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Fiscal Cliff Deal, a Loss for All?; Interview with Congressman- Elect Patrick Murphy; Peter King Says Republican Party Dysfunctional; Interview with Senator Roy Blunt

Aired January 02, 2013 - 11:00   ET

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

ASHLEIGH BANFIELD, ANCHOR, "CNN NEWSROOM": The itemized deductions are capped now for people who make $250,000 or more and then, combined with spouse, $350,000 in their household.

Estate taxes are going to go up to 40 percent. That's for inheritances over $5 million, so if you don't quite have five mill, don't worry.

Unemployment insurance is extended for a year. The Alternative Minimum Tax is going to get a permanent adjustment for inflation.

And that, my friends, is just the start of all of this. But there is a lot that's still missing from this deal, like how to deal with the next, even bigger, financial cliff and that is a $16.4 trillion debt ceiling which is likely to stir up another ugly fight.

And President Obama is already positioning.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I will not have another debate with this Congress over whether or not they should pay the bills that they have already racked up through the laws that they passed.

Let me repeat. We can't not pay bills that we've already incurred.

If Congress refuses to give the United States government the ability to pay these bills on time, the consequences for the entire global economy would be cat stenographic, far worse than the impact of a fiscal cliff.

(END VIDEO CLIP)

BANFIELD: So, let's bring in White House correspondent Brianna Keilar now.

A lot of people today are talking about winners and losers, Brianna, but truly, come on, I mean, I kind of feel like we're all losers in this, considering we didn't get a deal, we just got a patch.

BRIANNA KEILAR, CNN WHITE HOUSE CORRESPONDENT: No, that is true. I mean, there's certain things that I think you could say are positive. I don't think it's ever really healthy for Americans when you're kind of going through this process every year, whether it's the AMT fix or it's tax cuts that expire and there's uncertainty about how it affects people.

So, I think the fact that those tax cuts were permanently extended, Ashleigh, is a good thing because it is difficult when they aren't, but yeah, I think that you look at sort of -- especially now the environment of things as this is a Congress that the president wants to undertake other issues like immigration reform and gun violence and you can see how it even maybe has a bit of a bleed-over effect as they try to get their business done in a limited amount of time.

BANFIELD: Let me ask you this. You know, we essentially just avoided Armageddon. And, yet, we're seeing sort of backslapping and congratulations and that kind of garbage.

So, I guess my question is now that I hear that there was actually an f-bomb at the White House and I won't say whom, but it just doesn't sound like there's going to be any better tenor going forward and we still have these huge issues to deal with.

Is the White House actually considering this a victory?

KEILAR: I think -- I will tell you, Ashleigh, I think the White House considers that how this went for them, how this fight went for them, that they were -- that the president was more effective than, say, during the debt ceiling.

I think during the debt ceiling the tone we got was that President Obama was trying to position himself as a reasonable adult in the room, that he was trying to achieve something, talk about compromise and this time, remember, we saw him come out in the briefing room the day before this deal was sealed and -- or the day before it passed the Senate, and he was very hard on Republicans.

I think that we're actually seeing him taking a harder tack. I think that's going to continue into the fight over the debt ceiling.

The thing I will tell you that the White House doesn't like is that they feel like a lot of this stuff is so unnecessary. This isn't something that ultimately -- I mean, he can put that he extended a tax cut for the middle class and that should be considered an achievement for him, but dealing with the debt ceiling and all of these things, these aren't like huge sweeping achievements that he can say, look, I did something really, really amazing.

If it's something like entitlement reform, tax reform, dealing with the fiscal health of the country, that might be an achievement, but patching these things that have become almost like catastrophic things that could happen is, in their estimation, sort of a waste of time.

BANFIELD: Yeah, congratulations. We just didn't fail bigger. It's kind of frustrating to have this conversation.

Brianna Keilar at the White House, thank you very much for that. So, not only does Congress have to deal with the debt ceiling next month, they also have to deal with the so-called sequester. Remember that series of cuts in federal spending that will reduce the budgets of most agencies and programs by about 8 percent to 10 percent.

Last night's deal just basically kicked all that that down the road, so we still have that on the agenda.

And then there's also the budget, the so-called continuing resolution, which expires March 27th, and Congress has to pass another budget so that our entire government just doesn't go and shut down on us.

And if Congress doesn't get its act together fast, we're going to be in a similar situation before we even know it.

Democratic Congressman-elect Patrick Murphy joins us live from Florida now. He's in Washington. He's the congressman-elect from Florida, I should say.

Congratulations. I know you won this very difficult, pitched battle against Republican Allen West in your district, so my first question to you, sir, is are you looking forward to joining this group of legislators, given this despicable state of paralysis that has been displayed.

PATRICK MURPHY (D), FLORIDA CONGRESSMAN-ELECT, FLORIDA: Well, we've got to remember this is a new Congress that I'm joining. The 112th Congress was definitely -- it's disheartening what just happened, but, you know, it's not a surprise what happened.

This new Congress, there's about 90 new members. We were all elected on a message of bipartisanship, so the freshmen that I've met, whether they're Republican or Democrat, all want to do something big. We want to do the big choices to move our country forward, so I'm very excited to join this Congress.

BANFIELD: So, what do you consider one of the big choices? Because everything is going to have to hurt. Where are you prepared to hurt?

MURPHY: You're right. It's going to have to be across the board. And what just happened, what we just did is a band-aid and I'm very disappointed with this Congress. We are continuing to kick the can down the road and it's just not right.

We're not putting our children and our grandchildren in a strong position. Unfortunately, we have to look at cuts across the board. We're going to have to look at defense. We're going to have to look at some structural changes to some programs like Social Security and Medicare

You know, we have to look at fraud, waste and abuse. I'm a CPA by training. I want to bring that training by Congress and go through every single line-item and see where we can make the cuts necessary.

BANFIELD: And CPA business is one thing, it's real mathematical. What about the politics of it all? We just saw Republicans breaking ranks with one another and causing some serious consternation in order to get this deal forwarded. Are you prepared to break ranks with the Democrats you're joining? Because I know you said it's a new Congress, but you're joining a lot of old dogs at this.

Are you prepared to break away from them and say that's just not the way this should be done?

MURPHY: Well, Ashleigh, look, I'll tell you. The voters are paying attention. My race, we won because of the support from the Republicans and, of course, the Democrats, but voters are really paying attention. They're tired of the partisanship.

You know, I came to Congress to do what's best for all Americans, for 100 percent of the people.

BANFIELD: Yeah, I know all of that. I love hearing that. It's kumbaya, but I want to know where you actually think we can make painful cuts because you never very strictly what Democrats feel and you're one of them. So, where are you going to show some leadership?

MURPHY: Well, I just said it. You know, I think we're going to have to make some structure changes to programs such as Social Security, Medicare, Medicaid. We're going to have to make sure they're sustainable for years to come.

You know, our president put that on the table about a year ago when this began -- when this whole process began with the sequestration, so it's going to be across the board.

We have to look at all programs. Look at revenues and we have to look at some expenses that we have to cut.

This is math. It shouldn't be partisan politics. It comes down to math.

BANFIELD: Yeah, and do you have any optimism when it comes to -- well, let's just talk about the debt ceiling because that's sort of next on the agenda.

Do you have optimism that we're going to be able to do anything differently than is what we saw transpire in the last couple of week?

MURPHY: Well, I'll tell you. I'm optimistic about the new Congress, about the 90 new members because, like I said, we were all elected on this message of bipartisanship.

But what we just saw the last few days is really frustrating. You voters are going to continue to be frustrated with this, with Congress. We need new blood. We need new life, new energy.

We've got to work together. So, I'm optimistic, but, you know, I'm going to keep fighting and, hopefully, what just happened doesn't repeat itself. BANFIELD: And how do you feel about this notion that there seems to be a congratulatory tone just to avoid Armageddon? I mean, how do you feel about joining a group that effectively created a disaster and then didn't really even solve that disaster?

MURPHY: Yeah, there should be no congratulations in order. This is -- I don't want to say this is the worst-case scenario, but what just happened is not what should have happened. That's for sure. So, there would be no congratulations in order.

We need to sit down and almost start from scratch and really look at this with a fresh lens and put everything on the table and get our country back on the right track.

America's giving us a chance. The rest of the world is giving us a chance. I mean, you can look across the world, so many countries. You look at China. They're slowing down. Europe's still in a recession. Look at South America. They've slowed down.

America has a chance to really become and stay the global leader for generations to come if we make the tough choices right now.

BANFIELD: You might have some tough choices to make in the next couple of days on Hurricane Sandy, because, boy, oh, boy, there is a storm brewing there.

Congressman-elect, congratulations on your new job and we'll be watching you.

MURPHY: Thank you, Ashleigh.

BANFIELD: And, also, for more details on who is going to pay and how much tax after last night's deal, you can just go to CNNMoney.com. There's great information there. It'll break down a lot of what you might need to know about your own personal budget.

So, there's real outrage. I just mentioned it to the congressman this morning. House leaders failed to vote on much-needed aid for the people who suffered through this, Hurricane Sandy, its aftermath, its flooding.

House Republicans adjourned last night without acting on the legislation that would have approved the money for the recovery effort. All across the Northeast, a whole bunch of states waiting on this.

The Senate approved a $60 billion package last year, but the House's failure to vote on it drew some really loud protests from lawmakers from New Jersey, from Connecticut, from New York.

By the way, New York's Representative Peter King just spoke with my colleague, CNN's Victor Blackwell. Have a listen to this sweetheart.

(BEGIN VIDEO CLIP)

REPRESENTATIVE PETER KING (R), NEW YORK: Absolutely devastating and what was most galling about this is that, within 10 days of Katrina, we gladly voted $60 billion and it went over $100 billion, ultimately.

It's now nine weeks since Sandy struck Long Island, New York, New Jersey, and we have not gotten a penny from the United States Congress.

And we played by the rules, as I said in my speech last night. Governor Christie, Governor Cuomo, Mayor Bloomberg, Congressman LoBiondo, Congressman Grimm and I met with the majority leader, Eric Cantor, who, by the way, kept his word throughout this and the bill was drawn. It was going to come up either yesterday or this morning. We were promised that. We were guaranteed that.

We provided every penny of documentation that they needed and, last night, the Speaker of the House of Representatives walked off the floor, didn't even give us the courtesy of a notice. He told an aide to the majority leader who told us and we ended up telling the majority leader, I believe.

So, there's some dysfunction in the Republican leadership. The speaker, for some reason, is taking it out on New York and Long Island and New Jersey, but it's a disgrace.

Speaker Boehner is the one. He walked of the floor. He refused to tell us why, refused to give us any indication or warning whatsoever and, Eric Cantor, he met with us throughout the week. He's the one who devised the strategy as to how we would bring it to the floor to make it acceptable to let Republicans who wanted to vote against certain parts of the bill, they could do that, but the bill was going to pass with $60 billion.

And -- but, listen, bottom line is here, the Republican Speaker walked off the floor without allowing a vote and I'm just saying these people have no problem finding New York, these Republicans, when they're trying to raise money. They raised millions of dollars in New York City and New Jersey. They sent Governor Christie around the country raising millions of dollars for them.

I'm saying anyone from New York or New Jersey who contributes one penny to the Republican Congressional Campaign Committee should have their head examined. I would not give one penny to these people based on what they did to us last night.

I will stand on the values and principles that I believe are true Republican principles, but turning your back on people who are starving and freezing is not a Republican value.

I was chasing the Speaker all over the House floor last night, trying to talk to him and his staff, and he kept telling me, wait until the vote's over, wait till the fiscal cliff vote is over, everything will be taken care of, and then he was gone.

And he wouldn't -- he refused to meet with us. He actually yelled at Congressman LoBiondo, said I'm not meeting with you people. So, he wouldn't tell us why. He just decided to sneak off in the dark of the night.

(END VIDEO CLIP)

BANFIELD: Those are some strong words and Peter King went to even say that Speaker Boehner better not come to New York. Wow. Imagine a Republican congressman saying anybody who gives one penny to the Republican Congressional Campaign Committee better give their head a shake. Unbelievable.

So, with that in mind, the House Speaker may be getting that message because a senior aide has just told CNN that the speaker will make this his first priority, this Hurricanes Sandy relief bill, "first priority," quote, in the new Congress. That new Congress is set to be sworn in tomorrow.

(COMMERCIAL BREAK)

BANFIELD: I want to turn to the city of Newtown, Connecticut. Sandy Hook Elementary students will be going back to class tomorrow.

They're going to finish off the rest of this year at a school nearby in Monroe, Connecticut, their old building -- the one you're looking at -- now closed indefinitely after this horrendous shooting last month in which six teachers were killed and 20 students.

In the wake of this Newtown incident, there's other news to report to you, as well. Armed guards will be at every elementary, middle and high school in Marlboro, New Jersey. It is perhaps a sign of the times.

In Pennsylvania, that state is suing the NCAA. The governor of Pennsylvania, Tom Corbett, is holding a news conference. You're looking at some live pictures at this hour.

The announcement of this action, all because he wants the entire amount of the $60 million fine that Penn State received from the NCAA -- he wants that to stay in the state. That money was because of the Jerry Sandusky sex scandal, but only about 25 percent of it is going to state. The rest of it will be disbursed and that's why the governor's not happy.

He's not responding to this claim at this point. The NCAA is not either. But the slated 75 percent of the money to help child sex abuse victims, again, is going to be spend outside the state of Pennsylvania.

And then take a look at your video. It's just remarkable. A sled going across the ice and then the man falling through a frozen lake in Wrightwood, California. The tape was rolling as you can see this man struggling to swim in the frigid water and then come the rescuers, people coming to his aid or so-called thinking they are, coming to the edge of thin ice and what happens? Of course, you go through.

More people running to the edge of the thin ice, again. Well, you know how this ends, right? Thin ice stays thin, no matter how many people are on it and down goes another and another.

This became a calamity, but luckily, one of the people who was there had a rope and you can see the rope in your screen right there. They were able to get those people out of the frigid waters. But remarkable. Take a listen to this.

(BEGIN VIDEO CLIP)

MICKEY HERMAN, HELPED RESCUE PEOPLE FROM ICY WATER (voice-over): I ran up to the car, got the rope, ran back down, uncoiled it, threw it out and I was coming up about seven feet short from getting the rope to this guy.

At that point, other people started running over with cargo straps, tying them to the rope and they began throwing the rope and I ran up to the top of the hill and called 911.

(END VIDEO CLIP)

BANFIELD: So, that was Mickey Herman who had the rope, talking to our Brooke Baldwin earlier on CNN and this is what the aftermath looked like, people taking off their dry clothes and trying to help those people who were frigid in those waters.

It took almost nine minutes. Just put your hand in an ice cold glass of water. See if you can keep it in there nine minutes. That's how long it took them to take everybody out of that lake and get them to safety.

And the officials now say -- and I think this might be stating the obvious -- that the lake is going to be closed until April.

That is a Christmas Day to remember for a lot of those folks and maybe something we can all remember. Thin ice, stay off it.

Back to the fiscal cliff for a minute. There's a lot to get your head around when it comes to that deal. There's politics. There's the legislation. There's the new tax code. Pretty thick stuff, but there are some extremely tangible things that are going to hit you immediately, no matter who you are, like if you get a paycheck.

Christine Romans joins me now to talk about what every American needs to know because it is literally going to happen with your next check. What will happen?

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Well, what will happen is you're going to be paying a little bit more to fund Social Security. The payroll tax holiday you've had for a couple of years is now gone.

So, let me show exactly what that means. That means, if you make $25,000 a year, it's $42 a month. If you make $50,000 a year, $83 a month. If you make $75,000 a year, you're going to $125 more a month. You get the picture as it goes on and on.

That's real money. You know, that's -- you're talking about ...

BANFIELD: That's a lot. ROMANS: You're talking about two tanks of gas maybe, three tanks of gas, depending on how much money you make. So, the payroll tax holiday is going to be a bite.

That was never expected to be -- look, all the way back to last summer, people were telling me that payroll tax holiday is going to go away. That's not going to be part of any kind of fiscal cliff deal. It isn't, so now, you know, you need to prepare your own family budget for that.

BANFIELD: Then I want to move on to the next three big things that we have to face. I call them three more fiscal cliffs. We may have just averted uncertain doom, but we have three huge decisions to make.

ROMANS: Yep.

BANFIELD: Everybody hears that term "sequester." It just means huge spending cuts.

ROMANS: Yeah.

BANFIELD: Is that number one?

ROMANS: Yeah, look at the -- well, look at the calendar. You've got a sequester that we've got to worry about. That's probably going to be the beginning of January.

You've also got -- probably right at the same time, you've got the spending cuts, the sequester, then you've got the debt ceiling and then the continuing budget resolution. That's the end of March. You've got three big things.

A lot of people are calling the spending cuts, the sequester, the debt ceiling, "Twin Peaks," and the continuing budget resolution at the end in March just before April Fool's Day. Won't that be fun?

BANFIELD: Yeah.

So, I guess, break it down for me. Just to get through the sequester, what do they have to deal with?

ROMANS: Well, they're going to have to make some decisions about spending cuts and making decisions about cuts and about budget priorities is what got us in this mess in the first place, quite frankly.

You know, I want to read to you something that one of the these analysts told us that is just so fascinating, somebody from CitiFX, talking about the drama and the chaos around this.

The process was so chaotic and the outcome so unsatisfactory that we're likely to see a further U.S. downgrade at some point ...

BANFIELD: Oh, really?

ROMANS: ... meaning that there are so many opportunities for Washington to show us how they can't compromise and really get on a sustained path to, you know, budgeting.

What's more -- what is more fundamental at your house than the budget, what comes in, what goes out, and the priorities that you make based on that budget, paying for college or paying for a new car? Paying for this or that? Paying down debt or getting a bigger house?

Washington can't do that. Washington has shown it can't do that and that's why international investors get so nervous.

BANFIELD: But they are good at doing interviews, saying I came here to be bipartisan and to make the tough choices. I keep hearing that from everyone and I'm not singling anyone out, trust me.

ROMANS: You don't have to.

BANFIELD: I know.

Ah, Romans, I love you. Happy new year. OK.

ROMANS: You, too.

BANFIELD: Well, we have more to talk about later on, I know. We've got a lot more coming up, too. We'll be back right after this break.

(COMMERCIAL BREAK)

BANFIELD: So just quickly, a segment we ran about Peter King livid with Republican leadership over the failure to pass this relief package last night in Congress that would have helped these victims of Hurricane Sandy, I mentioned that he actually said Boehner better stay out of New York.

He was referring to the Speaker, but in a different way. He wasn't actually suggesting the Speaker stay out of New York. He was referring to Hal Rogers, the Republican from Kentucky, who had made the argument that FEMA's got enough money to hold this over, this problem for the Hurricane Sandy victims, at least for a couple of months.

Peter King was very angry with Hal Rogers and suggested, instead, that Hal Rogers better stay out of New York. He said Hal Rogers can suck up to the Speaker if he has to, but he can stay out of New York, stay out of New York, raise your money in Kentucky.

So, a quick correction there and I'm sorry, Speaker Boehner, for suggesting that that's what Peter King about you. He did not.

And there is no shortage of political drama in the fiscal cliff being done at the 11th hour either. The wrangling went through yesterday and, once again, it really exposed the discord that we have in Congress right now, the same discord that led to the fiscal cliff in the first place.

But, in the end, Vice President Biden and Senate Majority Leader -- Minority Leader Mitch McConnell crafted and negotiated and pushed this thing through. So what was going on behind the closed doors during those negotiations?

Republican Senator Roy Blunt of Missouri joins us with that. He is a member of the Senate appropriations committee. He's vice chairman of the Senate Republican conference and he's also a member of the Senate Republican whip team.

Senator Blunt, thank so much for being with us. I want to talk about the back-door wrangling and how this thing got through, but not before I ask you this. I would like to be a fly on the wall on your next Republican conference meeting as you try to whip. How is that going to go?

SENATOR ROY BLUNT (R), MISSOURI: Well, I think the next fight is clearly going to be about spending. It would have been better to get all of these things done this year. I wish the president and the Speaker would have been successful in solving as many problems as we could before the new Congress started.

But that fell apart and this is going to be a big fight about spending, the sequester, how do you target the spending cut cuts that we need to make, rather than just do the easy thing, which is across the board. That's not the right way to cut spending and we all know that and, so, we'll see.

I think, generally, Republicans in that Senate, at least, will feel like the tax agreement we made was about as good an agreement as you could get with a president who'd just been reelected committed, absolutely committed to raising that top rate.

Now, he was committed to raising the top two rates, but only the top rate went up and it only applies to people who made more than $400,000. That means almost every American's not going to see much of an impact by tax policies, except they now know that the tax laws are as permanent as tax laws can ever be, instead of temporary.

BANFIELD: Well, let me ask about the schisms, though, in your own party. The Speaker voted for this deal. So did Paul Ryan. But Eric Cantor did not. Other prominent Republicans did not and now there is this talk that there's a real problem, a fissure in your party that needs to be repaired if you're going to be able to do anything.

How are you going to repair that?

BLUNT: Well, at the end of the day what needed to get done got done. Now, I would have liked it if we hadn't raised any rates.

BANFIELD: It really didn't get done. We just avoided Armageddon, sir. I have to differ with you there. Nothing got done.

BLUNT: No, no, no. The tax policies that all went up yesterday are not all going to all go up. There was a $3.8 trillion tax increase that went into effect at midnight yesterday. That didn't happen, so don't say nothing got done.

We do now have to have a spending fight and it's better if the leaders can agree on ... BANFIELD: And a budget fight.

BLUNT: ... the things that need to done. And a budget fight.

BANFIELD: You've got a lot coming up.

BLUNT: And a C.R., you know.

BANFIELD: And that's why I'm asking you.

BLUNT: Well, we need -- one, we need a Senate that functions. We need a Senate that does appropriations bills and has a budget and we need a House that functions and a president that leads and all of those things need to happen, should happen.

We've got to find spending cuts. We have gotten to a point that I hope is a point that we can stay at on tax policy. Now, we need to get to spending policy.

BANFIELD: And not to, you know, beat a dead horse here, but you just had Peter King coming out on CNN within the last two hours excoriating the Speaker over the Sandy vote and suggesting that other members don't even come to his state.

Is that just a temporary problem, Sandy-related, or, again, does it speak to a bigger problem within your party?

BLUNT: Well, it's always bad when you have people saying stay out of town. Don't come to my town. That's not a good thing.

BANFIELD: And that the Republicans turn their back on the people. That's bad, too.

BLUNT: Well, you know, but what the Senate did was pass a bill that was bigger than the House was ever going to pass.

I said this repeatedly for well over a week anytime I was asked will the House pass a $60 billion bill? And I said, no. The House might pass a $25 billion bill, but sometimes when you ask for too much, you don't get anything.

And there's a way to do emergency relief. We should do it. It needs to happen. I voted for money in the Senate that would have gotten us till the end of March, money we know has to be spent.

I think the $60 billion was asking for too much and, again, when you ask for too much, sometimes you don't get anything.

This is a process where people have to believe that what you're asking for is what you absolutely need and nobody can defend that $60 billion figure.

Eventually, Ashleigh, we may spend more than $60 billion, but let's spend it when we know what it is rather than when we're guessing what it might.

BANFIELD: Well, I wish you good luck with that.

BLUNT: I think it's too bad that there was no emergency relief. I hope we do ...

BANFIELD: I do wish you good luck with that and there are a lot of people hurting up here in New York and these states.

BLUNT: I agree and, you know, we've had disasters in our state and we dealt with them with disaster relief and then we came back and dealt with them in the regular appropriations process ...

BANFIELD: So, I promise ...

BLUNT: ... and I think we'll do that again for Sandy.