germany fought the great war and financed it all on credit. We're fighting three wars and financing it on credit. They had deficits as far as the eye could see. We've got about a trillion dollars of deficits as far as the eye can see. You know, they manufactured money in order to bring down unemployment, QE too. And they devalued the currency. Lord knows we've done that. Now look, we've got a lot of things in this country to keep us from going off the cliff, but this is the most predictable economic crisis in history. And if we don't do something and do it relatively quickly, then what I can guarantee you is the markets will move and the markets will do it for us. I'm glad this debt ceiling is forcing some action. I'd be very disappointed if we didn't have at least $2 trillion worth of deficit reduction by August 2nd. You ought to do it quicker so there's some confidence filled up in the marketplace and businesses start to spend some money. But we better do at least that and we better set up some framework that goes in the area of $4 trillion of real deficit production. By when? I mean, agreement by when? For something larger than that? You know, my hope is that it will be part of this deal that comes out of the Biden talks when they kick it upstairs to the big boys. And they will kick it upstairs to the big boys. You can count on that. And how do you see the gang of five, the work they've done, folding into that? I hope they will come out with their plan. It will provide some bipartisan emphasis for people to have the courage to do what we all need. No, what we need to do is to put politics aside and to pull together and to put the country first. So as we leave here tonight, Senator Simpson, go ahead. We could really say something because Grover and I get into it. He doesn't like me any more than I like him. And we've proved that. We do meet. We have met together. I've ready to debate him at four in the morning or 10 at night, anywhere he wants to go. But let me tell you, this is the truth. And I use the Lincoln word, thrall. Look up the word, thrall, we use it in his, I think the second inaugural or whatever, but he used it several times, Lincoln, he liked it, thrall. It means your mind is in bondage. You're a slave to something out there. And I can tell you that if America and the Congress remains in thrall to Grover, Norquist and the AARP, we ain't got a prayer. That's the period. I'd just like to add one more thing since a lot of people haven't seen it. Jim Cooper is here tonight. And Jim and Frank Wolfe, you know, wrote a letter, you know, again, another bipartisan effort in support of the work of a gang of six. And we need more Republicans and more Democrats to decide we're gonna work together and to push the needs of the country forward. There is such a thing as principle compromise. And I think that's what we need today if we're really gonna have a chance to have our physical house really put back in the working hand. So the two of you will continue to work on this? As hard as we can. Let me tell you, we go everywhere in the US where we can and you give us 50 minutes with any group and questions and answers and we'll get a standing ovation. I'm not saying that about our ego. It's the fact we don't BS them. We don't give them much. Small ideas have no power to inspire. When we were doing this damn thing, finally Ruskin and I said, we'll just do a two man report since you guys are all slashing each other about Bush and Obama. They said, well, you wouldn't do that. And as we toughened the report, toughened it up, more guys came aboard. Now that's how it worked. Whether the amazing part of it was toughening it and more people came and you tell people the tough stuff because they understand one thing. You spend more on your own, you lose your butt. And if you spend a buck and borrow 41 cents, you gotta be stupid. And they think it's stupid. It's kind of interesting, Judy. You know, Al's right, the tougher we made it, the more support we got. And it's really not so hard to understand. You know, if you were gonna go to somebody like the veterans and say, we're gonna have to cut your benefits, they're gonna say, God, don't do that. You know, we've defended the country. But if you tell them that everybody is gonna have some sacrifice, you know, but everybody's gonna be in this, that we've got an enormous problem and we all have to do our part. And they say, okay, I'm in there. And that's what we gotta do. We all gotta give up something. There is no easy solution. You know, this problem is real and all of the solutions are really painful. There is a political will question. That's what we'll see. A little one. All right, thank you. Senator Simpson, Erskine. Thank you. Thank you.