Simpson Says Medicare to Squeeze Out Government Spending

Former U.S. Senator Alan Simpson, co-chairman of President Barack Obama’s fiscal commission, said escalating Medicare costs stand to squeeze out the rest of domestic government spending.

“Medicare is on automatic pilot. It will use up every resource in the government,” the Republican former senator from Wyoming said in an interview today on Bloomberg Television. Asked about spending ranging from highway programs to the Federal Bureau of Investigation, Simpson said: “The things you just mentioned will be completely squeezed out” by Medicare.

Representative Paul Ryan, Mitt Romney’s choice as his Republican vice presidential running mate, has proposed replacing Medicare with a plan giving the elderly a fixed amount of money to buy private coverage. Ryan’s plan may become a central part of the presidential campaign.

“We owe 16 trillion bucks and nobody even understands what that is,” Simpson said in the interview. “If you want to get the old playbook out and use infrastructure, airplanes, all the stuff, that’s great. You won’t even see it because of what’s going to happen with Medicare.”

Simpson said the country’s current path of debt, deficit and interest is “totally unsustainable.” President Obama’s fiscal commission was “solidly specific” and the commission acknowledged “the nature of a fragile recovery,” he said.

Simpson-Bowles

The Simpson-Bowles plan, issued by the commission headed by Simpson and former President Bill Clinton’s chief of staff Erskine Bowles, advocated a series of spending cuts and tax increases to balance the budget. The plan was never adopted nor openly endorsed by the president. The House voted down the plan, with Republicans saying it had too many tax increases and not enough spending cuts.

Ryan served on the 2010 commission and voted against its recommendations.

Even as Congress struggles to come to consensus on fiscal spending, Simpson said markets will control the debate over the future of the U.S. economy.

“All you have to do is a plan,” Simpson said. “We’ve got it in legislative language, we’re circulating it right now, among a very good group of Democrats and Republicans. If you do a plan then the markets will lay off of you.”

To contact the reporter on this story: Caroline Fairchild in Washington at cfairchild2@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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Former U.S. Senator Alan Simpson

Brendan Hoffman/Getty Images

Former U.S. Sen. Alan Simpson, co-chairman of President Barack Obama’s fiscal commission.

Former U.S. Sen. Alan Simpson, co-chairman of President Barack Obama’s fiscal commission. Photographer: Brendan Hoffman/Getty Images

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Aug. 13 (Bloomberg) -- Alan Simpson, a former Republican senator from Wyoming who was co-chairman of President Barack Obama's U.S. deficit-reduction commission, talks about fiscal policy. He speaks with Deirdre Bolton on Bloomberg Television's "In the Loop." (Source: Bloomberg)