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Fiscal Cliff Negotiations; Interview with Tom Vilsack

Aired December 30, 2012 - 09:00   ET


CANDY CROWLEY, HOST: Few big things get done in Washington without drama, and we are on the precipice of a very big thing.

Today the cliff-hanger.



SEN. HARRY REID, (D) NEVADA: Whatever we come up with is going to be imperfect.

SEN. MITCH MCCONNELL, (R) KENTUCKY: We'll be working hard to try to see if we can get there.


CROWLEY: Getting a deal and getting it passed with Democratic Senator Debbie Stabenow, Republican Senator John Barrasso, Republican Congressman Darrell Issa and Democratic Congresswoman Donna Edwards.

Then, the country goes into 2013 without a farm bill. Think you don't care?


VILSACK: The consumers when they go in the grocery store are going to be a bit shocked when instead of seeing $3.60 for milk, they see $7 a gallon for milk.


CROWLEY: Agriculture secretary Tom Vilsack on sticker shock in the dairy aisle. And how rural America sees the gun debate.

Plus, the politics of the fiscal cliff and 2016, yes 2016 with Matt Bai of the New York Times Magazine, the Washington Post's Karen Tumulty, Gerald Seib of the Wall Street Journal and CNN's Jessica Yellin.

I'm Candy Crowley. And this is State of the Union.

If silence is golden, perhaps something is up, because we haven't heard much about whether a deal to avoid the fiscal cliff is in the works or out of the question. In what passes for a sign of hope, senate staff members spent Saturday shoveling papers, presumably containing proposals between Senate Majority leader Harry Reid and Republican leader Mitch McConnell's offices.

Both the Senate and House are meeting today. Joining me to talk at about where things stand, Republican Congressman Darrell Issa of California, Maryland Congresswoman Donna Edwards, a Democrat, Michigan Senator Debbie Stabenow, also a Democrat, and Republican Senator John Barrasso of Wyoming -- from the great state of Maryland by the way.

Thank you all for being here. So, what's up? What is happening that you can tell us about?

STABENOW: Well, there's a lot of work going on, Candy, right now on both sides of the aisle in the Senate to come to some agreement. And to me there really is just a very basic principle, and if everybody agrees we can go forward, and that is, don't hold middle class families hostage to the debate about whether or not the wealthiest Americans should get another tax cut. I would argue we can't afford it as a country. But the question is are we going to allow middle class families to see their taxes go up while we have this debate? And if we can agree that we will continue tax cuts for the middle class I think everything else begins to fall into place.

CROWLEY: So who is working at this moment? Are you all involved in this in any way, shape or form I mean, if lots of work is going on?

BARRASSO: I've been in touch with those this morning who are involved in this. There is no deal yet. I continue to hope for a bipartisan agreement today. what

But what we're seeing here is a monumental failure of presidential leadership. The president is the only person with a pen who can sign this, and it's the president's responsibility to work on something that the House will pass, the senate will pass and that he will sign. But he is outsourcing this. He continues to campaign and lecture when he ought to be focusing on the number one problem that hurts us as a country, which is our debt. And the problem is a spending problem.

EDWARDS: It would be nice to place all the blame on the president, but that is in fact not the reality. I mean, the House our Democratic caucus is meeting later on today. We've been united as Democrats in wanting to protect middle class families from a tax cut going up. 98 percent of the American public, 100 percent of people who made under $250,000 will be protected under the president's proposal and under a bill that we've had waiting for the House leadership to put on the floor to protect middle class families. We could do that today. We can come in, we could do it tomorrow. We could get it to the president's desk and deal with the most pressing issues that families facing which is are my taxes going up on January 1?

CROWLEY: It's really minimalist at this point. I mean, we started out with we're cutting the debt and we're going to do this and we're going to do that, now we're really down to unemployment compensation and what's going to happen with these tax rates.

ISSA: I think that the important thing, though, Candy, is what we do agree on we don't agree on. The House passed months ago a bill that kept everyone's taxes low. Now, that's dependent on how you scored it, $50 or $60 billion difference between the current president and Democrats' position. CROWLEY: That's with the $250,000 and under keeping their tax rate. Everybody else gets a tax hike?

ISSA: But understand, I live in an alternate reality. I grew of age in politics during the Clinton administration, watched former Speaker Pelosi and many of the leading Democrats, Harry Reid vote for tax increases under Bill Clinton that are the taxes we would go back to if we do nothing.

At the same time, I watched Nancy Pelosi lead the charge against the Bush tax cuts that ultimately now they want to keep 98 percent of. The truth is if we go over the cliff on a tax basis, we're only going back to the Clinton era taxes. If we don't change spending, we're going to stay over the cliff. Even if we go back to the Clinton tax rates, the Clinton tax rates, which is what the cliff is described as, you still have nearly half a trillion dollars a year, $5 trillion over ten years worth of deficit, that's because while we grew the -- under Bush the taxes revenue went up 25 percent, spending went up 100 percent in the last 12 years.

So even if you put back all of the revenue you would get from those higher taxes, you still have a deficit, that's what we're trying to change.

CROWLEY: We kind of are where we are, and no one is talking about spending cuts, they're talking about keeps taxes low, which everybody agrees.

Let me just ask you a very specific question, first to the Democrats here. If they came out with a deal that said, all right, we will keep tax rates for those making $400,000 or less, would you vote for that?

STABENOW: Candy, I'm willing to come to the middle. I think we've got to all be willing to come to the middle.

CROWLEY: So that's a yes?

STABENOW: But I want to say something else that is very important, and that is for two years now we have only been focusing on spending cuts. In the last two years we've put in place $1.6 trillion in spending cuts. We have put in place spending reductions under Medicare of over $700 billion by cutting overpayments to insurance companies and so on. The only thing, the only thing that we have not been able to get any agreement on is whether or not the wealthiest Americans should be part of the solution. That's what this is about.

CROWLEY: I will give you -- let me give you a chance to talk about the spending cuts.

STABENOW: We've already done tax cuts -- excuse me, we've done spending cuts.

CROWLEY: So you're done with spending cuts, is that what you're saying. STABENOW: I'm willing to do more. I have $24 billion sitting on a farm bill in cuts we passed to the House. The House committee passed spending cuts that would stop big subsidies to farmers who shouldn't be receiving them. The House won't take it up. So I'm happy to do more reasonable spending cuts, but not if over and over the middle class gets hit.

The middle class and seniors get hit over and over again. It's time for the wealthiest to be part of this.

CROWLEY; I want to give you all a chance to respond to that. But, first, let me just try to get -- these were sort of two questions ago in a row, if it were $400,000 or less, the tax rate stayed the same, that would be okay for you?

STABENOW: If it includes something broader. We have 2 million that are going to lose their unemployment benefits next week.

CROWLEY: Including unemployment.

STABENOW: It's a possibility.

CROWLEY: How about you?

EDWARDS: The president proposed $400,000 as a balanced approach to try to negotiate. The reality is the president ran on $250,000. Come January 1 tax cuts for everyone will expire. We have a majority of support in the congress, Republicans and Democrats, who actually support providing tax cuts for people who make under $250,000.

CROWLEY: To the point, would you vote for something if it came out, all right, let's extend unemployment benefits and it's $400,000 or lower would you support that?

EDWARDS: I think I want to look at a balanced package. And if $400,000 is part of a balanced package, then fine. But if it's not, then what's the point, because...

CROWLEY: You know what you're going to get, if you get anything, right -- it's going to be an extension of unemployment benefits and somewhere along the line retaining tax rates for whatever one defines.


EDWARDS: Republicans actually rejected the $400,000.

BARRASSO: ...we have an obsession (ph) level with increasing tax rates, and people across the board say this does nothing to deal with this spending problem we have in this country, nothing. He's fixated on what may help what funded the government for seven days a year, completely ignoring the other 358 days a year.

(CROSSTALK) BARRASSO: You have to focus on really what's going to save this country. And we are not there. And the president is doing nothing about the addiction that his administration has to spending. He's the spender in chief.

ISSA: And Candy, I can't let Senator Stabenow say what she said and not correct the record. Those $700 billion, this wonderful savings, it all went into Obamacare. The idea that you save money in Medicare, it was saved as part of a big spending program.

STABENOW: We cut overpayments to insurance companies.

ISSA: Here in Washington people say cut while things grow.

CROWLEY: Slowing the growth?

ISSA: Right. Right, look it's sort of like saying you have freeze, but it's water and when water freezes it expands. We have grown 100 percent in 12 years. We have grown 100 percent in 12 years, the government. The government is bigger, and unless we do something now the government will continue to get bigger and the deficit will continue to get bigger even if we raise taxes on everybody. We still have a huge deficit if we do not take on spending, then the cliff may not seem like a cliff but will be a downward slide to make us like Greece, no longer a viable economic power.

CROWLEY: Hang on. I want to get -- we'll continue this. I want to take a quick break. The fiscal cliff has the president sounding like New York Yankees legend Yogi Berra.


OBAMA: This is deja vu all over again. American wonders why it is that in this town for some reason you can't get stuff done in an organized timetable.


CROWLEY: So if we all saw it coming, why did Congress wait so long to do something about it?


CROWLEY: We are back with Congressman Darrell Issa, Congresswoman Donna Edwards, Senator Debbie Stabenow and Senator John Barrasso.

Let me just go back to one point, and that is there are people sitting around wondering whether their taxes are going to go up. So I want to ask you again about the chances that you think of something passing.

Senator Lindsey Graham thinks the chances are exceedingly good and, quote, "the president won."

So what does that mean to you? And is that what you're sensing, that this -- that we will probably get something more in line with what the president wants and what Republicans have been asking?

BARRASSO: Well, I'm hoping for a by partisan solution that can actually pass and that we can --


CROWLEY: Beyond the hope, do you think the chances are good?

BARRASSO: Well, we're not there yet. We're trying to line up Rubik's cube right now. We're not there yet. So we're going to be meeting later today. This is going to continue and then go on till tomorrow.

But my goal is to help keep tax rates down for all Americans. I think it hurts our economy if tax rates go up. And that's why I'm very concerned for the future and the growth of our economy and jobs.

CROWLEY: What is your all's sense of something that could pass, what appears here, just even from our -- the first part of the conversation? Just the dividing line is so bright.

STABENOW: I'm optimistic, Candy. I am, because think the practical reality is that, come January 1, we begin to see the average middle class family having their taxes go up about $2,200.

And one mom said to me in Michigan, that's four months' groceries. I mean, that's commuting back and forth to work in gas for up to three years. I mean, that's a lot of money. So I really do think even though there's great divides about the role of the wealthy in the country and what -- and whether they should be part of the solution, I do think that I'm optimistic we'll be able to come together to protect 98 percent of the public and 97 percent of small businesses.


CROWLEY: (Inaudible) 2013?


CROWLEY: Before 2013.

EDWARDS: Yes, I've actually always been hopeful despite --


EDWARDS: No, not at all.


EDWARDS: I mean, I do -- I do think, though, that there's common ground around extending tax cuts for 98 percent of Americans. That's common ground. Extending unemployment, that's common ground.

And so I think -- I hope that we'll come to that point on January 1st and that this is what the president has laid out all along. It's what Democrats have supported. And it's going to take a lot of Democratic votes in the House to get there. It's going to be bipartisan, but it will take an awful lot of Democrats to support this proposal.


ISSA: I'm not as optimistic because if what we do is vilify a small group of people, raise their tax rates from 35 percent to 39 percent, that's the rate change for ordinary income, and at the same time not fix the problem, it's $530 billion or so a year if we all are in it together in a tax increase. That's half the deficit.

If, in fact, we just raise it on that small group -- I'm not saying no to the small group. What I'm saying is it doesn't fix anything.

Senator Barrasso said seven days, eight days. The fact is, it doesn't fix the problem. It's not even 10 percent of the deficit.

So if we ignore spending, if we ignore spending at this juncture, think that we fix anything by vilifying the rich, what we've done is divide America without giving any real solutions to Americans.


ISSA: That is -- that I can't be --

CROWLEY: (Inaudible) situation where you have Republicans who don't want taxes raised on anyone voting against something that would at least keep them low for some people. Is that -- I mean, do you know what I mean? You see that --

ISSA: If the president had offered up $100 billion worth of tax increases disproportionately on the wealthy and $400 billion worth of cuts, he'd had a deal in a New York minute.

But when you offer up $70 billion worth of tax increases on a relatively small 2 percent, 1 percent of the population and no cuts and, in fact, ask for a stimulus that would consume all of that money, you understand that we're going to vote on $60 billion for New York and area relief for Hurricane Sandy. That's going to consume a full year's worth of this tax increase that's proposed.


STABENOW: Let me just say -- let me just go back. It's so important, because we've had two years now of debates about all of this. Each time we've only done spending cuts that hit middle class families and senior citizens the most.

We are at a point where we're saying no more. When Congressman Issa says everybody ought to be in and treated the same, that's fine. But in the last decade we've seen Wall Street bailed out. We've seen more tax cuts for the wealthy while we have gone two wars and gone into debt. We have got to right-size the ship. I support common sense spending cuts. I voted for them. But it is time for everybody to be all in. (CROSSTALK)

CROWLEY: The debt is $16 trillion.

STABENOW: Well, there's no question about it. We've seen business people come together across the country, saying they're willing to give a little bit more. The CEO of FedEx said it's a Washington myth that somehow allowing the taxes to go back up to the Clinton era time will impede growth.

I mean, the reality is this is common sense.


STABENOW: This is about everybody participating to solve the problem.

CROWLEY: Let me try to just sort of wrap this up, because the alternative to not getting a deal between the two Senate leaders and something that could pass the House is the president wants a straight up-or-down vote on something that contains the $250,000 tax rates and under staying the same, extension of unemployment, I think something with the alternative minimum tax, keeping that in place so the middle class people aren't hit by that.

So if that comes to that, if it comes to that, just that, will Republicans stand in the way of that in the U.S. Senate?

BARRASSO: Well, this morning CNN reported that that's actually a political ploy by the president so he can blame Republicans. The president has now maxed out his credit card. He's going to want to raise the debt ceiling again. We hit that debt level tomorrow night. That's not included in any of this. So we're going to continue to focus on cutting --

CROWLEY: Will you stop it? Will you stop that? That's the question. I got to go.


BARRASSO: (Inaudible) I'm not sure they have the votes to pass it.

EDWARDS: The president and the American people deserve an up-or- down vote and the Republicans should submit to that.

ISSA: The president does not deserve an up-or-down. The process under Nancy Pelosi when she was speaker, we didn't get votes. Under Harry Reid, he'd got hundreds of bills bottled up that would pass if they came to the floor of the Senate.

The idea that one bill suddenly is entitled, well, in fact, we -- both the senator and I -- Barrasso and I would love to have some of these things unbottled for an up-or-down vote. It's not the process; it's not fair to divide America. CROWLEY: I've got to run. To be continued. I hope you'll come back. Thank you so much. Congressman Issa, Congresswoman Edwards, Senator Stabenow, Senator Barrasso, thank you all for being here. I appreciate it.

Up next, why neglecting rural America could be costly for everyone.

And later, the Washington game that never gets old.


SEN. HARRY REID, MAJORITY LEADER: Kicking the can down the road.

JOHN BOEHNER, SPEAKER OF THE HOUSE: We're not going to address it by kicking the can down the road.

OBAMA: Kick the can down the road when it comes to solving the larger problem of our deficit.



CROWLEY: A group called the Population Reference Bureau tracks people where they live and where they're going. It analyzes trends and their implications. It describes the current state of rural America as a place where workers won't go because there are no jobs and businesses won't locate because there are no workers. As a result the bureau says a broad area of the country is emptying out, rural areas are caught in a downward spiral. Just 19 percent of Americans live in rural America now, the lowest ever recorded by the Census Bureau. No one worries mother about that than the agriculture secretary who says as a by-product of the population decline rural America has lost political clout in Washington.


VILSACK: We're losing our young people because we're not doing a particularly good job of sending the right proactive message from an economic perspective, and that then translates into a lack of support for programs that are important to rural America.


CROWLEY: That would be programs like the ones in the trillion dollar farm bill languishing in congress for most of the year. A big chunk of the money is for Food Stamps, but the bill also includes crop insurance, land conservation and commodity programs that is programs that help feed the poor and keep milk from costing $7 a gallon.

Vilsack thinks he'd have a bill by now if the rest of the country understood what 19 percent of the country is providing.


VILSACK: The most important thing is that there is not the kind of understanding or appreciation of what takes place in rural America in other parts of the country that would provide it continued political relevance notwithstanding the fact that maybe poorer or it may be less diverse or it may have fewer people.


CROWLEY: Defining the stakes and regaining influence with Agriculture Secretary Tom Vilsack next.


CROWLEY: Secretary of Agriculture Tom Vilsack is causing a bit of a ruckus these day. He's telling every agricultural group he talks to that despite providing most of the country's fuel, food and outdoor recreational spots, rural America is becoming irrelevant to politics. When we sat down to talk about that, the secretary told me you don't have to go far for proof.


VILSACK: It is unconscionable that we don't have a farm bill. This is just historic. You have every single major commodity group and farm group in the country united in the message to get this worked on, yet congress doesn't get it done. You can't point to a time when congress has been this reluctant to pass farm legislation. And frankly I think it's a reflection of this changing dynamic. And I think we better be changing attention to it and do something about it.

CROWLEY: So you think it's an easy one to ignore because there's not that pressure behind it of a political lobbying group as it were?

VILSACK: Exactly. When the speaker of the house basically says, look, we can't talk about the fiscal cliff and the farm bill at the same time because it's a 1,000-page bill. It's not 1,000 pages, first and foremost. It is a bill that could easily be attached to a hurricane relief bill or a fiscal cliff resolution bill, easily attached to either one those if you had the will, if it was a priority.

When you consider what rural America does, it provides most of the food, a lot of the water, almost all of the energy and fuel as well as many, many jobs connected to what happens in rural areas, there should be a greater appreciation for what takes place in rural America and a greater concern on the part of all of us to make sure rural America is healthy and prosperous.

CROWLEY: In the short term it seems me the sales job has to be why does anybody care if there's not a farm bill on January 1? What would happen to me or my family sitting here in Washington, D.C.?

VILSACK: Well, if you like anything made with milk, you're going to be impacted by the fact that there's no farm bill, because if there is ant extension of the existing bill or a new bill basically on January 1 or shortly thereafter, permanent agriculture law goes back into place, 1949 law, which basically means that the federal government will go back in the business of strongly supporting, and I mean strongly supporting, the dairy industry by raising the price support if you will or support for dairy products to $38 a hundred weight, that's almost double what the price of milk is today. That's going to ultimately ramp up so the consumers when they go in the grocery store are going to be a bit shocked when instead of seeing $3.60 a gallon for milk, they see $7 a gallon for milk.

And that's going to ripple throughout all of the commodities if this thing goes on for an extended period of time. So it impacts consumers. It impacts those of us who are concerned about the energy security of this country because the farm bill contains ways in which we can promoting alternative energy sources, ways in which we can create a biofuel industry that's robust that creates consumer choice.

For those folks who are concerned about exports and the jobs that are connected in this country to agricultural exports, we lose the potential capacity to promote and market exports without a farm bill.

If you're concerned about the ability to provide adequate nutrition, and you are a supporter of farmer's markets and you want to see an expansion of those local and regional food systems, can't do it because there is no farm bill.

If you like the idea of fields that expand habitat opportunities and you like to hunt or you like to fish, your hobby, your vocation, if you will, in that area is also going to be affected by no farm bill because a lot of the conservation programs are not extended or ended.

If you're a farm family, obviously you're going to be impacted. So across the board in virtually every aspect of our economy and as society, there is an impact and an effect by not having a farm bill.

CROWLEY: Is this a failure on the part of this administration, on the part of this department that there is not any urgency to this farm bill?

VILSACK: We have been talking and the president's been talking about this. And I've been talking about it. And farm groups have been talking about it. It gets back to the original point that this interview started with, which is that the voice in rural America needs to be amplified. That's why it's important and it's why I called for strategic alliances.

We need to have better connections, better partnerships with groups around the country. We need to pick the right fights. We need to become part of the country that embraces diversity of opinion and also diversity of population.

I mean, there are many things that rural America needs to do in order to amplify this message so that it gets heard.

CROWLEY: Let me ask you quickly about food stamps, which are a part of the stamp program, which is part of this farm bill. Both sides of Congress want to cut the funding for that. It has grown, as you know, exponentially; hard economic times and any number of reasons, but you have done some about waste, fraud and abuse. Is there -- are there more places to cut in food stamps? VILSACK: Ninety-two percent of recipients of this program are either senior citizens, people with disabilities, children of working families, people who are actually in the workforce. It's not understood. Fourteen cents of every food dollar that's spent in grocery stores ends up in a farmer's pocket.

So it's part nutrition assistance; it's also part of the farm safety net. So it's an important program. It's misunderstood. It's another one of those aspects of our world here at USDA that's not fully understood. When you understand who you're helping here, then it becomes a little bit more difficult to advocate for significant and massive cuts as some have suggested.

CROWLEY: Let me turn you to a subject that's very much in the news right now. And we now have a renewed conversation about gun control because of the horrific events in Newtown, Connecticut.

And I wonder if you think, knowing Iowa as well as you do, knowing the Midwest as well as you do, dealing with rural America all the time, is it an easy sell to say we need to get rid of semi -- we need to ban semi-automatic weapons, we need to ban those multiple clips that are capable of shooting 30, 50, 100 bullets in a very short period of time?

And we need to make sure that at those gun shows there are background checks and that in private sales, there are background checks. Is that, will that be -- because that's what the administration wants. Will that be a tough sell where you come from?

VILSACK: You know, I don't think the president sees this as a sale. I think he sees it -- and I think he's right about this -- as a conversation in which the United States, the people of the United States, are all frustrated at the frequency and the severity of these horrific events and that we should find common ground, some way of reaching that very difficult middle with reasonable policies and strong policies, but ones that respect the value systems that we're talking about here.

CROWLEY: Do you see this as -- and let's use a different word than -- do you think that the farmers, that rural America in general is ready to say, yes, let's do these three things? Is that going to be tougher than they'll agree to?

VILSACK: I really believe that this is a different circumstance and a different situation and I think the president believes it as well, that this is going to be a sustained convention.

So I think over time, as people think about this, as there are conversations, not just at the national level, but conversations that engage people at a local level -- and this is not a situation where it's simply a top-down effort. This is really a situation where the president recognizes that it's also grassroots up.

And you know, I'm in politics. I'm in politics because of an act of violence. The mayor of our town in 1986 was shot and killed by a disgruntled citizen who walked into a city council chamber and did a horrific act, which turned upside down a town of 8,000 people. And I will tell you that it has an impact and effect. And it never leaves you.

Here's how I view this. I view when the conversation starts, as this conversation started, with a respect for the 2nd Amendment and a recognition that there is a value system attached to it that is important, and it starts with the recognition that people do hunt and that that's important to them -- 38 percent of America either hunts or fishes. So you know, it's a big part of the population.

It's a much deeper conversation. And it's a good one to have for this country. It's a -- it's potentially a unifying conversation. The problem is that these conversations are always couched in the terms of dividing us. This could be a unifying conversation and Lord knows we need to be unified.

CROWLEY: And before I thank you for your time, are you in for another four years?

VILSACK: I'm here as long as the president's pleased with my service. At least that's what the certificate says.

I've got a great job and I -- and I'm privileged and honored to have it.

CROWLEY: You're happy to keep it?

VILSACK: If I'm able to, absolutely.

CROWLEY: Mr. Secretary. Thank you so much for your time this morning.

VILSACK: You bet.


CROWLEY: You can see more of my interview with Agriculture Secretary Tom Vilsack on our website, including the answer to this very important question.


CROWLEY: You're here; you're secretary of agriculture. America grows and puts together a lot of healthy food, but what we want to know is, what's the unhealthiest food that you enjoy?

VILSACK: Oh, my. How many minutes do we have left?



CROWLEY: Get to know a little more about the agriculture secretary at

Up next, the odds and costs of diving over the cliff with Matt Bai of "The New York Times", CNN's Jessica Yellin, Karen Tumulty of "The Washington Post" and "The Wall Street Journal's" Gerald Seib


CROWLEY: Joining me around the table, Matt Bai, chief political correspondent for "The New York Times" magazine, CNN chief White House correspondent Jessica Yellin, Karen Tumulty, national political correspondent for "The Washington Post" and Gerald Seib, Washington bureau chief for The Wall Street Journal.

CROWLEY: All these titled people, thank you for coming.

Jess, you have got some news to break about what they're working on.

JESSICA YELLIN, CNN WHITE HOUSE CORRESPONDENT: Well, I think it's sort of state of play update, which is that negotiators were working last night as you expect. And my understanding is they're still debating a lot, they're debating actually where the threshold for tax rates an increase would hit. And it's still not worked out at this hour.

We know that the deal that is under discussion, according to my sources, would include unemployment insurance, an extension of that, this patch to the alternative minimum tax. It would include some -- there's still up for debate whether the estate tax that's going to jump in the new year, if that would a halt in that jump would be included.

But of course, the big headline for everybody is exactly where this threshold for the tax rate would hit, and that's the big unknown. Some folks on K Street think that if the Senate Democrats agree to place it between $400,000 and $500,000 that a lot of Republicans would sign on in the Senate. but that's of course what the lobbyists say. And we don't always -- lobbyists are usually right but not always right.

CROWLEY: So where does this -- I mean, I couldn't get anybody to say what they would or would not vote for in the panel we had. It seems to me there's -- that they throw in this whole idea of leaving the estate tax alone to try to get Republicans to vote for it. So it's something approaching a bipartisan vote. Where is this going?

GERALD SEIB, WALL STREET JOURNAL: Well, that's the tradeoff that's under discussion in the last 24 hours. If the Democrats give in on the estate tax, will they get some Republican votes back on where the tax rate -- raising the tax rates for somebody somewhere.

I'm not convinced that's the deal there. One of the problems here is I think both sides have some incentive to not a deal, to let this kick forward. Mitch McConnell has got to worry about a revolt from the right. Harry Reid, the Democratic leader in the Senate says, well look, I'll have two more Democratic senators in the new year when we get to the new congress. What's the rush? I'm not sure the incentives for a deal are as great. YELLIN: I just have to emphasize that was the old thinking. I know before Friday's meeting, The new new thinking post meeting is that both Reid and McConnell have this -- I don't know this new energy to come to the deal and that there's a sense that the Senate is trying. But there's a lot of anxiety about the House.

KAREN TUMULTY, WASHINGTON POST: Ah, we're in the Washington perpetual state which is on the verge of progress. But the dog that's not barking in -- at least the stuff we're hearing over the weekend is debt ceiling, and that's the question of whether we're going to be right back here in February with all these questions on the table because of the expiration of the debt ceiling.

CROWLEY: And Matt, you've written a lot about the debt ceiling, I know. And the truth is we heard the president -- but the president has said I'm not playing politics with the debt ceiling. I'm not going to negotiate over the debt ceiling. He can't hold on that, can he?

MATT BAI, NEW YORK TIMES MAGAZINE: You know, they're back now. What we're talking about now is more or less the kind of thing they do every year now, which is to come down to the deadline on this stuff that's expiring, try to redo it.

I mean, the larger hope here, obviously, after the election was to revisit the grand bargain negotiations of 2011 and to do something really comprehensive. I was mistaken, because I thought both the speaker and president really wanted to do that. I think it's become apparent in the last couple weeks that the president actually doesn't want that kind of deal at this point. He doesn't trust Speaker Boehner can deliver the votes in his caucus. He feels the election changed his leverage on this. It does not appear the president wants to do this kind of grand bargain.

What he wants to do is get tax rates up as he promised to do in the campaign. And that's why I think we're looking at a much narrower discussion right now than I thought we would be.

CROWLEY: We're out of time, right? I mean, we don't have any time for some big old deal at this point right now?

YELLIN: There's want and then there's political realism. I mean, the one other point I meant to say is that they are talking about whether they can put off those spending cuts and whether there's a way to agree to that.

CROWLEY: The across the board defense and nondiscretionary.

YELLIN: But I do agree there's no more trust between Speaker Boehner and President Obama.

SEIB: That's the other dog not barking here, is how small expectations have become here, how little deficit reduction will actually happen here.

CROWLEY: None, right? And by the way, aren't taxes going up anyway?

SEIB: Well, yes, true. CROWLEY: I mean, what people don't know is -- or what we haven't focused on here, nobody is talking about keeping taxes low on Social Security.

TUMULTY: Right. And the payroll tax, the extension of the holiday that's been in effect is just not even on the table at this point.

YELLIN: But the question is -- right. My question is, could this be an ongoing battle where you see a series of skirmishes in the new year maybe over the debt ceiling and then again over another budget because it's an ideological tug-of-war that will eventually break and they're just fighting for now, but it's a huge battle of ideas that maybe they have to fight over for a while.

BAI: It is. And you're right, Jessica.

Look, we forget this, this is a legitimate policy difference. Because I think the speaker at heart -- it's not about necessarily his caucus to vote, he does not believe that raising taxes on people making more than $250,000 is a good economic policy. He thinks it's disastrous policy. The president simply doesn't believe that an austerity policy right now is good for the economy. They're not anywhere near each other on what actually is going to help the economy improve. And that's at the core of this. It's not simply childish, it's actually difference in -- a policy difference.

CROWLEY: I totally agree with you. I've said they completely disagree in principle. This isn't about who can stay speaker and who can please their left and all that kind of stuff. But isn't that a recipe for nothing?

BAI: We're in an interesting situation politically in which you have two parties that are very evenly divided in terms of power, but very far apart in terms of ideology. And that's a very difficult situation in which to govern. So for John Boehner or Barack Obama or Mitch McConnell or Harry Reid, they all have a big problem and it's a structural problem in the political system.

CROWLEY: I need you all to stand by for a second. We have to take a break.

And if you're sick of talking about the fiscal cliff, we're going to take a little break after this. Some news for you, we're going to debut CNN's new polls with the top contenders for 2016. I'll ask you all to offer up some predictions for this New Year as well.


CROWLEY: We are back wrapping up the fiscal cliff talks.

What I'm wondering here, Matt, is we hear so often about a cliff. It's a natural disaster, falling off a cliff. You object to this.

BAI: I do. This is not -- it's important to remember, this is important for voters to remember, this is not a fiscal cliff. Because the cliff, as you say, is something that occurs in nature. You come up on a cliff, if you don't slow down, you plummet to your death. This is a fiscal suicide vest. This is congress rigging the system and saying last year in 2011 it actually was, we can't be trusted to make good, mature decisions about what needs to be done. We're going to booby-trap the system, and if we can't act like adults by this date certain, the whole thing is going to explode, it's going to be awful. And it turns out, shocking to everyone, they actually can't make those responsible decisions together by that date certain. But no one should mistake this for some naturally occurring part of the legislative process. They created this disaster. They've not been able to deal with it. And when they're talking about how they wish he they could be home with their families and it's the holidays and all of this you should remember that people are going to lose their unemployment benefits if they can't get together and do something meaningful.

CROWLEY: And where do you see this ending? What's your gut instinct now? Are we going to get -- because I hear from both sides at this point saying, well, we might be in a better position come January 2 or 3 or 4.

SEIB: Well, my gut instinct all along had been we'd get some minimalist deal at the last minute. I'm glad to hear Jessica that you still think that's true. In the last 48 hours I started to doubt that. I just think it might be easier for everybody to go off the cliff, let Speaker Boehner be reelected House Speaker on January 3, get a new term, let the new congress come in and then let everybody resume the conversations then.

YELLIN: There is some flexibility, I think, especially for the Republicans after they go over the cliff in that they can do essentially the same things they're talking about now and it'll be a tax cut, rather than a tax increase.

CROWLEY: They'll call it something different.

SEIB: And it's a lot much fun to negotiate a tax cut than a tax increase, right?

BAI: We're all, really -- if we all process politics like 6- year-olds that'll be a tax cut.

CROWLEY: Well...

BAI: Let's give people just a little more credit.

CROWLEY: Exactly.

YELLIN: Well, I have to say, I talked to some negotiators or people close to the process who say the press is a lot more optimistic than some people who are close to it. So you might be right, Gerald.


All right, just quickly, just to humor me. 2016, CNN took a poll and said, hey, how likely are you as Republicans to support the following people? And they put up a lot of names. And I thought what was interesting was that you saw in these polls a lot of serious support saying, yeah, I'd look at Rand Paul, I'd look at Rick Santorum and then kind of on the other end, sure, and Chris Christie.

Now, Paul Ryan's numbers I think are that high because he was the vice presidential pick.

You look at this and you think, what, other than why are we talking about 2016, I get it. But it's because...

YELLIN: ...fiscal cliff.

CROWLEY: The fiscal cliff, I'm done with that until we get some news.

YELLIN: I think that's a lot of name recognition, don't you? And people also, Rand Paul, for example, is very dynamic on television, people recognize him and his energy and his different ideas, so he stands out. But it also is a reflection of the fact that the Republican Party doesn't -- has an identity crisis. I mean, these are people who are moderates, who are iconoclasts, who are very far out on the edges, that doesn't speak to a party that really has a clear leader or a central ideology that it knows to speak to.

CROWLEY: And won't really until it gets a nominee. I mean, that's -- the next time we'll know what the Republican Party is about, maybe, is when they get a nominee, right?

BAI: Well, yeah. But we'll have the -- you can get the contours of a debate if people really don't have one. I mean, remember Bill Clinton campaigning in the late 80s and early 1990s building a very steady, consistent case for a change in direction for the Democratic Party that was in some ways in worse shape than Republicans are now, but in some ways similar.

YELLIN: Although that took two gigantic strokes of luck. And one was that Mario Cuomo did not run for the nomination and that Ross Perot did run for the presidency. So, we're going to see them trying to find their way, but, also, you know, there are going to be circumstances out there that nobody can anticipate at this point.

SEIB: Right, and I do think there was an interesting thing that happened to the Democratic Party when it was in a similar situation and Bill Clinton kind of dragged the party to the center a little bit, but that was a big debate and we'll see if Republicans have a similar debate. And I think the names that were just up on the screen are kind of proxies for different sides in that argument about where does the Republican Party go from here?

I think it's more about that, what is the shape of the Republican Party than it is about any of the individual names. It's probably too early for that, but not for what they stand for.

BAI: Jerry is a little more optimistic about that debate than I am. I think before you can have a real debate, you have to be willing to anger some people in your own party. And what is missing I would say in both parties right now, but on the Republican side, what the only ingredient missing for an actual debate is somebody actually willing to take a side that not everyone agrees with. And when they really are willing to articulate philosophical differences in a way that is a little risky, then you will have a debate that's worth having for a major political party.

YELLIN: Sometimes you just also need a charismatic leader to come to the front and then that answers the question. Barack Obama did it for the Democrats.

CROWLEY: He did it, indeed.

So -- I mean, but don't Republicans, Karen I'm going to give you the last word, don't they have to get past a few issues before they can start reshaping themselves, let's say, immigration, let's say the fiscal cliff, that kind of...

TUMULTY: This is -- they're going to have to figure out where they are on taxes and they're going to have to figure out where they are on immigration.

I think if you look at those two issues, you're going to figure out what direction the Republicans have, if they have decided to take one.

CROWLEY: Karen, thank you. Gerry, Jessica, Matt, thanks you guys for being here.

When we return, the politics of procrastination.


CROWLEY: For all we don't know about what a final fiscal cliff bill would look like, we do know it will be minimalist. It will not address the tough stuff -- Medicare, Social Security, meaningful defense or domestic spending cuts, et cetera.

There is a time honored phrase for this kind of nonaction.


SEN. ROBERT BYRD, (D) WEST VIRGINIA: That is legislative and political kick the can at its worse.

OBAMA: Kick the can down the road when it comes to solving the larger problem.

BOEHNER: Kicking the can down the road.

(END VIDEO CLIP) CROWLEY: In psychology, somebody who habitually kicks the can down the road is a procrastinator or action phobic. In Washington, it is often accompanied by chronic wishful thinking.

(BEGIN VIDEO CLIP) DICK CHENEY: In politics, there is always a temptation to kick the can down the road hoping that long-term problems might simply disappear.


CROWLEY: The political version of kick the can is a bipartisan game with analyst variations, for every issue there is a can to be kicked: the budget.


UNIDENTIFIED MALE: This is the kick the can down the road budget of the Democrats.

UNIDENTIFIED MALE: The spending bill that just kicks the can down the road and buys the administration time.




REID: Kicking the can down the road and letting future presidents find our way out of Iraq.


CROWLEY: Entitlements.


UNIDENTIFIED MALE: If the issue of Medicaid is not addressed...

UNIDENTIFIED MALE: It doesn't kick the can down the road, it kicks the can down the road a decade.


CROWLEY: Equality.


UNIDENTIFIED MALE: Mr. President, the Paycheck Fairness Act is something that we can't afford to kick the can down the road any longer.


CROWLEY: The funny thing about it is the more often Washington plays the game, the more they talk about stopping.


SEN. MITCH MCCONNELL, (R) KENTUCKY: It's crucial that we tackle the problem now and not continue to kick the can down the road.


CROWLEY: Once upon a time when children played outside, kick the can was a popular game, its ageless appeal very much a part of the culture.


UNIDENTIFIED MALE: It's almost as though playing kick the can keeps them young.


CROWLEY: But that's not real, that's an episode of "The Twilight Zone." Kicking the can down the road doesn't make anybody younger or wiser in Washington, but it often keeps them elected.

Thanks for watching State of the Union, I'm Candy Crowley in Washington. Head to for analysis and extras. And if you missed any part of today's show, find us on iTunes, just search State of the Union.

Stay with CNN for continuing coverage of the fiscal cliff negotiations. Fareed Zakaria GPS is next.