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PARKER SPITZER

Rendell on Tax Deal; Senator Warner on Tax Cut Backlash; Republican Woes on Tax Deal

Aired December 10, 2010 - 20:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


KATHLEEN PARKER, CNN ANCHOR: Good evening, I'm Kathleen Parker.

ELIOT SPITZER, CNN ANCHOR: And I'm Eliot Spitzer.

Kathleen, it was time warp at the White House today. It was like being there in the 1990s all over again.

Bill Clinton, holding forth, dominating the stage, President Obama invited him down. And, of course, Bill Clinton did a great show for him. But get this. Halfway through, President Obama said, "I got to go."

Listen and take a watch.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Here's what I'll say, is I've been keeping the first lady waiting for about half an hour. So I'm going to take off. But --

BILL CLINTON, FORMER PRESIDENT: I don't want to make her mad. Please go.

OBAMA: You're in good hands. And Gibbs will call last question.

CLINTON. Yes, help me. Thank you. Yes, go ahead.

(END OF VIDEO CLIP)

PARKER: Oh my god. I mean, he's going, I got to go, the wife is waiting, I'm going to get in trouble. That was not good. Sorry. But Clinton, of course, had nowhere to go. And he held the podium for a classic Clinton performance.

He was there to support the president, and he did it with characteristic Bill Clinton conviction. Let's take a listen.

(BEGIN VIDEO CLIP)

CLINTON: Everybody has got to give a little. Yes, I think -- I think the one thing that has always happens when you have divided government is that people no longer see principle compromise as weakness. This system was set up to promote principled compromise. It is an ethical thing to do. In a democracy, where no one is a dictator, we would all be at each other's throats all the time, and we would be in a state of constant paralysis if one's power is divided, there is no compromise.

(END OF VIDEO CLIP)

SPITZER: All right, Kathleen. You know what, he could sell anybody anything, but he's not selling me on this deal. I know Bill Clinton is there to defend the president, there is a bond there, they're doing it with all good intentions, but I still maintain, bad deal, bad economics, bad for the nation, more debt, money to the wrong people.

I don't get it. I don't know why the Democratic Party doesn't fight harder. I want to see what happens up on the hill.

PARKER: But he not only endorsed the plan, he said worse things will happen if it doesn't go through. So that was more than just an endorsement.

SPITZER: Well, this is the fifth argument we've heard. We worked hard for it, it's better than you think, there's good unemployment. If you don't like those, we're going to have a double- dip recession.

Every day, a different theory for why we're given the wealthy money they don't need, and not giving it to our educational system, not giving it to build the infrastructure, and we're borrowing this money that we're giving to the rich from the Chinese.

I'm sorry. I don't get this as an economic model.

PARKER: He still has to sell it, right? He's got to sell it to --

SPITZER: Congress?

PARKER: Congress? But he's also got to sell it to the American people, who are usually in the mood to buy anything Bill Clinton is selling, especially these days when he looks like Winston Churchill and Thomas Jefferson rolled into one.

(LAUGHTER)

PARKER: And loving every minute of it.

Joining us now to talk about the president's bravura performance at the podium today, and we're not talking about the current president, is Pennsylvania Governor Ed Rendell.

Welcome, Governor.

GOV. ED RENDELL (D), PENNSYLVANIA: Kathleen. Eliot.

PARKER: You look wonderful in purple.

RENDELL: Good to see you.

SPITZER: Thank you for coming in.

RENDELL: You look splendid.

PARKER: So President Obama and President Clinton had a little love fest today. They agree that compromise is the best thing. Are we now in for an era of peace and love?

RENDELL: Well, not necessarily. But it was important for President Clinton to say what he did. For two reasons. One, because all Democrats remember how successfully after the beating that the Democrats got in 1994, how successfully President Clinton -- I won't say moved to the center, but made government work.

PARKER: Made people think he had.

(LAUGHTER)

RENDELL: Well, that's right. But he made government work, he got things done and then got reelected by huge electoral landslide. So I think that's number one. And number two, no one worked harder in this election cycle than Bill Clinton for congressional candidates, Senate candidates, and there is a great deal of gratitude among rank and file Democrats for what he did.

So for him to come out and endorse the deal as unequivocally as he did I think is going to make a difference.

SPITZER: Look, I totally agree with you. As a political matter, an endorsement from Bill Clinton is about as good as you can get on either side of the aisle. People just love him and for good reason.

Having said that, the fundamental objection that seems to be uniformed or until today has been uniformed across the members of the House and the Senate Democrats was this deal was not one that you fought hard enough to get.

RENDELL: Well --

SPITZER: And when I speak to senators and members of the House, they are frustrated beyond words that President Obama didn't go to the mat, didn't seem to wring what he could have at the other side.

RENDELL: I think that comes with ill grace on the part of the members of my party in the Congress. Let me tell you why. Number one, I heard Mark Warner earlier today say that if we were going to fight this out we should have fought it out before the election. We ran away from this issue before the election. We should have made this the central issue in the election.

PARKER: Well, there was a strategic decision to do that. Why?

RENDELL: I don't know. And then why if it's so good now -- (CROSSTALK)

PARKER: Why wasn't it then. Exactly.

SPITZER: Look, Governor, some people like you were saying that back then. I was saying it back then.

RENDELL: Absolutely.

SPITZER: Because there is a powerful philosophical argument and powerful economic argument that what President Obama and the Republicans want to give to the wealthy is bad economics. It is bad for the social fabric of this country. Why didn't President Obama --

RENDELL: Bad for the deficit.

SPITZER: Bad for the -- bad at every level. I mean Senator Warner's point earlier today was that the $4 trillion that we're giving away in the deal that the president cut with the Republicans is exactly the amount that the Bowles-Simpson tries to save making all sort of hard cuts.

RENDELL: Eliot, you just (INAUDIBLE) traffic made a little bit of a mistake. We're not giving away $4 trillion.

SPITZER: Why not?

RENDELL: Because it's only two years. And two years is one fifth.

SPITZER: Wait a minute, wait a minute --

(CROSSTALK)

SPITZER: No, no, no. This is not a mistake. This is a very clear understanding of what's going to happen. Anybody who thinks this is a two-year deal, and that's why I said $4 trillion, is kidding themselves.

A Republican House is not going to boost back up the tax marginal tax rates on the rich, simply not going to happen.

RENDELL: Well --

SPITZER: This etches into stone.

RENDELL: Except, you're assuming there's going to be a Republican House. The next time this is taken up --

SPITZER: Well, there is for the next two years.

RENDELL: But the next time this is taken up is two years from now after the presidential election, and if I'm the Democrats, it's time to show some spine guys, and let's make this a central issue in the election in 2012. SPITZER: Well, Governor, I could not agree with you more, but I don't see more than a 1 percent shot of that happening. And that's why I do think this is a 10-year. It's an embrace of the tax rates --

RENDELL: Eliot.

SPITZER: -- that are --

RENDELL: You have little faith.

PARKER: He's a pessimist. I know.

SPITZER: No, no, no. I've seen the way --

(CROSSTALK)

RENDELL: But there's a second reason I think the criticism that is wrong on the president. Remember last week, the Schumer amendment, which was the best case for us, on millionaires. We brought it before the Senate where it has to pass.

Forget the House for a moment. We got 53 votes. We were seven shot. We lost five Democrats, including Russ Feingold.

PARKER: Yes --

SPITZER: But let me ask you this -- let me ask you this question.

RENDELL: So how are we going to win?

SPITZER: Because the president had not laid the foundation over months and months and months. Instead, he signaled from the get-go, we were ready to concede on the issue of taxes. And it was -- we have yet -- and I think the frustration, Governor, is that we have not yet seen him really walk away from the table, look the Republicans in the eye and say, I dare you, the way President Clinton did with Newt Gingrich, and he said I dare you to shut down the government.

RENDELL: Different time and it's a different issue. Look, what's at stake here -- and I believe the Republican Party is playing hard ball, and would have been venal enough -- and I use the word venal.

It would have venal enough here to let the tax cuts expire, number one, and blame us for it. Number two, to make sure that the unemployed didn't get additional compensation. Number three, to end the earned income tax credit. Number four, to take away the college credit.

It would have been destructive to the people that we're here to protect. And in the end, it's all about governing. It's all about real stuff. It's not about political gamesmanship.

PARKER: Well, thank you. What you -- you say that -- you know, that the deal is the best that President Obama could have gotten under the circumstances. The President Clinton agrees with that.

When you talk about President Clinton, when he was in office, moving toward the center, at least making people think he had moved center, is that what Obama is doing? Is he moving center? Is he just playing his --

RENDELL: I think he's doing two things. I think he's trying to govern. And the test for President Obama, and Elliot knows this. For those of us who were executives in politics, and my day, I've got five weeks to go, and then I'm done.

SPITZER: Enjoy it.

RENDELL: For those of us, it's about getting things done. People want to see leadership. And leadership means more than just screaming and yelling and pointing the finger at the other guy.

It means -- I've got a very progressive agenda through in my eight years as governor, I've had to compromise, because I had a Republican legislature, and each and every piece of that agenda, I put things in that I didn't like. But that's what governing is all about.

What the president has to do -- energy bill and we can get it, we can do it bipartisan energy bill. Education. No Child Left Behind. A new way. If he gets stuff like that done, and does real deficit reduction, he's going to get --

(CROSSTALK)

PARKER: OK, so why are Democrats being such whiners? I mean, come on, he's doing --

SPITZER: Wait, let me refine that.

PARKER: He's leading. He's leading.

SPITZER: Let me respond. I agree with every piece of the agenda you just laid out and more importantly, the philosophical principle that compromise is an essential part of governing.

RENDELL: Of governing.

SPITZER: Having said that, you compromise at the right moment when you have made your affirmative case. The president didn't make the case.

Here's what I would have loved to hear him say. The 120. Let's just take the two-year number.

RENDELL: Right.

SPITZER: To address your first one. The two-year number, $120 billion that is going to the wealthy through the inheritance tax and the increase -- the decrease in marginal rates. Imagine what that $120 billion that we're going to have to borrow from China to spend to or give back to them. Imagine if we used that on education. Imagine if we used that on energy. Bill Gates and Warren Buffett oppose the tax reduction for the rich because they know that $120 billion would be better spent in those other areas.

I wish the president --

PARKER: Well, because they've got more money than god, too.

SPITZER: Well, but --

PARKER: I mean two people earning $250,000 per household do not consider themselves rich.

SPITZER: I wish the president had made that case and stood with those guys to do it.

RENDELL: Yes, Eliot, in many ways, you're right in terms of making everyone feel good. But government is not about making you feel good. It's about getting things done.

SPITZER: You're caving to the hostage takers and you're making yourself a hostage.

RENDELL: Yes.

SPITZER: In other words, you need to frame the debate.

RENDELL: No, no.

SPITZER: When you say the Republicans were tough, therefore we caved? No.

RENDELL: Do you think, Eliot, that Russ Feingold didn't know what was at stake here? He didn't vote for the millionaire's amendment.

SPITZER: No, no. But you know what? That's because Russ didn't want to do any of it. Russ came at it from the other side. I think what you could have done was had -- look, the senators, Democratic senators and members of the Democratic House were appalled because the president didn't work with them to negotiate this.

RENDELL: Different.

SPITZER: And at that level --

RENDELL: I agree.

SPITZER: If he had worked with them, then you could have gotten those votes and we could have made this happen.

RENDELL: I don't think -- you're right, but he still should have worked with him. That's number one. Number two, he shouldn't have trashed the base. What he should have come out the next day and said, look, to my progressive Democratic friends, I feel your pain. You're right. Part of this stuff just stinks. But we had to preserve our people. We have to get the economy right --

PARKER: You're saying instead of calling them sanctimonious --

RENDELL: Absolutely. Absolutely. You don't do that. I mean they're good people and they care very much about the things that they're talking about. Don't rip them. And I think that was a mistake. But look, 53 votes when we needed 60?

SPITZER: I'm not saying it's easy. But look -- can we switch gears totally for a second?

RENDELL: Sure.

SPITZER: Is the White House going to bring you in some --

RENDELL: No.

(LAUGHTER)

SPITZER: Are they going to let you be the general who's going to drive this -- you know how to do it.

RENDELL: I'm for a general. But I'm for General Powell for chief of staff. And look, Peter Rouse is a great guy and is a terrific guy, but we need someone with the stature to continue to bring the government together.

PARKER: Governor Ed Rendell, thank you so much for being with us.

RENDELL: Miss Kathleen. Eliot.

SPITZER: Thank you. Happy holidays.

RENDELL: Good to see you.

SPITZER: When we come back, well the president's tax compromise takes up all the oxygen in the room, some smart Democratic ideas are being left on the table. We'll talk to one senator with a plan when come back.

(BEGIN VIDEO CLIP)

SEN. MARK WARNER (D), VIRGINIA: I don't think anybody was surprised that the president -- President Clinton, you know, liked the opportunity to be back in the limelight.

PARKER: He seemed right at home.

(END OF VIDEO CLIP)

(COMMERCIAL BREAK)

SPITZER: The narrative around the tax cut package just changed in the last few days. First, President Obama said the deal had to be made to extend benefits to the unemployed. That didn't go over so well, so his economic adviser Larry Summer said we risked a double-dip recession unless the package was enacted.

PARKER: Virginia Senator Mark Warner is a Democrat on the Senate Budget Committee. He had another idea that would have allowed taxes to go up for the rich and use that income for business tax cuts, but he couldn't sell it.

Senator Mark, welcome. Senator Mark Warner, welcome. How are you?

WARNER: Thanks, Kathleen.

PARKER: So --

WARNER: Well, you know what? I still think my deal looks pretty good in my perspective in terms of what we're actually going to be voting on. But you know --

SPITZER: It looks great, Senator. You keep pushing it.

WARNER: Thanks, man.

PARKER: Well, so we know that President Clinton and President Obama met this afternoon.

WARNER: Right.

PARKER: And President Clinton came out in favor of the deal, saying it was the best deal possible under the circumstances. And he took questions for a long time. That is, President Clinton did. So what's your reaction?

WARNER: Well, listen, I wish I would have been in the room. I think there could have been a better deal. But the fact is, the deal was made and I think it will pass. I will support it because the alternative, frankly, is the notion that we're going to play Russian roulette or roll the dice with the American economy, because I think the economic uncertainty that could be created, particularly with what's going on in Europe at this point, of allowing the tax breaks for the middle class to expire, and allowing the unemployment benefits to expire, could be really a very, very draconian.

So, you know, let's go ahead and move forward on this deal. What I hope is that -- though is that we in Congress could actually show that we could, you know, walk and chew gum. So my hope is -- and I think there's a lot of bipartisan support for this, that while we do this short term stimulus, we also make a commitment that next year we're going to do the real hard work, which is around real tax reform and deficit reduction.

Because I think any economist that -- even the economists that applaud this deal say if we don't get our fiscal House in order over the longer haul, this is just putting off an inevitable decline of the country.

PARKER: Did President Clinton's enforcement of the plan have anything to do with your conclusion? WARNER: No --

PARKER: Or has you reached that --

(CROSSTALK)

WARNER: I got a lot of respect for President Clinton, but I -- when this deal was announced, the reality of this or doing nothing, to my mind, was pretty clear, and that we had to act. And what I'm simply trying to do now is trying to rally folks on both sides to say, if we're going to add $900 billion to the deficit over the next two years, let's all -- so go ahead and in a bipartisan and civil way commit to, you know, doing deficit reduction and real tax reform over the long haul next year.

Because if we don't, the -- every week that goes by, we add billions of dollars to the national debt. And frankly, I thought the Simpson-Bowles commission work that was done last week, I was the first guy not on the commission that would have said, again, not perfect, but I would have voted for it if it would have been on the floor.

SPITZER: Look, Senator, I don't mean to challenge you on where we are. But we still do have about 10 days or so until things really do run out of time. The Democrats in the House have taken a different position, saying no, we're not going to bring this to the floor.

Why isn't there time now to say there are pieces of this package that are not stimulative? And I really don't think that the state tax piece or the reduction in marginal rates or the extension of the lower rates for the super wealthy has any stimulative effect. And meanwhile, we're borrowing money from China to pay for that.

It's a real bad set of facts for the economy. Why can't we push back on those, and substitute your idea, use that money, at least for something that would be stimulative? Why isn't there time for that?

WARNER: Well, Eliot -- Eliot, I'd like to see that, and you know, I agree with you particularly on the estate tax. You know, we could have done something in the middle between the $3.5 and $5 million exclusion rate that would have caused a lot less heartburn, at least amongst a lot of Democrats.

But as we saw, even when we raised -- tried to raise the marginal cutoff to $1 million in the Senate, we only got 53, 54 votes on that. So the fact was, we didn't have the votes on that kind of even higher level on a million-dollar cutoff a week ago.

And with the clock ticking, you know, I do think we're looking at -- with perhaps some small addendum around the side here or there, I think we're looking at the framework of either this or potentially allowing the tax rates to expire and everybody taxes going up.

SPITZER: There was movement, certainly during the Clinton presidency, President Clinton began with some very heavy lift whether it was NAFTA or his budgets or the tax ideas, and he would get certainly members from his own party to come on board and occasionally across the aisle, as well.

This president doesn't seem to be able to do that. Is that his failing or is it just a rigidity and a stubbornness and a uniformity on the Republican side that simply can't be overcome?

WARNER: One of the things that I have been disappointed in, in a lot of my Republican colleagues is, you know, there has been kind of an "our way or the highway" approach. And, you know, the fact is, over the last two years, we've had the numbers to jam stuff through.

The Republicans had the luxury of just saying no. Come January, both parties are going to own both the problems and they're going to own the solutions. And I'm hoping at least on the Senate side there can be a reemergence of the group in the middle, Democrats and Republicans, and it'll be -- you know, we're going -- hopefully form a new caucus, the "let's get stuff done" caucus, which is --

SPITZER: Right.

WARNER: -- definitely what I think is needed.

PARKER: You know this afternoon at the press conference, President Obama and President Clinton spoke for a little while and then President Obama excused himself, he kept checking his watch and finally said look, I've got to go, Michelle -- I've kept my wife waiting for 30 minutes already.

And he turned it over to President Clinton who seemed delighted to be back in place. What do you think of that?

WARNER: You know, I found one of the things as a current elected official, it's probably not good to comment on current or former president's in terms of their speaking time. You know --

(LAUGHTER)

WARNER: I'll do a quick pass on that one.

PARKER: Fair.

(CROSSTALK)

WARNER: Kathleen, I don't think anybody was surprised that the president -- President Clinton, you know, liked the opportunity to be back in the limelight.

PARKER: He seemed right at home.

SPITZER: Well, I think there's another reality here, which is that the terms of this deal are not, in my view -- again, I hope I'm wrong about this, but this is not a two-year transaction with the Republican House of Representatives starting in January, hard for me to imagine any political dynamic that has the Republicans in the House moving these numbers up, or making -- raising these marginal tax rates.

So I think we're talking about something that will probably last at least a decade.

WARNER: But if we do that, the -- basically, the amount we add to the deficit now with these other add-ons is -- over the next decade is more than $4 trillion.

SPITZER: Senator, that is --

WARNER: More than $4 trillion. And remember, put this in context. Last week, all of the hubbub about the Simpson-Bowles thing that took on Social Security, took on Medicare, ended up -- you know, closing a lot of tax exclusions. In total, that only reduced the deficit $4 trillion.

So, you know, the idea that these are going to be locked in stone with all of the other things that are kind of hard to get at, will mean that at one point soon, whether it's the next couple of years or five years from now, the bond market and others are going to say, they're not going to buy our debt anymore, and we're going to have the same kind of crisis that Greece and Ireland and potentially other countries in Europe has had.

And if we don't step up.

SPITZER: Yes.

WARNER: And do our part on that, we all ought to be fired.

PARKER: I couldn't agree more with that. Senator Mark Warner, thanks so much for being with us.

WARNER: Thank you, guys.

SPITZER: Coming up in "The Arena," it's not just the Democrats balking at the tax deals. Some Republicans don't like it either.

We'll be back to ask two insiders, is the tax deal dead on arrival?

(BEGIN VIDEO CLIP)

RALPH REED, CHAIRMAN, FAITH AND FREEDOM COALITION: So basically what he's doing is, he's essentially conceding that for the duration of his presidency, the central pillar of the Bush economic policy will remain in effect. That is a devastating philosophical --

SPITZER: Ralph, I hate to do it, I hate to do it. I agree with you.

(END OF VIDEO CLIP)

(COMMERCIAL BREAK)

PARKER: There's a new perspective tonight on the tax compromise we've been debating all week. Now Obama is not only getting pushback from House Democrats but today two prominent Republican senators also panned the proposal. SPITZER: Joining us in "The Arena" to talk about the bill's future, Ralph Reed, chairman of the Faith and Freedom Coalition. Welcome. And Steve Kornacki, news editor of Salon.com.

Thank you for coming back.

PARKER: Welcome, gentlemen. So nice to have you both.

Thank you. Good to be here.

SPITZER: Ralph, I want to start with you. Senator DeMint, a very conservative and increasingly powerful voice has come out vehemently against this, saying it is a budget busting tax cut, we can't afford it, a cave to special interests.

First, where do you stand on the so-called compromise? I don't view it as a compromise. Why do you stand on it? Do you agree with Senator DeMint?

REED: Well, I think, like Senator DeMint, Elliot, I would much prefer just a clean bill where you simply extend the Bush tax cuts. And I would prefer that we not extend them for two years.

(CROSSTALK)

SPITZER: Which means so not the unemployment benefits and some of the other tax --

REED: Not the other stuff they weighed it down with. Now you know --

PARKER: Wow, you're hard core.

REED: Well, thank you very much. I'll take that as a compliment.

But you know I -- look, I was on the Hill during the Reagan tax cuts. And that was what Reagan wanted. He simply wanted the rate reductions, no baubles, no Christmas ornaments, just pass my bill.

That's unlikely to happen. So, you know, we'll see what happens. I mean it's kind of a moot point right now to the extent that the House Democrats have said they may not even bring it to a vote.

SPITZER: Well, let me put you on the -- given Senator DeMint's critique that it's a budget busting bill, because of the loss of $4 trillion of revenue over 10 years -- two years, you know, about $1 trillion, how do you respond to that critique?

REED: Well, again, I'm in favor of extending the Bush tax cuts. I favored originally the Bush tax cuts being permanent.

SPITZER: Right.

REED: So -- and I certainly don't think it's a good idea for us to be sitting here basically two or three weeks from the end of a calendar year and 26 million small businessmen and women and job creators and entrepreneurs having no idea what their tax rate is going to be.

I mean, we have a very weak economy. We have the longest and deepest recession in the post World War II period. The real estate market is still flat on its back. This thing is not over yet. We've got 15 million Americans out of work. And what this is, is this is just showing Washington isn't -- is broken and Obama can't lead and that's not good for anybody.

PARKER: Steve, you take a different view, kind of a surprising view. You say that this is actually a stimulus plan for Obama, and therefore a good plan.

STEVE KORNACKI, NEWS EDITOR, SALON.COM: Yes, I mean, I wouldn't say it's just -- it's cause for celebration of the I mean, there's obviously -- I don't think -- I think a strong case can be made --

PARKER: A reasonably good plan.

KORNACKI: It's the best plan that he could have gotten under the circumstances, I think. And he would have said that at the start of this year, if he would have said halfway through this year, if he would have said right after the election when the Republicans won over 60 seats in the House that Barack Obama was going to be able to in December extract $300 billion in economic stimulus out of the Republicans, and get them probably to vote for it and sign that into law, I think a lot of Democrats would have been very surprised at that.

And if you're looking at what Barack Obama's situation is right now, politically, the most important thing for him and the most important thing for Democrats heading into 2012 is to show that there's been economic improvement under the Obama administration. He got $300 billion of stimulus from this to do just that.

PARKER: Well, everybody keeps saying that Obama has been held hostage by Republicans. Eliot made the case earlier in the show that he actually presented himself as a hostage. But, you know, aren't the Democrats now being obstructionists?

KORNACKI: Well, no, I mean the Democrats are playing their role. This is their president and it's their responsibility to --

PARKER: So when the Republicans were saying we're the party of no, they were just playing their role.

KORNACKI: Well, it's the job of -- it's the job of liberals in Congress, it's the job of liberal commentators to pull the president of their party as far toward their goals and their objectives as possible. And this is a situation where Barack Obama went and made a deal on his own and they feel left out, and their voice --

(CROSSTALK)

SPITZER: Here is my sense of you're argument. You're making a purely pragmatic argument, but you don't like the tax cuts for the wealthy. You think -- I don't want to put words in your mouth. You don't think it's good economic or social policy.

KORNACKI: It does nothing -- the tax cuts for the wealthy themselves do nothing to stimulate the economy.

SPITZER: Right. And you're viewing this as a pragmatic resolution you can live with because you think it's the best he could get.

KORNACKI: Absolutely.

SPITZER: Now so my challenge to you -- with Ralph, we just have a different philosophical perspective. He thinks the tax cuts are good economics. So that we could have that debate as well.

Yours is a purely pragmatic argument saying he couldn't have negotiated to a better end point, that one I just think is flatly wrong.

KORNACKI: Right.

SPITZER: I mean, and you look at the history of President Obama over the course of his negotiations, he always caves at the first sign of toughness on the other side. He said they weren't going to give.

Well, how do you know until you either walk away or even line up your soldiers?

KORNACKI: Right.

SPITZER: He didn't even get the House and Senate Democrats to stand with him and say we're as tough as you are. And we have the majority.

KORNACKI: Let's be honest about this. I think you and I, and I think most people who watch this stuff closely, we knew this moment was coming, at least the moment when the Bush tax cuts all get extended temporarily. The meeting in September it was agreed that this stuff is off the table until after the elections.

SPITZER: Wait, wait. Let's stop one second. Why did they adjourn it until after the election if that was today --

(CROSSTALK)

KORNACKI: No, I agree. If you want to make the case --

(CROSSTALK)

KORNACKI: If you want to make the case that this should have been done earlier.

SPITZER: Yes.

KORNACKI: I think you can make that case. If you want to look at what's going on right now and the chance that Barack Obama had to add $300 billion in stimulus, I would take that deal.

REED: Well, first of all, they didn't call the extension of unemployment benefits stimulus until after they had caved.

SPITZER: That is correct. You're exactly right on that.

REED: Now all of a sudden they're trying to reframe it.

(CROSSTALK)

KORNACKI: There's also a reduction in payroll --

REED: To call that $300 billion --

KORNACKI: Also a reduction in the payroll tax.

REED: To call that $300 billion in stimulus, you're trying to make lemonade out of lemons. They never said that before.

SPITZER: I want to agree with Ralph about something. Only in the last 48 hours when they knew they couldn't win this as a matter of good democratic policy did they say stimulus was the real objective.

And I'm going to challenge the common thinking. I don't think it's that great a stimulus. What they're counting as stimulus is a payroll tax deduction that is good for consumer spending, but it's not on the employer side, it's on the employee side. It doesn't lower the cost of hiring somebody.

DONAHUE: Most estimates that I'm seeing, you know, you look at Zandi, they're saying this is probably going to point and growth in the next year.

SPITZER: And then it runs out.

DONAHUE: Yes, but is the Republican Congress at the end of 2011 going to say we're going to raise the payroll tax?

SPITZER: I don't know.

DONAHUE: I think you're probably getting two for one out of this deal.

SPITZER: The tax cuts for the wealthy are a permanent piece of it. I assume you agree with that, Ralph.

REED: I do. I don't think there is no way that you can look at -- well, two years is a long time in American politics.

SPITZER: It certainly is.

REED: But if you look at the map going into 2012, the Democrats have 23 seats to defendant in the Senate, Republicans only nine. There's not been a time, even in a blowout election, like Reagan, '84, where an -- the average number of seats picked up in a reelect of an incumbent president being reelected since World War II is nine. So even if Obama is re-elected, and by the way, I'm not conceding that point. I don't believe he will be. He might. But even if he is, he's likely to be facing a more Republican Senate than he is today, maybe a Republican Senate and a Republican House.

SPITZER: Right.

REED: So basically what he's doing is he's essentially conceding that for the duration of his presidency, the central pillar of the Bush economic policy will remain in effect. That is a devastating philosophical --

SPITZER: Ralph, I hate to do it, I hate to do it, I agree with you. It kills me. You're right. He has conceded President Bush's most important domestic agenda.

KATHLEEN PARKER, CNN CO-HOST, "PARKER SPITZER": Hold that thought. We've got to take a quick break. Stay with us. We'll be right book.

(COMMERCIAL BREAK)

PARKER: We're back with Ralph reed and Steve Kornacki.

SPITZER: If the stimulus works that would be wonderful and that would help the president politically, of course, and more important than that, it would be great for the economy.

However, if it works, he's never then going to be able to reinstate the taxes. Either way, I see the tax cuts continuing, because if it works their argument will be see it work. If it doesn't work, we're still in a recession. You can't raise taxes. So I see no way --

(CROSSTALK)

STEVE KORNACKI, NEWS EDITOR, SALON.COM: It's funny how we learn lessons on this, though, because it was supposed to be permanent when Reagan brought to down to 28 percent in the '80s, and his successor, his vice president, George W. Bush brought it up into the 30s. And then Clinton brought them up even higher. We had a 39 percent marginal rate and we had some of the best growth we have ever seen in this economy. We didn't learn that lesson as voters. So I don't think voters necessarily learn the lesson --

SPITZER: I agree with you as a matter of substance. I'm talking about the politics in terms of the likelihood of the --

KORNACKI: What we have learned about voters, they're very irrational and don't have much of a long-term memory.

PARKER: Oh, dear. Let's insult the voters.

REED: What's so ironic, George W. Bush who left office with job approval in the low 30s has a successor who is extending, as I said, the foundation of his economic policy, has emulated the surge that he green lighted in Afghanistan, and has not closed Gitmo, and is likely to have a very large contingent of U.S. troops in Iraq when he leaves office.

SPITZER: Ralph?

REED: This Shakespearean kind of situation.

SPITZER: Again, I'm getting shivers.

(LAUGHTER)

The other night on this show, I said I want to talk about George III. And I said not the King of England, I mean George III, the third term of George W. Bush for precisely those reasons. We are seeing the status quo continue in so many of these core policies that Democrats thought were in fact going to be changed.

PARKER: Well, is W. being vindicated?

REED: I think he is being vindicated. And I would go further and say that I think Barack Obama is being shown as having campaigned in a way that, you know, best case scenario was playing to his base, worst case, very naive in thinking that he could change Washington.

PARKER: Probably a little of both.

REED: Ushering himself in with a Che Guevera poster and a return to --

(CROSSTALK)

PARKER: All right. This week you described the president as somebody who is, quote, "conciliatory and compromising one moment, petulant and arrogant the next."

Ralph, really, hasn't that always been the case. Isn't that how Obama always was? I think these American people projected on to him what they wanted him to be, and now everybody is shocked and surprised he acts this way, that he's making backroom deals.

REED: My point -- you're right. I think he has always been that. But my point was, everybody has wondered, is he going to respond to this new era in Washington, this new Republican reality, by being either a Clintonian triangulator, or is he going to be Harry Truman and take them on?

And I think in this episode he's going to try to do both. So he cuts the teal and then he goes into the White House briefing room and attacks and condemns him. And I just don't think it will work.

KORNACKI: We're you're talking about he's either Clinton or he's Harry Truman, and you're saying Clinton is the model of compromise and Truman is the mod of conflict. Clinton compromised and then shut down the government with the Republicans.

SPITZER: That's true. That is true. (CROSSTALK)

REED: I think it is a myth that Clinton, quote, moved to the center and adopted the Republican agenda. He agreed with them on some things, he fought them on others. Remember, he vetoed welfare reform twice before he signed it. He vetoed the tax cut, the Republican contract with America tax cut.

SPITZER: And Ralph, you make an credible point, which is Bill Clinton fought before he got to the middle point. He didn't do what I think President Obama has done here, which is to move so quickly without a principled articulation of why that he seems in my view, actually in fact did, cave rather than fight for the best bargain he could get. Very different things. You can fight and compromise simultaneously.

REED: Here's what Clinton did that Obama should do. I'm not saying it will guarantee his reelection, but he should do it. He should recognize that what happened on November 2nd is a wave. It's coming. OK, you can't stand on the beach and yell at it and make it go away. It is on top of you. It is either going to hit the beach, ride up and then recede, or it will break you.

And there are certain elements of this, the Bush tax cuts being permanent, fiscal restraint, lower spending, and a forward strategy of freedom and the war on terror that he ought to concede, because if he doesn't, it will break him.

PARKER: Hate to stop you guys, but thank you for coming. Ralph Reed, Steve Kornaki, great conversation. Stay with us. We'll be right back.

(BEGIN VIDEO CLIP)

PHIL DONAHUE, FORMER TALK SHOW HOST: Every major metropolitan newspaper in this country supported the invasion of Iraq. I mean, think about that. This is the land of the First Amendment, cacophony of voices, arguing, growing.

SPITZER: Let me raise something then --

DONAHUE: This is corporate media.

(CROSSTALK)

(END VIDEO CLIP)

(COMMERCIAL BREAK)

PARKER: If you think Oprah has the longest running syndicated talk show in history, think again. That particular honor belongs to our next guest.

SPITZER: Phil Donahue invented the daytime confessional format, aiming both high brow and low in his 29-year long career. We spoke to him earlier. (BEGIN VIDEOTAPE)

SPITZER: Thank you for joining us. It's an honor to have you here.

PARKER: I'm thrilled. I watched your show for years and years. I think my expire life.

DONAHUE: Well, I thank you. You turned out anyway, didn't you?

PARKER: Do you sometimes think maybe you created a monster?

DONAHUE: Well, I have said they are all my illegitimate children and I love them equally. But it is true that the game has changed, really quite something. In many ways it's changed from when I went often the off the air which was '96 with my daytime show.

And even the cable, nighttime, your arena, since 2002, when I was on MSNBC, it's totally different know.

PARKER: Is it meaner? Is it coarser?

DONAHUE: Sure. First of all, I would never mention Bill O'Reilly on my MSNBC program in 2002. This is only eight years ago. Why would you mention the competition? People might -- today, this --

SPITZER: They live off each other.

DONAHUE: The shows have fallen back on each other and we are now being entertained by watching them fight.

PARKER: But guess what, you don't see women doing that, do you?

DONAHUE: I haven't thought about that.

SPITZER: Oh, sure you do.

PARKER: Oh, really?

SPITZER: I'm not going to name names. I don't think there is a gender divide. Some of the more vitriolic names right now may not be women, but I don't think

PARKER: I think some woman are vitriolic in their approach to interviewing and commenting. But I don't think they go after each other.

DONAHUE: You might want to watch "The View."

SPITZER: I want to go back to Newt Minnow who way back in the 60s, I think it was, referred to TV as a vast wasteland. Are we doing better? Even though the talk shows are edgy and loud and the decibel level may be too high, do they contribute to our politics in a way or a bad way, do you think?

DONAHUE: Well, as you know, I'm a brilliant man. (LAUGHTER)

SPITZER: We do know, that's why I'm asking you this hard question.

DONAHUE: Here's the thing I'm having trouble with. You know, I -- in -- my first job was in a radio station, and I was the news director. I had never been a reporter. I was the news director, by the way, because I was the only man in the news department. It was a small radio station.

And I covered the news, and I could stop the mayor. I was like -- I looked 12 years old, and I couldn't get over the power of this thing. And then I'm a slow learner. The First Amendment ensures that if anybody can be a reporter, even me, I took no test, I didn't pee in a bottle, I just said I'm a reporter, and I was, that's what you want, because you get a lot of people reporting then. And then somewhere in the middle of this large crowd will be found the truth.

Today, that middle is occupied by five companies. So you don't get to push back. There is -- I have 900 channels on my TV, but 700 of them are selling the Botox machine. That is not good diversity.

SPITZER: But right. But here's where the new media, the technology maybe our saving grace. There has been this diffusion, this explosion in terms of the number of channels and the YouTubes and social media so everybody is a journalist, because everybody can talk to everybody.

And you're right. There is this enormous and dangerous compensation, but out of that voices will emerge, can we not hope, sort of --

DONAHUE: You would hope. But let's remember this, governor -- every major metropolitan newspaper in this country supported the invasion of Iraq.

SPITZER: Right.

DONAHUE: I mean, think about that. This is the land of the first amendment. Cacophony of voices, arguing, growing --

SPITZER: Let me raise something then that --

DONAHUE: But this is corporate media.

SPITZER: I want to raise something then that we weren't going to raise, which is that you were pushed off the air because you opposed it.

DONAHUE: I opposed the war.

SPITZER: And is that one of the reasons they pushed you off?

DONAHUE: Read the memo published by the "New York Times," "Donahue's anti-war voice is not going to work against the flag waving on the other station." Donahue and any anti-war voice in 2002, remember, they're all doing what I did now. The whole channel is now. You could not criticize this war four months before the invasion. It was not good for business.

You had -- General electric had no interest in featuring an old talk show host who was against the president's war. It was -- it was unpopular. You weren't American. This is what you get with corporate media. It's going to happen again.

PARKER: Well, and, you know, when the Congress voted for it, too. But everyone did think there was something going on. It's not like they were just maliciously going after another country. People were afraid, don't you think? After 9/11 --

DONAHUE: Are we so insecure?

PARKER: Yes.

DONAHUE: That when --

PARKER: After we were attacked the way we were attacked, I think there was a low, low tolerance for any kind of risk. I'm not making a justification for war. I'm just saying what --

DONAHUE: Are you making a justification for this war?

PARKER: The mindset of the country at the time was such that -- I mean, I wish you had been on the air doing your old show.

DONAHUE: I do, too. But I didn't make it to the invasion. I was gone three months -- the invasion was March of '03 and I was gone like in January. And the president -- the president scared the hell out of the nation.

PARKER: The nation was already scared.

DONAHUE: He's under your bed, he's outside your window, he's got mass destruction. You could feel the heartbeat of the nation accelerate. It was a bloodlust --

SPITZER: You are so right in what you're saying is so important about the lack of tolerance for dissenting voices and your voice won't be silenced.

DONAHUE: Oh, thank you.

SPITZER: It won't be. I don't care who does what. It won't be silenced.

PARKER: Phil Donahue, thank you for being with us.

DONAHUE: Thank you both.

PARKER: We'll be back.

(END VIDEOTAPE) (BEGIN VIDEO CLIP)

NICO MELE, SOCIAL MEDIA EXPERT: This was a political action these hackers took and an act of civil disobedience.

PARKER: Is this something we should admire?

MELE: I absolutely think it's something we should admire. They're standing up for political value they believe in, which is a radical free speech on the Internet. I would argue maybe it's the only value of the internet actually has.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(NEWS BREAK)

(COMMERCIAL BREAK)

SPITZER: Time for tonight's person of interest. Here's the real meet meaning of the WikiLeaks story, the powerlessness of government in the internet era. In the last few days, supporters of WikiLeaks founder Julian Assange have launched "Operation Payback," shutting down major website like Visa, MasterCard and PayPal. One of the alleged perpetrators is all of 16 years old.

PARKER: Nico Mele is the perfect person to speak on this new wild, wild net. He has been on the cutting only of edge of social media and politics. He ran Howard Dean's 2004 president Internet campaign and teaches about technology and government at Harvard's Kennedy School.

It seems a little bit scary to me that anybody can organ attack on an institution and shut them down. What does that mean?

MELE: Almost like a sit-in. Anybody can go sit in the lobby of a bank and shut the bank down for an hour.

SPITZER: That's a fascinating metaphor. But it really isn't. First of all, a sit-in requires many people, and second of all it shuts down only that one little branch. This was right at the heart of the internet infrastructure for major global institutions, and they went kaput. And how many people did it take to organize this?

MELE: It took a few people to organize it but hundreds of thousands to participate. It's a denial of service attack. What they do is, they get lots of people to all request the web site at the same time, and figure out ways of automating it, but it's still a broad coordinated activity.

PayPal shuts down Wikileaks account, but you can still give money to the Ku Klux Klan. This was a political action these hackers took and an act of civil disobedience.

PARKER: Is this something we should admire? MELE: I absolutely think it's something we should admire. They're standing up for a political value they believe in, which is a radical free speech on the Internet. I would argue maybe it's the only value the internet actually has.

SPITZER: You say you admire them. How far does that go? Cyber war is the new frontier. China could shut down our grid. Where do you draw the line of what's permissible?

MELE: I wouldn't equate this with cyber war.

SPITZER: Why not?

MELE: I don't know that they broke any laws, right?

PARKER: All they did was show up.

MELE: All they did was show up. All they did was request the website. A lot of people requested the website at once.

SPITZER: If China were to do that and try to overwhelm our internet structure --

PARKER: We should be shut down.

SPITZER: -- would that be cyber war?

MELE: You're talking about a sovereign state going after another sovereign state's critical infrastructure.

SPITZER: It was a non-sovereign, 10,000 people who are anarchists --

MELE: This was a brief attack that actually disabled a few systems for very short period of time. It's very analogous to a sit- in.

SPITZER: The defense of people like a PayPal or a Visa or MasterCard is kind of like the defense that the major telecommunications companies have. We're just pipelines. We are just vehicles for other people to do their thing. We do not either filter content or even care about the content. Do you see that distinction as being meaningless in the Internet world?

MELE: Well, I don't know -- I don't know if I see it as being meaningless, but I do think there was kind of an act of political paranoia here, where PayPal will let you give money to the Ku Klux Klan, but they won't let you give money to a platform for whistleblowers?

SPITZER: I'm not disagreeing, I'm just trying to parse this, because I think this is kind of new and it will move in all sorts of different directions, and it may be sort of the frontier of combat of the future.

MELE: I tend to think of the internet as a that people interact with each other and bypass institutions. Right?

PARKER: Right.

MELE: And consequently, it's very hard to capture it for any substantial length of time. It was designed in part to avoid any kind of single point of failure. You can always cut the cable going into your house, right?

SPITZER: China is trying to cut into a whole nation.

MELE: Sure.

SPITZER: They're doing a pretty good job of it.

MELE: And I also think, let's not forget, that a lot of this power actually rests in the hands of corporations rather than in public infrastructure. I mean, if Google wanted to, Google could take WikiLeaks off the Google databases. When you Googled " WikiLeaks" you wouldn't see anything. That's a power they have, and in some ways a power I see PayPal tried to execute there.

SPITZER: All right. We will continue this conversation. Nico Mele, thanks for joining us tonight.

MEALY: Thank you.

SPITZER: And thank you for watching.

PARKER: Goodnight for New York. "LARRY KING LIVE" starts right now.