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Jared Bernstein Discusses Tax Cut Deal; Republican Senators Address Media

Aired December 07, 2010 - 14:00   ET

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

ALI VELSHI, CNN ANCHOR: All right. I'm Ali Velshi.

All eyes right now on the White House briefing room, right there. The president is going to be there momentarily. About 2:20 we're expecting remarks from him to reporters. We're expecting him to take questions from reporters.

I've been telling you all about this. We're assembling the best political team on television right now to have this conversation.

It's about extending those Bush-era tax cuts for everybody, baby- sitters to billionaires. You've heard that expression. It is the product of some bare-knuckle talks between the White House and Republicans, a stimulus/safety net worth as much as $900 billion, maybe even more.

Here's a breakdown of it.

The tax cuts, well, they live on, but only for two years. Not permanently, as Republicans had wanted.

Federal unemployment benefits get funded through the end of next year. This is not an extension. This doesn't go beyond the 99 total weeks you can get, but for people who have to apply for that extension, they can do that, while people with jobs get a one-year two-percentage point break in the payroll tax which funds Social Security.

A big get for the GOP, a break in the estate tax. The White House agreed to cap the tax on estates worth more than $5 million at 35 percent. It was above 50 percent. It was going to revert to being above 50 percent.

Now, most Americans pay more in Social Security tax than they actually do in federal income tax. If the president's compromise passes, the rate for 2011 for Social Security tax -- this is what you have pay on your paycheck -- drops from 6.2 percent to 4.2 percent.

For someone earning $40,000 a year, that amounts to -- call it a raise of $800. For someone earning $70,000 a year, it's $1,400 more.

All right. There are tax breaks for businesses and families that I haven't even mentioned, but please remember none of this is certain. Democrats, in the House in particular, say they haven't agreed to anything yet. And that brings me to Jared Bernstein, chief economic adviser to Vice President Biden. He joins me from the White House, where actually we understand the vice president continues discussions with Democrats.

The tough job at this point, Jared, of convincing some Democrats that they have not just made a deal with the devil.

JARED BERNSTEIN, CHIEF ECONOMIC ADVISER FOR VICE PRESIDENT BIDEN: That's right. And by the way, thank you, Ali. You did my job for me with that very extensive introduction of what's in the plan.

No, I think this is far from a deal with the devil. This is a better deal in terms of jobs and middle class tax relief than I think anyone could have expected.

On unemployment insurance, it was just a few weeks ago that the House was scrumming over a three-week extension. We're talking about a 13-week (sic) extension of unemployment insurance. This means a lot to those long-term unemployed who are exhausting their benefits. You're talking about seven million people prevented from falling off the rolls, because we still have an unemployment rate that's unacceptably high. And given that rate, the thing you want to most is promote job creation, and there's a lot in this framework to do just that.

VELSHI: Let me put you in the unenviable position of explaining to my viewers how exactly extending this tax cut to people who earn $250,000 or more as a family creates jobs.

BERNSTEIN: Ah, you know, I think that that part of this agreement doesn't have much to do at all with growth or jobs. And that's not just my opinion. You have heard the president articulate that not just for weeks and months, but literally for years. What that agreement does -- remember, we were stuck with an intractable opposition on this point who was willing to hold the American middle class and economy hostage until we agreed on those tax cuts for the high end. The president broke that impasse, broke that stalemate by negotiating an agreement that temporarily extends those high-end cuts against his economic judgment. But in terms of the politics of the situation, and staving off a situation where middle class taxes would have gone up $3,000 next year, where the economy, in a fragile recovery, would really have been put at risk if the president didn't get us out of the stalemate with these negotiations, and that was part of the compromise.

VELSHI: Jared, let me ask you this -- whether you want to pay down the debt and reduce deficits, or you want to reduce taxes, the reality is the one magic bullet here -- and there is a magic bullet. That magic bullet is economic growth.

It is more people earning money and paying taxes, buying things from businesses, who then pay more taxes. In other words, more people paying the same rate of tax can be better than everybody paying more tax. What has to happen to get us to economic growth, and how much more economic growth will we need in 2011 to change the landscape of how our economic future looks?

BERNSTEIN: I mean, I think we have to get gross domestic product above its current rate of growth, which is around 2.5 percent. Economists generally agree that if you're at that level, the best you're going to do is keep the unemployment rate constant.

Now, let me refer you and your viewers to a number of analyses. These are not our analyses, these are analysts by outside analysts of what this framework will do in that regard.

The Center for American Progress, Mark Zandi, among others -- I hear microeconomic advisers -- have revised their forecast up based on this. And I know you guys are good at collecting those data, so I encourage you to do so.

What you will see is that through a two percent payroll tax cut, temporary, because of deficit reasons, because of the UI extension, because of some of the tax credits we're talking about, we're doing precisely that. We're adding to GDP growth, adding to job growth at a time when you're exactly right, that's what the economy needs right now in the short run more than anything.

VELSHI: Hey, Jared, a lot of people -- you mentioned the two percent cut in the Social Security payroll tax. A lot of my viewers have been asking me, where did that even come from?

We didn't see the groundswell movement for that. I think Alice Rivlin mentioned this as part of the presidents' deficit-cutting commission.

BERNSTEIN: Right.

VELSHI: Do you think that's going to contribute a lot, that extra $80 for somebody who earns $40,000 a year, $1,400 maybe if you earn $75,000 a year?

BERNSTEIN: Yes, that would be about $1,500 for someone who earns 75,000. Interestingly, it's an idea that's been quite bipartisan.

Members of both parties have espoused this idea. And you're exactly correct, both the Rivlin/Domenici Commission and the fiscal commission appointed by the president recommended this temporary payroll tax cut holiday. So these are folks with great deficit- cutting street credibility, obviously, but they recognize that this is an important bipartisan measure.

It's purely on the worker's side, so you're right, it very quickly injects, through higher paychecks, diminished withholding, higher paychecks, more money for working families. It's going to reach over 150 million workers out there. So we think this is a great way to quickly boost paychecks and growth.

VELSHI: Stephen Moore, who you know, is going to be talking to me in just a few minutes. And one of the things that Stephen and I argue a little bit about is how we know that when people get unemployment insurance, more of that money goes right back into the economy than might happen if you have give it to somebody with a lot of money who can choose to save it. Somebody on unemployment insurance generally can't choose to save it.

But here's my question to you -- my colleague Mary Snow brought us a very moving story an hour ago about one of these 99ers, people who have exhausted all of their emergency unemployment benefits, their federal extensions, everything. There is nothing in here for them.

BERNSTEIN: Well, look, I think someone who has experienced that extensive length of long-term unemployment, they absolutely need help. And I think the help they need most is some kind of structural training, something to help them get back into the workforce, because I think the case for someone who has been out that long is that they really do need a skill enhancement. And that's obviously a huge part of our agenda, not part of this agreement.

Now, in this agreement, on unemployment insurance, I do want to be very clear about one point. Again, this 13-month extension does go to 99 weeks in those states that are hardest hit by unemployment. And again, that was something that I think people who have been watching this debate didn't expect just a few days ago. So we really did try to go the distance to help the jobless who, through no fault of their own, are having such a tough time right now.

VELSHI: Jared, good to talk to you. Thanks very much for joining us on this and explaining some of it to us.

BERNSTEIN: My pleasure.

VELSHI: Jared Bernstein, chief economic adviser at the White House to Vice President Biden, who, by the way is -- let me just show you what I've got.

Kelly (ph), what have you got pictures of for me right now?

All right. So, on the left, you've got Mitch McConnell speaking on Capitol Hill. On the right, you've got preparations for the president's news conference.

Kelly (ph), do we want to listen in to Mitch McConnell?

Let's do that.

(JOINED IN PROGRESS)

SEN. MITCH MCCONNELL (R), MINORITY LEADER: -- one of the issues here at the end of the session, which is to make sure the American people's taxes don't go up at a time of 9.8 percent unemployment. I'm very hopeful and optimistic that a large majority of members of the Republican conference will find this proposal worth supporting. And I'm hopeful that the Democratic leaders will be able to convince their members as well that this is the way to go forward and the right thing to do under these circumstances here as we move toward the end of the 111th Congress.

With that, let me call on Jon Kyl.

SEN. JON KYL (R), ARIZONA: Excuse me, Leader. Just one comment.

Several of you have asked about some very specific provisions of tax law and whether or not it's included or not in some of what we might be doing. And I just ask that you give us and our staffs an opportunity to work through some of those issues that haven't been discussed by the president. Give us time to work through those before asking us to tell you exactly all of the specific things that are in or outside the tax package. We're working through those quite rapidly, and I think we can conclude it fairly quickly.

SEN. LAMAR ALEXANDER (R), TENNESSEE: There are a lot of stories, as there would be expected to be, about who won politically or who lost politically in this agreement. The way I look at it, and I think a great many members of our conference look at it is, what would be the best thing for our country right now?

And we believe our number one goal is to make it easier and cheaper to create private sector jobs. And the best thing we can do right now to make it easier and cheaper to create private sector jobs is not to raise taxes on people who create jobs and on the American working people in the middle of an economic downturn.

That's why the right thing for our country is to support the tax agreement. It makes it easier and cheaper to create private sector jobs.

SEN. JOHN THUNE (R), SOUTH DAKOTA: I think the American people have two major concerns. One is, they want us to deal with the issue of economy and job creation. And secondly, they want to get Washington growth and spending under control.

And I think that the proposal that's been reached on taxes is an important one where the economy is concerned, because I do believe that if we're going to create conditions that are favorable to economic growth, we can't have taxes going up on our job creators, our small businesses. And this particular agreement preserves the current tax rates and hopefully will unleash some economic growth so we can get people back in this country back to work.

The second thing I think that American people want addressed, and they want it addressed in short order as well, is the issue of spending and debt. And I hope that before this Congress adjourns, that we can come to an agreement on a spending bill that doesn't increase spending, that recognizes that we have to get our fiscal house in order here in Washington. And I hope that that we can get a CR passed, a clean CR passed before Congress adjourns, and deal with the issues of taxes, spending, debt, and put the other things off until next year, when we're going to have an opportunity to debate a whole range of other issues.

SEN. JOHN BARRASSO (R), WYOMING: I appreciate the president's willingness to work in a bipartisan way to give the kind of certainty that American businesses and the job creators of this country have been asking for by not raising taxes on anyone when there's 9.8 percent unemployment in this country. I appreciate the president's efforts to agree that that is the proper way forward as we work to try to revitalize the economy.

MCCONNELL: We'll take a couple of questions.

QUESTION: Are you considering this proposal and agreement to be final, or are there still concessions to be had by the other side?

MCCONNELL: Well, the agreement is essentially final. Senator Reid and I will have to discuss procedurally how we go forward. And as you know, in the Senate, that requires a pretty broad agreement as to how you go forward.

I believe it is his intention -- he can speak for himself -- to bring it up first in the Senate. So my assumption is we'll be dealing with it sometime soon.

QUESTION: Do you have the votes to get it (OFF-MIKE) that you've overcome as there seems to be some very opposing voices out there already?

MCCONNELL: Well, I think it's pretty early to tell who's going to vote how. I reported to you a few moments ago, and I'll say again, that I think the vast majority of the members of the Republican conference of the U.S. Senate feel that this is a step in the right direction, an important step to take for the American people. And I think the vast majority of my members will be supporting it.

Thank you.

VELSHI: OK. Members of the Republican Caucus to the Senate, Republican senators, responding to the deal that they have made with the president. Mitch McConnell there just saying that he expects the vast majority of Republicans to support that deal.

What you're looking at on the right of your screen is the White House briefing room, where the president is expected to speak possibly within the next 10 minutes or so. He will outline the deal that he's made with Republicans. We know what that deal is.

He will take reporters' questions. And some of those questions may focus on the fact that there are some Democrats, particularly House Democrats, who are not entirely behind the president's deal to extend the Bush-era tax cuts to everybody, not just the middle class, but to households earning more than $250,000. The president did so in order to gain those middle class tax cuts and extensions to unemployment benefits for millions who have fallen off those extensions.

So that is the problem that we've got right now.

Let's take a quick look at the team that's going to be joining us momentarily now to analyze the president's speech and to tell us what it means for you. This is "The Best Political Team on Television": John King, Gloria Borger, Wolf Blitzer, Roland Martin, Ed Henry, who is in the room right now with a picture that makes him look like he's about 12 years old. Brianna Keilar on Capitol Hill, and David Gergen. Ed Rollins is joining us as well.

We have got the whole team here to bring us some perspective on what the president is saying, whether this deal will go through, what it means to you politically and economically.

We're going to take a quick break, and we'll get there with "The Best Political Team on Television" in just a moment.

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