Erskine Bowles: Debt Default Would Be 'Catastrophic'

Wednesday, 02 Oct 2013 09:22 AM

By Newsmax Wires

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While the current government shutdown is "bad and painful," the United States would trigger a 'catastrophic' global chain reaction if the nation would actually hit the debt ceiling and default on it obligations, according to Erskine Bowles, the former Clinton administration aide who co-heads the National Commission on Fiscal Responsibility and Reform.

"This shutdown is bad. It's painful. It does hurt some people. It costs the taxpayers some real money. But it's not catastrophic. We hit this debt ceiling, that's catastrophic," the former Clinton White House chief of staff told CNBC.

"We need to get through these man-made crises and get to real problem," said Bowles, author of a debt-reduction report, along with former Sen. Alan Simpson, R-Wyo.

Editor’s Note: New Video Exposes a ‘Great Retirement Heist’

His warnings came as the shutdown enters a second day amid no signs of ending.

Lawmakers in both parties have warned the shutdown might last for weeks, The Associated Press reported. A funding cutoff for much of the government began Tuesday as a Republican effort to kill or delay the nation's healthcare law stalled action on a short-term spending bill.

The National Commission on Fiscal Responsibility and Reform was created by President  Obama's executive order in February 2010. Bowles and Simpson co-chaired the bipartisan group, whose goal was to address the nation’s mounting debt, in the wake of congressional inaction.

The group recommended new tax revenue and deep spending cuts in entitlements and other programs.

Those recommendations were basically ignored by both parties, Bowles has said.

"I hoped common sense and real analysis of data would lead to smart decisions. You know, in hindsight, you could see this coming from a mile," he noted.

"Since we came out with the report (in December 2010), we've done the easy stuff. We raised taxes on people making more than $400,000 a year," Bowles explained.

"They've done stupid stuff. You don't get much stupider than a sequester. We've avoided stepping up doing the tough stuff," such as focusing on reforming titlement programs and making Social Security sustainable, he said.

"We've avoided retaining the tax code to be globally competitive. We've got to replace these cuts with programs with smart reforms in mandatory and entitle m programs. That's what make sense."

Meanwhile, Pacific Investment Management Co.'s Bill Gross has faith that the nation will avoid such a "catastrophic" default.

"The U.S. Treasury is the center of the global financial complex," Gross, manager of the world’s biggest bond fund, said during a Bloomberg Television interview with Trish Regan and Adam Johnson.

Gross told Bloomberg that such a default would be "unimaginable" and might spark ripple effects around the world.

Editor’s Note: New Video Exposes a ‘Great Retirement Heist’

Related Stories:

Bob Doll: Govt Shutdown Could Continue to Weigh on Stocks

Shutdown Would Cost Economy $300 Million a Day, IHS Says

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