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On the Edge of the Fiscal Cliff; Interview with Rep. Steny Hoyer; Clinton Hospitalized for Blood Clot; Short-Term Deal May Be Reached; Investors Brace for Fiscal Cliff

Aired December 31, 2012 - 11:30   ET

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

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UNIDENTFIED FEMALE: My New Year's message to Washington is that this entire fiscal cliff problem isn't just an isolated incident. It's representative of how partisanship and polarization have taken over Congress. I'm 18, and I go to college in D.C. I used to be excited for the future, but I don't want to live in a country that doesn't have a successful working legislature. Congress, it's time for you to remember what your purpose is and get back to doing your job.

(END VIDEO CLIP)

CHRISTINE ROMANS, CNN ANCHOR: The fiscal cliff is self-imposed disaster, entirely made and approved by the lawmakers who can't seem to agree on how to avoid what they created in the first place. Vice President Joe Biden and Senate Minority Leader Mitch McConnell are at the center of the talks and were locked in urgent negotiations late last night.

While the Senate has just reconvened while the House is on standby, including Democratic Congressman Steny Hoyer, who joins us from Capitol Hill.

Good morning, sir.

If it comes down to a vote, Congressman Hoyer, you're the one who will count the votes as the House minority whip. What are you hearing from your Senate counterparts this morning? Any signs of progress there?

REP. STENY HOYER, (D), MARYLAND: There are some signs of progress. We have heard that there is another offer on the table by the administration to reach agreement. In terms of the specifics, I don't know all the specifics, some of which I'm not too happy with, some of which I don't think make the math work. But I think the most important objective is of the administration's and hopefully all of us is to not go over this cliff, to make sure working Americans don't get a tax increase tomorrow and to make sure that those on unemployment who have been unable to find a job have some help in the week ahead. I think we need to keep our powder dry to remain positive. There's still time to act and we need to reach agreement. Both sides need to be willing to do that. ROMANS: It's a work in progress. The details are emerging and it's all changing. You say you don't know all the specifics but some of the specifics, what don't you like?

HOYER: Well, I think the president was correct on his $250, $200 threshold for making sure nobody below those amounts got a tax increase. Over that, I think some of the people who are making more than that can help address the deficit and the debt problem that confronts our country. We have obviously a necessity to put this country on a fiscally sustainable path. If we're going to do that, everybody has to make a contribution toward that. Those who have the most, need to make their contributions. So the math has got to work.

We're not really dealing with the math at this point in time. We're dealing simply with what are the realities of the ability to get to an agreement and create consensus, which is going to be essential if we don't go over the cliff at midnight tonight. So clearly, the administration has been working very hard. I think others have been working hard. Hopefully, we'll get there.

ROMANS: I know you're measuring this in hours. We've been measuring in days and weeks.

HOYER: Yes.

ROMANS: In fact, as my colleague, Ali Velshi, points out, 517 days ago is when this was wrought by the very bodies trying to fix it.

On the Senate side, Tom Harkin, veteran liberal Senator from Iowa, made it clear, they may try to block that vote over the thing you're talking about, the $450,000 income threshold.

I want to listen to what he said on the floor just moments ago.

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SEN. TOM HARKIN, (D), IOWA: If we're going to have some kind of a deal, it must favor the middle class, the real middle class. As I have said before, no deal is better than a bad deal, this looks like a bad deal the way this is shaping up.

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ROMANS: I have heard other Democrats and liberals say there is an incentive for the president and for Congress to let the country go over the fiscal cliff, the Democrats in Congress. Would your party have more leverage if we went over the cliff?

HOYER: I think both Leader Pelosi and I have said going over the cliff ought not to be an option. Going over the cliff will be an indication of failure of the Congress to work as it should. Very frankly, this has been the least effective, most confrontational Congress, least willing to compromise Congress in which I have served, and I came here in 1981.

So I think going over the cliff is not our preferred choice at all. We think we need to get to a compromise, which, as I said, will preclude taxes from going up on middle income Americans, provide for the unemployment insurance. I think we also provide for the reimbursement of docs who are giving services to Medicare patients.

But fact of the matter is it's been very difficult to reach compromise. I think the president of the United States and is now, through Vice President Biden, trying to reach a compromise. And a compromise by its very definition means that neither side gets exactly what it wants. The difficulty from the House of Representatives -- last week, the Republicans indicated that they wouldn't even be for any kind of a tax increase on those making $1 million a year in net taxable income. If they are going to continue on that stance, we are not going to get to a compromise.

But I understand Senator Harkin's frustration. Frankly, at $400,000, $450,000 the math will not work to get us on a fiscally sustainable path. It may get us to an agreement, but it won't get us to fiscal sustainability.

ROMANS: We'll have a lot more of these fights ahead.

HOYER: Yes.

ROMANS: Because even with the framework of what we're talking about here, you're going to have to talk about the sequester, unemployment benefits again -- there's just a lot of work to be done.

HOYER: I think you're absolutely correct.

ROMANS: All right.

HOYER: Let me say, though, obviously, we can continue to work on those when the New Year comes our work is not going to end. It's not the end of the world. It won't be the preferred alternative. We'll have to continue to work on sequestration. We ought not to allow that to go fully into effect, even if it goes into effect on the 2nd -- as you know, it goes into effect. We need to work on the adverse consequences of that happening.

ROMANS: Steny Hoyer, Congressman from Maryland, also the House minority leader.

Lots of work to do. Thank you, sir.

(CROSSTALK)

HOYER: Thank you very much.

ROMANS: You're welcome. Happy New Year.

(LAUGHTER)

Next, we'll hear from Republican Congressman Howard McKeon about the fiscal cliff talks from the other side of the aisle.

(COMMERCIAL BREAK) ROMANS: Secretary of State Hillary Clinton will be ringing in the New Year from a hospital. Doctors closely monitoring Clinton for the next couple days. They discovered a blood clot during a follow-up exam related to a concussion she suffered earlier this month. The State Department issued this statement saying, quote, "She's being treated with anti-coagulants and is at New York Presbyterian Hospital so that they can monitor the medication. Her doctors will continue to assess her condition including other issues associated with her concussion."

Here's chief medical correspondent, Dr. Sanjay Gupta, with more perspective on Clinton's condition.

DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT: Christine, there were a few important things in that statement from the State Department regarding the secretary of state.

First of all, they say she had a blood clot, but it's somewhere in her body. They don't say where. They say it's related to her concussion, but we're not entirely sure how. The only thing we do know is she's on blood thinners, anti-coagulates, at this time. She will be in the hospital over New Year's getting monitored for that medication.

What we know is a few weeks ago we she had this concussion. She was asked to take it easy after that. The concern now is that this blood clot that's formed needs to be addressed in some way.

It seems very unlikely that the clot is on top of the brain, which is what you might think given its relation to the concussion. The reason being, you wouldn't treat that clot with blood thinners. It can make the bleeding worse and could prohibit an operation from occurring if an operation was necessary. That's almost never the case.

Most likely, the type of clot they are talking about is in some of the blood vessels in the body, like the veins. A deep venous thrombosis -- you may have heard of that term. You can see the veins that form in the lower extremities. And they can be treated with the blood thinners, but the concern is, if they are not, they can break off and travel throughout the body. It could be veins located around the head being treated with blood thinners. We don't know at this time.

We know that the secretary of state, back in 1998, at the time I worked for her, she had a deep thrombosis at that time as well. She described it as one of the more frightening medical experiences she's ever had. Again, trying to prevent that is key.

We know other things that put her at risk -- lots of air travel. She's the most frequently traveled secretary of state in history. She was told to take it easy after the concussion. Those things can all put you at risk. We do know she's getting the medications, and will be in the hospital for a couple days.

As we get more details, we'll bring them to you -- Christine?

ROMANS: Thanks, Sanjay.

Up until this point, she was wrapping up her busy tenure as secretary of state. She's been pretty much going nonstop, logging more than 400 travel days and nearly a million miles as the nation's top diplomat.

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ROMANS: Deal or no deal in the Senate. We're hearing about a lot of process and progress. Maybe not the kind of progress we were expecting or hoping for.

CNN senior congressional correspondent, Dana Bash, is on the Hill.

Dana, what are you hearing about a possible short-term deal, a push off of the sequester, which would create another mini cliff down the road. What's the drama around this?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: We have been hearing over the past hour from Congressional Democratic sources, Christine, telling us that Republicans are pushing to delay the sequester, which is at least in the first month, $110 billion in spending cuts, to delay it for three months. Democrats on Capitol Hill are saying that they don't want to do anything less than a year. They want to delay the sequester for at least a year.

And what is fascinating about this is, what has happened over the past 24 hours or so, is when we learn about things when they hit a snag, it's for a purpose. It's to send a signal to somebody or to try to put the brakes on something. It appears to be the case right now. Specifically, congressional Democrats are concerned that the vice president, who is the prime negotiator right now with Mitch McConnell, that he's potentially prepared to cut a deal that delays the sequester, these spending cuts for three months, and that's something that Democrats here on capitol hill don't want. In fact, a congressional Democratic aid said to me, the emerging deal that creates another cliff in three months can't pass, meaning they believe it's a horrible idea because we'll be back where we are in three months trying to figure out how to find spending cuts.

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BASH: An interesting drama interesting intra-Democratic drama about how this is shaping up. The negotiators are talking furiously. By that, I mean, Mitch McConnell and Joe Biden, keeping people here on Capitol Hill in the loop. And some of what they are hearing, they are happy about, some not so happy. That's where we are right now.

ROMANS: The Republican drama has been about raising taxes on anyone, even the very richest. As the day goes on, it looks as though they are coming to sort -- feels, I should say, because this is all emerging -- there's some resolution on the tax front. Now you're seeing that inter-party controversy happening on the Democratic side?

BASH: That's right. This is one issue. But another issue we talked about earlier in the hour are just generally the progressives or liberals in the Democratic caucus making clear they don't like what they are hearing, specifically, the idea that households would keep their tax cuts in place up to $450,000.

I should add, since we last talked, Jessica Yellin learned that the threshold they are talking now is households of $450,000 and individuals of $400,000. That's new since we talked.

But in general, yes, we hear progressives, Tom Harkin, your home state Senator from Iowa, a leading liberal in the Senate, veteran Senator, he has made clear he does not want that. He told me he may try to block a deal to stop it.

ROMANS: Unemployment benefits, the payroll tax holiday, the estate tax. The ANT, the doc fix. It's more than just rates that we're talking about here, and it's more than just the sequester. There's all these patches. Any clarity on those?

BASH: You're absolutely right. There's so much. On the payroll tax, I have not heard anybody talk about continuing that. It doesn't mean it might not pop up at the last-minute, but what it means is that everybody will see a little bit of a bite taken out of the paycheck no matter what because the payroll tax holiday goes away. On the AMT, many of us working the story at CNN were told they're talking about patching that permanently. Then I got an e-mail from a Democratic source saying it's not true. The estate tax, keeping the low rate, or at least lower than it was, on the table, seems to still be on the table. All of these things are still worked out.

You're absolutely right. There's so much here and that affects people where it matters most, in their wallets and paychecks.

ROMANS: Parents, teachers, college students, every working Americans, doctors, I could go on and on forever.

Dana Bash watching the emerging -- emerging --

(LAUGHTER)

-- sketches of a deal. We'll see where it leads.

Dana Bash in Washington. Thanks.

Back in two minutes.

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UNIDENTIFIED MALE: My new year's message to Washington is this. There are not enough wealthy people or corporations to keep you in office. In that light, please simply grow up, govern, but most importantly, support middle class policies.

(END VIDEO CLIP)

ROMANS: All right. So both parties now telling us they want to fix this thing. They don't want to go, you know, head first over the fiscal cliff at midnight. How they're going to get there, though, still uncertain with mere hours to go. It's not just our iReporters and Main Street America that's baffled and worried about the fiscal cliff. Wall Street is baffled and worried.

Let's get straight to Alison Kosik at the New York Stock Exchange.

Investors clearly on edge and stocks are lower and up and down, they aren't going to make any big moves on the last day of the year not knowing what's going to happen with the cliff.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: A wait-and-see mode, Christine. The stocks are flat right now. The investors are waiting for lawmakers to make their move.

What's interesting this session, stocks started off deeper in the red. They turned around. They're more flat now because the market really is trading on these headlines coming out of Washington. Right now those headlines seem more positive than negative. Volatility could pick up toward the close as we get closer to the deadline and investors get more uneasy about holding onto their positions because they're gun-shy to holding onto positions because they don't know which way lawmakers will go on Wednesday when the markets re-open after New Year's Day.

ROMANS: And hey made a lot of money this year. Let's be honest, this has been a good year in stocks, despite all the fiscal cliff uncertainty. I mean, this could be one of the 10 best years ever for one of the major averages, even with the fiscal cliff uncertainty.

KOSIK: You're right about that. Wall Street had a decent year. The Dow is up 6 percent and the NASDAQ is up 14 percent. And the S&P 500, that mostly tracks your retirement savings, up more than 11 percent. We've seen a slow churn upward over the course of the year, and that's the way you want to see the market move. Much has to do with the improving economy.

The question is what will happen when we go on over the cliff, will we see stocks fall and what will happen to the economy? We know it wouldn't look good for the economy at this point -- Christine?

ROMANS: No, it won't.

Alison Kosik, thank you.

Here's how the markets are reacting as we edge closer to the fiscal cliff and investors brace for the potential fallout.

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ROMANS: You see this? Oh, let me guess -- more Washington gridlock. No, it's worse -- look, our taxes are about to go up. Not the taxes on our dividends though, right? That's a big part of our retirement. Oh, no, it's dividends, too. The rate on our dividends would more than double. But we depend on our dividends to help pay our bills. We worked hard to save. Well, the president and Congress have got to work together to stop this dividend tax hike before it's too late.

OK, guys, time to forget about all the fiscal cliff negotiations for just a moment. Why? Because the entire world is it throwing a giant party to ring in the New Year.

Alina Cho is doing her best to keep warm in Times Square as preparations for tonight kick into high gear.

ALINA CHO, CNN CORRESPONDENT: Hey, Christine. Good morning. Great to see you.

From all the talk about the crystal ball, the confetti and New Year's resolutions, here's what you need to know if you come to Times Square tonight. Dress warmly. It is frigidly cold. And it will feel like it is below freezing tonight.

Let's talk about security. It's something we talk about every year, but it is mind-boggling the amount of security in place tonight, thousands of police officers, sharp shooters on rooftops, radiological scanners, explosives teams and tactics teams and firearms teams. Unless you think it won't be safe here in Times Square, there will be surveillance cameras throughout.

Also, something you should know if you plan to come to Times Square, do not bring a large bag. Do not bring a backpack or alcohol. You will not be allowed inside the perimeter.

Some of these people who are here early already, they're very smart. Get here early. The streets around Times Square start to close at about 1:00 p.m. eastern time, so get here early.

One million people expected to jam Times Square tonight, Christine. It will be packed and freezing cold, and hopefully with all this security it will be safe.

Christine, happy New Year.

ROMANS: Thanks for watching. I'm Christine Romans following the fiscal cliff all day and night. Ashleigh Banfield returns tomorrow.

NEWSROOM with Suzanne Malveaux starts right now.