(CBS News) If the White House and Congress fail to reach a budget deal by the end of the year, the U.S. will likely fall back into recession, as huge, automatic tax increases and spending cuts would take effect.
Dave Cote, the CEO of Honeywell International, knows what's at stake. Cote was on the Simpson-Bowles commission, which came up with a budget plan. Last week, President Barack Obama sought his advice. We asked Cote to put America's debt into perspective by comparing it to the size of the overall economy.
COTE: Our debt is higher as a percent of GDP today than it has been at any time in our history since the Revolutionary War, with the exception of the end of World War II, when we had a very good reason to be doing that. So we've got to do something.
PELLEY: What is the size of the problem?
COTE: Our net debt today, if you include the impact of borrowing from Social Security, is about $11 trillion today, and over the next 10 years grows to about $20 trillion. That means our annual interest bill would be a trillion dollars a year. It's ridiculous.
Dave Cote knows about fixing finances. He pulled Honeywell out of a slump. It's one of America's largest industrial conglomerates, with 130,000 employees making products ranging from aircraft parts to home thermostats.
PELLEY: Given the uncertainty of what's going to happen next, how much effect does that have on your planning at Honeywell?
COTE: I wish I had made up this phrase -- cause it's so good -- but it's "capital is a coward." So when it comes to hiring, you know, I let people attrit. They retire, they leave for a variety of reasons, and I'm just not going to back-fill those jobs. I'm not going to hire for them. When I look at capital expenditures and I decide, should I build that new plant? Or should I modify it? Should I upgrade it? Should I invest in this new product? You know, maybe I'll hold back a little bit, I'll wait and see what happens, and that's happening across industry right now.
Cote told us a deal in Washington has to include big budget cuts and increases in tax revenue. The tax money, he says, could come from reducing deductions.
COTE: We collect $2.2 trillion in taxes, but we give away half of it in credits and deductions.
PELLEY: The mortgage deduction, for instance, charitable deductions.
COTE: Oh, there's all kinds. There were, like, 169 different ones used in, I don't know, 2008, 2009, somewhere in there.
PELLEY: But when Republicans say, "We will not allow tax rates to be increased," you say what?
COTE: Well, that's where you start to get into, I guess, the word parsing that I -- I've said one of my other learnings from Simpson-Bowles is that I'm not a political savant, so some of this stuff I just don't quite get. But the fact is you need more revenue.
PELLEY: When it comes to cutting the budget, where does that money come from?
COTE: The big nut is going to have to be Medicare/Medicaid, and even though most people don't want to talk about it --
PELLEY: You're not a politician, are you?
COTE: No, no.
PELLEY: You just said it.
COTE: At the end of the day, you can't avoid the topic, especially with the baby boomer generation retiring. It's going to literally crush the system.
Cote told us that if Washington doesn't make a deal by the deadline, the nation will be condemned to two percent growth and eight percent unemployment.