TheLiveBigWay Digest – Simpson Bowles edition
We’ve all heard about the Simpson Bowles Commission (technically, the National Commission on Fiscal Responsibility and Reform), which was created by President Obama in early 2010 and delivered its final report on December 1 of that same year. Neither Congress nor the White House embraced the findings of the commission, but that hasn’t kept Alan Simpson, former Republican senator, and Erskine Bowles, chief of staff under Bill Clinton, from hitting the lecture circuit with a message of reality, rationality, and reform. Elissa had the chance to hear them live earlier today while attending (and speaking at) the Schwab IMPACT conference in Chicago. She was duly impressed by the clarity of their non-partisan prescription for dealing with some of the fiscal imbalances in the US economy.
Asked by an audience member what it will take to overcome the stalemate in Washington, Simpson replied simply, “Pressure.” Simpson and Bowles expressed the hope that the financial advisors in the audience would, among other things, encourage their clients to bring pressure to bear on both sides of the partisan divide to compromise and adopt a sustainable solution for the sake of the country. This message is our attempt to do just that. The first thing you can do is visit their website and sign a petition urging Congress to make the hard decisions that the situation demands.
As reported in Advisor One by Jamie Green, there are five major areas that must be addressed:
Bowles listed the five biggest budget problems, many of them “third rails,” as Simpson acknowledged that the U.S. faced and must take action on:
1) Healthcare spending: “We spend more than any other country but we don’t get the outcomes” we should on that investment in terms of actual health.
2) Defense: “We spend more today than the next 17 top countries combined.” Perhaps the biggest round of applause came when Bowles proclaimed: “America can’t afford to be the world’s cop.”
3) Taxes: Bowles got another round of applause when he listed the third big problem the country faces budget-wise, “the most inefficient, globally anticompetitive tax code that can be imagined.” The Bowles-Simpson proposal: “Let’s get rid of all this backdoor tax spending,” much of it in the form of deductions, that he said costs the Treasury $1.1 trillion. In exchange he called for reducing individual income tax rates and the corporate tax rate.
4) Social Security: Bowles said jokingly that “President Roosevelt was too smart” in setting up a Social Security system that started paying benefits at age 65 when average life expectancy was 62. “Let’s make Social Security sustainably solvent so it will actually be there when we need it.”
5) Compound interest: By this Bowles means the compounding of our debt that will be an albatross for the country. Referring to his decision to partner with Simpson in his fiscal crusade, Bowles said, “I began this thinking I was doing it for my grandchildren, and then for my children, but we’ve got to do it for ourselves, here, today.”
While we would take issue with Bowles’ point about Social Security (the life expectancy AT BIRTH was 62 when Social Security was created, it was longer for those who lived long enough to qualify for benefits), his underlying point is valid: people are living longer than the system was built to accommodate. Advisor One’s Green, meanwhile, ends his report with Messieurs Simpson and Bowles in deadly earnest about the need to get past the talking points and the politics of the matter:
“We do math, not myth,” Simpson said, and warned that the country’s disability insurance fund will be used up in four years. He saved his deepest criticism, and got the loudest applause, when he suggested that raising some taxes would be necessary to fix the nation’s budget problems. Referring to Grover Norquist, the conservative Republican guru who has successfully received pledges from lawmakers and candidates not to raise taxes under any circumstances, Simpson turned deadly serious. What we need in this country, he said, is “patriots, not panderers.”
He finished by voicing his disgust over the fact that “compromise has become a dirty word.” Citing the Declaration of Independence, the Constitution and the Missouri Compromise, Simpson said that “this country has always been run by compromise.”
We hope that anyone who isn’t familiar with the details of the Simpson Bowles plan will take this opportunity to learn more and make your voice heard.