The co-chairman of President Barack Obama’s 2010 fiscal commission said it’s unlikely the president and Congress will reach a deal by the end of this year to avert the so-called fiscal cliff.
Erskine Bowles, also a former chief of staff to President Bill Clinton, estimated there is a one-third probability the sides will strike a deal by the end of this year. Speaking today at a breakfast in Washington sponsored by the Christian Science Monitor, he said there’s another one-third chance that all sides will reach a deal early in 2013.
“I’m really worried,” Bowles told reporters. “I believe the probability is we’re going over the cliff.”
Bowles isn’t involved in the budget negotiations, though he said he met with Obama yesterday. He also was among a group of company leaders who met today with House Republicans. Following the meeting, Bowles told reporters he sensed no greater willingness by Republicans to let income tax cuts for high earners expire Dec. 31 as Obama is demanding.
“We’ve got a very long way to go and very few days to get there,” he said. Bowles didn’t describe his conversation with the president.
“There’s no scientific basis for me to say one-third, it’s just what I feel having spent my life as a negotiator,” Bowles said. As “people begin to react” and economic news comes out in the fourth quarter, there’s another one-third chance “you get something done real quick” in 2013, he said.
“That’s still leaves that one-third that we could actually have real chaos and no deal, and I think that would be a disaster,” Bowles said, a message he said he relayed to Obama.
While House Speaker John Boehner today reiterated his opposition to touching income tax rates, he also said he is “optimistic” that talks with Obama will continue.
The bond market isn’t showing anywhere near the same level of concern.
As the national debt has soared to more than $16 trillion from less than $9 trillion in 2007, U.S. borrowing costs have tumbled.
The yield on the 10-year note touched a record low 1.379 percent on July 25, down from more than 5 percent in mid-2007 before the financial crisis. The super-low yields have pushed rates for mortgages, car loans and corporate borrowing to historic lows.
The “sticking points” for a budget deal are the president’s call for $1.6 trillion in new tax revenue and the fact that “there’ve been no serious discussions” so far on changes to entitlement programs, Bowles said.
Based on his White House meeting yesterday, Bowles said, he also believes there is “flexibility” in the president’s call to let George W. Bush-era tax cuts expire for the wealthiest Americans.
“I didn’t sense it, I heard it” directly from Obama, he said. Bowles said while Obama believes the major portion of revenue should come from ending the tax cuts for the top 2 percent of taxpayers, a plan also could include limiting some deductions and credits, an approach favored by Republicans.
The Campaign to Fix the Debt, founded by Bowles and former Republican Senator Alan Simpson of Wyoming, is working to gather corporate and grassroots support for a bipartisan plan to cut the U.S. deficit by trimming entitlements and increasing revenue.