What’s your assessment of the debt-ceiling deal that was just cut in Washington?
I think it was absolutely imperative we raise the debt limit. And we did. This was not the program that we should have had associated with raising the debt limit. I would have raised the debt limit as a clean increase, but that was not politically possible. I do not think this was the program that we needed. But there are a couple of things about this that are constructive. One is there are virtually no cuts in 2011 and 2012, so you’re not going to have any reduction—virtually no reduction—in demand from cuts during that period, which I think was very important. And secondly, although I think the focus was far too heavily on the discretionary part of the budget, at least it included both defense and non-defense. But fundamentally, we needed a very different program. We should be putting in place a serious deficit-reduction program of the kind that the Bowles-Simpson Commission outlined and that, actually, President Obama laid out in the middle of April. I think we could do ourselves an enormous amount of good on the jobs and growth front.
You’ve had some experience with Congress. Do you think this super committee will work?
What we should do now, and it directly relates to your question, is I think that we need to have a real public discussion about the consequences of our decisions. And what we need is far greater public understanding of what we need to do. And if the public understands the importance of putting in place a serious deficit-reduction program that defers its implementation date for a couple of years to try to give us time to get back on track, and also understands that we must have substantially increased revenues if we’re going to have the public investment that we need and the social safety net that the American people want, then we can put ourselves in a position where confidence can be substantially increased.
Do you think it’s crucial who’s appointed to the committee?
Oh, yeah. It’s absolutely crucial who’s appointed. But we need to create the public environment that affects how this commission operates so that its members feel a tremendous pressure to base their decisions on facts and analysis, not ideology—and to work across party lines to make the kind of tough decisions we need to make to have a sound economic policy in this country.
Does the President, because he has the bully pulpit, need to explain what it will take to cut the deficit and create jobs?
The question of jobs and the question of getting back on track fiscally, I think, are really one question. This is what happened in ’93: President Clinton put in place a deficit-reduction program. It was half revenue increases and half spending cuts. We were widely criticized for the revenue increases. And instead of the recession that a lot of people predicted, we had the longest-lasting expansion in the nation’s history, with vast job creation. That’s the kind of thing that we need to do. The revenue increase will be a smaller part of the whole, just because of the political context, but that’s where we need to go. And I would make sure that we had robust public investment because we’re going to need that if we’re going to be competitive.
When you talk of raising revenues, how would you do that today?
What I would do is take the Bush tax cuts for the high income groups, $250,000 and above, I’d go back to the Clinton rates. It’s absolutely a red herring to criticize that as increasing taxes.
Was this like two people in cars playing chicken—if you think the other guy’s crazy, you’re going to have to factor that in?
I think the President did what he needed to do.
Which was spending cuts and no new revenue. So he decided to fight another day?
He faced reality and dealt with it.
Where’s this debate going over the next two years?
There’s a critical moment in January 2013 when all this is going to come to a head because the sequester goes into effect [which forces across-the-board cuts if debt-reduction goals aren’t met], the Bush tax cuts expire in December 2012, and we’ll probably be at the debt ceiling again. It’s critically important that we have movement toward a position of the kind I’ve outlined so we come to all three mega-issues and wind up with a sound economic policy.