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President Obama Lays Out His Deficit Reduction Plan; Stocks Deep in the Red; Clemency Appeal on Troy Davis' Case; White House on Obama Debt Plan

Aired September 19, 2011 - 11:16   ET

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

(PRESIDENT'S REMARKS ABOUT DEBT PLAN SENT AS SEPARATE TRANSCRIPT)

WOLF BLITZER, CNN ANCHOR: There's the president of the United States. He's actually going to go shake some hands, it looks like, in the Rose Garden. We'll keep that picture up as we assess what we just heard.

He's got some invited guests there, as well as the news media, of course. Music playing. We'll see if he gets a shouted question or two, as we hear what he has to say, but he unveiled what he calls his $4 trillion, as opposed to $3 trillion, plan to cut debt.

Christine Romans was watching closely, together with all of us.

What did you think, Christine?

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Well, the great line was, "It's not class warfare," Wolf, "It's math." And one of the things is that Republicans will say, OK, here's the math for you. Ninety-five percent of all taxpayers, their tax bills, are equal to the top one percent.

When you think of that, the top one percent pays 95 percent of all of the income coming into the government, and they'll also point out that 45 percent of taxpayers pay nothing. And, in fact, in many cases, get money back from the tax code every year.

So, the fact is, the tax code is an absolute, utter mess. It's not as simple as some would like to make it out to be, and it does need reform. But it doesn't sound like there's a lot of political unity -- and Gloria is better on this than I am -- a lot of political unity for real tax reform at this stage, and that's what I think.

BLITZER: A lot of talking right now.

Gloria is with us, Gloria Borger.

Gloria, as we see the president going back -- he'll walk up the stairs and go back into the Oval Office, get on with some other activities today. I had a chance -- I met with Steve Forbes last night. For years he's been talking about a flat tax.

Is it realistic at all as we get ready for an election year to think there's going to be -- beyond talking, any significant tax reform, substantive change? GLORIA BORGER, CNN CHIEF POLITICAL ANALYST: Well, the only way, Wolf, and the only real hope is that you have this super committee that has an ax hanging over its head. That if it doesn't do some serious tax reform, deficit reduction, entitlement reform, then the Congress will have to accept these kind of cuts that could be very politically difficult for them. So, since there is an ax hanging over their head, maybe they will actually do the job that they were sent there to do.

I also have to say that I believe the president, himself, who I was listening talk about how we need to do this tax reform, missed an opportunity himself in his State of the Union speech. Way back in January, Wolf, you'll remember the Simpson-Bowles Commission had come out. It had proposed tax reform, and at that point the president held back and did not embrace it.

If he had embraced it, or parts of it in January, we might have had enough time to actually get something done, but right now, we've got a very, very tight deadline. And, you know, who knows if they can really get something done before Christmas, you know, even with the threat out there.

BLITZER: The threat of across-the-board cuts, including significant cuts in defense spending.

BORGER: Yes.

BLITZER: The president rejected that Simpson-Bowles plan, in part because some of the liberal Democrats who were members, they rejected it.

BORGER: Right.

BLITZER: They didn't like some of the entitlement cuts that were proposed, and as a result, they rejected it, just as some of the conservative Republicans like Paul Ryan rejected it. And in the end, the president didn't accept it either.

You want to make one final point, Gloria?

BORGER: Well, and that's why you don't see huge entitlement cuts in this president's first offer here, in his particular marker. This will make his base happy, because while he does have some cutbacks in Medicare, it's really to providers, not to beneficiaries. But again, you have to believe this is the first shot across the bow. So hopefully there'll be more talking.

BLITZER: Let's get a little Republican reaction. Douglas Holtz- Eakin, he's been with us in our coverage of the president's remarks. He's joining us, served for both presidents, Bush, as well as an economic adviser to John McCain four years ago.

I assume you didn't like what the president had to say, Doug, but tell us why.

DOUGLAS HOLTZ-EAKIN, ECONOMIST: I mean, there's a yawning gap between the rhetoric and the budgetary reality. This president has put out three budgets, budgets where he has the ability to go through line by line and dictate his vision for America. And each one led to a Greek- style, third world debt crisis, despite the fact that he raised all the taxes he wanted to in those budgets.

That tells you that you have to get serious about spending, that the entitlement programs, Medicare, Medicaid, Social Security, and his new Affordable Care Act, are crowding out everything else, and they are. And so the choice is not the one the president talked about between having crumbling schools and broken bridges and raising taxes on rich people. The choices are how we spend the money and have the bill be small enough that we can actually afford it.

And he put together not one proposal for entitlement reforms that's serious here. So, if you look at where we are, Wolf, we haven't cut anything yet.

The president said, oh, I just cut $1 trillion. That's not true. It's a promise that maybe in 2018, long after he's no longer president, we'll spend less.

I've seen a lot of Congresses come and go. They don't always fulfill those promises.

We have yet to cut an actual dime out of actual spending. He's missed an opportunity to get serious about entitlement reform. We are missing the fundamental threat to this economy and to future generations, and I'd rather see him put out a real budget than give another speech.

BLITZER: One final question, Doug, before I let you go.

When the president asks Congress, the Republicans in Congress, to continue that tax cut, the payroll tax cut that continues through the end of this year, but then it ends unless it's renewed, if it's not renewed, is that a tax increase on middle class families in America under your definition of a tax increase?

HOLTZ-EAKIN: I mean, look, if you compare the world (ph) with the policy versus letting it go, sure, it's a tax increase. There's no question about that.

BLITZER: Would that be a violation of the commitment under Grover Norquist, no tax increase, even if there's a -- I ask the question not as a "gotcha" kind of question, because as you know --

HOLTZ-EAKIN: I honestly don't know the answer.

BLITZER: -- the Bush tax cuts were for a limited number of years. They will expire now, based on the last agreement, the beginning of 2013. And if they do expire across the board, that would be seen as a tax increase.

So I wonder if they allow the payroll tax cut for middle class families to expire at the end of this year, will that, under that definition, be seen as a tax increase? HOLTZ-EAKIN: It may be. I don't know the pledge, but I do think it points to the fundamental issue, which is, tax reform is something that is not in violation of anyone's pledge. It says we need a tax system that's coherent, raises the money that pays the nation's bills, and doesn't impede with economic growth.

I'm sympathetic to what Gloria said about how hard it is to get this done and we should have had some leadership earlier in the year. But I think if we're going to talk about taxes, talk about tax reform. But let's just remember, what's missing in this discussion is the big problem in the budget, which is in the entitlement programs, and that's just an enormous miss for the president.

That's the only way we will address the fairness to the next generation. It's the only way we'll actually preserve a social safety net that every American wants. And to leave that in disrepair I think is a real mistake by the president.

BLITZER: Douglas Holtz-Eakin.

Thanks very much, Doug, for joining us.

HOLTZ-EAKIN: Thank you.

BLITZER: I'll be back 5:00 p.m. Eastern in "THE SITUATION ROOM." Much more coverage then. The director of the National Economic Council, Gene Sperling, the president's top economic adviser over at the White House, he'll be joining us live.

I'll also get Republican presidential candidate reaction from Michele Bachmann. She'll be joining us in "THE SITUATION ROOM" later today as well.

Until then, thanks very much for watching.

CNN NEWSROOM continues right after a short break with Suzanne Malveaux.

(COMMERCIAL BREAK)

SUZANNE MALVEAUX, CNN ANCHOR: Live from Studio 7, I'm Suzanne Malveaux. I want to get you up to speed for Monday, September 19th.

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UNIDENTIFIED MALE: Oh, my God!

(END VIDEO CLIP)

MALVEAUX: Federal crash investigators in Nevada are collecting thousands of pieces of a vintage plane. It nose-dived into the crowd on Friday.

Now, the plane had a data system and a mounted video camera that could provide some clues. Early suspicion has focused on the tail. Parts fell off before impact. Now, the crash killed the pilot and nine people in the crowd.

And we're just learning that a 10th person has died as a result of that crash. Authorities haven't released the names of all of those killed, but we do know one is Mike Wogan (ph) of Phoenix. He had Muscular Dystrophy, but graduated with high honors from Arizona State in May.

And John Craig (ph) owned a construction business in the Reno area. He was at the show with his son. A reporter talked to his sister-in- law in Colorado.

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SHANNON WILHITE, VICTIM'S SISTER-IN-LAW: They could see the plane coming down, and I think that he probably sheltered his son. And that's the kind of guy he was, so very, very a good dad, very good husband, very in love with my sister.

(END VIDEO CLIP)

MALVEAUX: Craig's (ph) son, 12-year-old Ethan, was hit by a piece of metal, but doctors say that he is going to survive.

Well, Russian investigators blame a plane crash last June on the men in the cockpit. They point to pilot error and say that the navigator was drunk. Forty-seven people died when the pilot tried to land in bad weather. Instead, the plane clipped the trees, slammed into the ground in a fireball.

Well, a truck bomb exploded at the home of a senior Pakistani police official today. Now, he wasn't hurt, but six of his guards were killed, along with a woman and her daughter who were passing by on the way to school. Well, the police official who was the target of that assassination attempt, he appeared on TV, and he says he's going to continue fighting against the Taliban militants.

Police in Birmingham, England, are searching the homes of six men suspected in a terror plot. Now, authorities are not going to give details of the operation. They only say that the plot was in its early phase. Police later arrested a woman, and she is charged with failing to tell them about the plot.

Stocks are in the red across the board today. New worries now because the debt crisis in Europe is driving those markets lower.

Alison Kosik, she's at the New York Stock Exchange.

Alison, so we know, first of all, markets are down. Tell us by how much, and how much of that is actually related to the concerns out of Europe?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Oh, it has pretty much everything to do with Europe, Suzanne.

The Dow, down right now 204 points, though it is off its lows of the session. The Nasdaq is down more than one percent. Look, Wall Street is focused on Europe. It also had one eye on what President Obama was just talking about. And traders I'm talking to say you know what that was? That was more of the same.

They call it politics as usual. They're questioning whether or not any of these tax increases will even make it through Congress. So they're skeptical if it has any chance of passing.

It's the reason why Europe is really what's moving the markets, specifically Greece. Despite those small, positive steps that were taken last week, now all of that a distant memory because time is running out for Greece.

One analyst says that Greece is getting closer to running out of money. At this point it has to agree on taking tougher austerity measures before getting this bailout. So everybody is sort of waiting to see what happens.

And, you know, you think about it, Greece is really a small country. But if it defaults, the big question is, what will be the ripple effects? You know, that nervousness is what you're seeing play out in the markets today, the VIX also spiking. That's the fear index. That's spiking 10 percent. So, you really see that fear trade back on today -- Suzanne.

MALVEAUX: It's the domino effect. Yes, OK.

Alison, thank you very much.

It is a fight over the Holy Land, and this week the Palestinian government is expected to demand recognition as an independent state. Well, that's putting the halt to the Middle East peace process and the deal in harm's way. We're going to explain how.

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MALVEAUX: It's a decision that could change the face and the future of the Middle East. This week, the Palestinian Liberation Organization will push to have Palestine recognized as an independent country by the United Nations.

Now, a lot of other countries, including the United States, are scrambling to stop that from happening.

Our CNN senior State Department producer, Elise Labott, she is joining us from the U.N. in New York to explain why all of this is happening.

And, Elise, I want you to break it down for us, because the Obama administration for a long time, right, has been trying to guide Israel and the Palestinians back to the bargaining table. Why is it that statehood for Palestine would be a block here to actually having that happen?

ELISE LABOTT, CNN PRODUCER: Well, Suzanne, in theory, it wouldn't. And the U.S. says it does support a Palestinian state, but what the U.S. says, specifically Secretary of State Clinton, is that the road to a Palestinian state doesn't lead through New York at the U.N. It leads through Jerusalem, where the two parties should negotiate this.

We know at the end of the day that no matter what happens here at the United Nations, the Palestinians are not going to have an end to the Israeli occupation of the West Bank and Gaza and not going to have their state. What the U.S. and others are hoping is that they can use this opportunity to say, listen, let's not do anything confrontational, provocative that will get everybody excited. Let's use this opportunity to get back to the table.

Palestinians are saying, listen, negotiations all these years have failed. We're not getting our international legitimacy from the table with Israelis. We want to go to the U.N. and we want to demand our rights as a state in front of the international community.

MALVEAUX: Lisa, if they go to the U.N., what do they get out of this? What do they gain from being recognized by the U.N. as a country?

LABOTT: Well, it depends what happens at the U.N. Security Council, which President Abbas has threatened to do -- it doesn't look like he will get anything, because there would not be a vote, because the U.S. has promised to veto and block even him getting a majority, which would really not be good for President Abbas.

If he goes to the United Nations General Assembly, which is seen a little bit less confrontation, but certainly he has a lot more support, he could upgrade Palestine's status as an observer state, observer member and then they could get more working through international bodies.

What Israel is afraid of right now is that they could Palestinians could use this to go against Israel at the International Criminal Court, those kind of things to get rulings against how they treat the Palestinians. Palestinians are saying, no, we just want to have our seat at the table, like any other nation, Suzanne.

MALVEAUX: What would the borders look like? What would a Palestinian state actually look like? Would be it a state with borders or without borders?

LABOTT: Well, what the Palestinians are saying is, we don't want a Swiss cheese state. Here, the Palestinians, they don't want Israeli settlements in their state. Israel always has said that there are settlements they can't get rid of, these very big, large settlement blocs in the West Bank.

What everyone is hoping that they can go back to what they call the 1967 borders before Israel declared its independence. This would basically be '67 borders with agreed-upon swaps. They could have some of these settlements block would be an Israeli state. They would kind of move the borders around a Palestinian state. Palestinians very concerned that they have already given up so much of their territory. Every little percentage, as we say, is very important.

MALVEAUX: Yes. OK. Elise, thank very much.

We also want to bring in Fouad Ajami, a senior fellow at Stanford University's Hoover Institution, to talk about the bigger impact that this decision could have.

Fouad, first of all, we're watching unprecedented revolutions roll across the Arab world. And the United States, its stance now on Palestinian statehood, how is that being viewed in the rest of the region here? Isn't there a risk if the United States says, wait a minute, hold on, we don't want you to have a state through the United Nations?

FOUAD AJAMI, PROFESSOR OF MIDDLE EASTERN STUDIES, JOHNS HOPKINS SCHOOL OF ADVANCED INTERNATIONAL STUDIES: Well, Suzanne, I think you have reached the heart of the matter for President Obama, who came into office speaking about self-determination and who promised the Palestinians that it's a new day and a new dawn for them.

To go to the Security Council and cast a veto against the Palestinian state, it is politically problematic. It's really a catastrophe for him in the Arab and Islamic world, but then he has no choice but to pass this veto if it came to that. The hope is between now and Friday, some exit, some other formula will be found that would spare one and all of this confrontation at the Security Council.

MALVEAUX: Do you think that's possible, that perhaps Abbas, that the United States could convince him not to move forward on this, this week?

AJAMI: Well, I think Abbas has rolled the dice. If you listen to him, when he came, when he made his stand in Ramallah, he basically said, look, I'm ready for a confrontation, I'm ready for the hardships that will be inflicted on the Palestinian people.

I think it's very interesting. You began -- you led with the question of this Arab spring, if you will, of the wider regional setting, and I think President Abbas is convinced that the Arab spring gives him leverage vis-a-vis the United States. I personally don't think so, but it's his call. And it's his cause. And this is the decision that the Palestinian leadership appears to have made.

MALVEAUX: Let's talk a little bit about Israel. We saw in this weekend's "New York Times," columnist Thomas Friedman says that Israel is -- quote -- "adrift at sea alone isolating itself even further from the rest of the region."

What's at stake for the future of Israel here?

AJAMI: Well, I think Israel dwells alone. This sounds like a biblical expression, if you will. And now it dwells alone all the more so, given the severance of the ties or the weakening of the ties between Israel and Turkey and given the troubles between Israel and Egypt.

So, in fact, the isolation of Israel in the region is now sharper. And you can see it. And I think the Israelis are deeply worried about this. And it makes them -- ironically it makes them more reluctant to give into the Palestinians. And you can see their logic, that if the region is so hostile, concessions much harder to come by. MALVEAUX: There's another twist to all of this and that is the tensions now between Turkey and Israel heating up dramatically. Now, Turkey is a NATO ally and it's one that the U.S. is sworn to defend. What does this conflict mean for U.S. policy? If these two continue to go each after, whose side is the United States on? Who do we defend?

AJAMI: Yes. Well, think we try to avoid, if you will, their reckoning.

I think what is clear that the Turkey that we are familiar with, the Turkey that was led by the military establishment, by the bureaucracy, the Turkey of Ataturk, if you will, and his foreign policy which dominated Turkey for the last 70 years or so, that phase in Turkish diplomacy has come to an end. And the Turkey of Erdogan is much more activist in the region and drawing much closer to the Arab world, and has really, in effect, put a distance between itself and Israel.

And we should remember as well ties between Erdogan and President Obama are quite good. I think the alienation from Israel is not at the same time complemented -- or it doesn't have the same alienation from American power and from President Obama personally.

MALVEAUX: All right. Fouad Ajami, thank you so much for kind of putting it into perspective, the big picture, if you will. Really appreciate it.

AJAMI: Well, thank you for the great reporting you did out of Afghanistan as well. So...

MALVEAUX: Oh, thank you. Thank you. I really appreciate that. Thank you.

The final clemency hearing for death row inmate Troy Davis, it is going on right now. We're live right outside the parole board meeting.

(COMMERCIAL BREAK)

MALVEAUX: To "Choose the News," text 22360 for the story that you would like to see.

Text 1 for garden of the future. A giant park built in the middle of downtown Singapore mixes nature and technology in some surprising ways.

Text 2 for sleep and relaxation apps for those who can't stop bringing our smartphones to bed. Some new apps promise to help us sleep better and more soundly.

And text three for Guinness world records, a roundup of some of the wackiest records of 2012, from growing the largest afro to squeezing into the smallest space. That sounds like fun. You can vote by texting 22360. Text 1 for garden of the future, 2 for smartphone sleep apps, or 3 for 2012 world records. Winning story is going to air in the next hour. A last-ditch effort is under way now to halt the execution of death row inmate Troy Davis, convicted of killing a Savannah police officer back in 1989. Well, Davis' supporters are demonstrating outside the Georgia Board of Pardons and Paroles while the five-member board holds a final clemency hearing.

The pope, Archbishop Desmond Tutu, former President Jimmy Carter and more than 50 members of Congress have added their voices to calls for mercy because of questions about the evidence in the case. Now, if clemency is denied, Troy Davis is set to be executed by lethal injection on Wednesday.

Our David Mattingly is outside the Parole Board Meeting in Atlanta.

David, first of all, there's a lot of attention that's being paid to this particular case. We know that time is running out here. Seven of nine witnesses have recanted their testimony against Davis, but he's never won any appeals.

Do you think that clemency is even likely?

DAVID MATTINGLY, CNN NATIONAL CORRESPONDENT: Well, this is an extraordinary case, and what his supporters are looking at is the fact that even though he was denied clemency back in 2008 by this very same board, there are now three new board members sitting there hearing this case for the first time. So they're hoping that the presentation of their arguments regarding what they say are the lack of evidence and the people who have recanted their testimony, they are hoping that fresh ears and fresh eyes looking at this case will give them the votes they need to get Davis off of death row.

So right now, what we're seeing happening today, we're seeing attorneys for both sides, both for the prosecution and for Troy Davis' defense going back to this board and giving their best, one last best shot to either preserve or deny this death row.

MALVEAUX: Right. And do we expect that Troy Davis himself will speak at the hearing?

MATTINGLY: He will not speak at the hearing, but he will be heard from. He is actually, he's been interviewed by a staff member working for this board. Just as he has been interviewed behind bars in the past, he has been again this time. So his words will be entered into the record. The board members will have that to look at. In addition to everything that the attorneys on both sides are presenting them.

This is a huge case. This has been in the appellate level for 20 years now, and Davis has lost at every single turn. So that just shows you what kind of drama is going on right here.

MALVEAUX: Sure.

MATTINGLY: It is literally about life and death. He has no other place to go except to this board, and they have the power right now over whether or not Troy Davis lives or dies. MALVEAUX: And, David, of course, we can't forget the victim in all of this. Savannah Police Officer Mark MacPhail, and his family believes the right man has been convicted. That it is Troy Davis.

Are they here as well for the hearing and will they be making a statement?

MATTINGLY: Well, their point of view will be put into the record as well. We have heard from his mother over the weekend. She says that the family has been having a rough time with this. They want some resolution here. And they want some peace.

The mother says she's had a hole in her heart for the last 20-odd years, that this, since her son was killed. They believe that the courts have got this right. They believe that Davis is guilty. The prosecutors in this case have maintained that he is guilty and the courts have backed them up at every turn. Listen now to what his mother had to say.

(BEGIN VIDEO CLIP)

ANNELIESE MACPHAIL, MOTHER OF KILLED POLICE OFFICER: It has been hell, because I want -- I would like to have some peace. I would like to have this situation over with. We are the victim.

(END VIDEO CLIP)

MATTINGLY: And the families for -- the family members for Davis, they have been incredibly active over the last couple of decades. In fact, they have been the ones responsible for maintaining his innocence in the public, gathering support and it has really taken on an incredible life of its own.

This is extraordinary in the way that he has gathered support from around the world. Over 600,000 signatures on petition from around the world. All of that presented for this board to see as well.

Suzanne?

MALVEAUX: All right, David. We're going to be following this very closely. Obviously a lot of twists and turns, and there will be developing news either way in the next 48 hours on this case.

Thank you very much, David. We're going to have more after this break.

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MALVEAUX: Well, the TV industry honored their own last night's Emmy's, but you may have missed this cameo from our own Anderson Cooper. It's a special newscast on how the state of New Jersey is becoming a force in television. With Jane Lynch playing the executive who is making it all happen.

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ANDERSON COOPER, CNN CORRESPONDENT: New Jersey is everywhere. But who's behind this explosive trend?

JANE LYNCH, ACTRESS: Thanks to me, now 50 percent of all television is set in Jersey. "Cake Boss" Jersey; "House" Jersey; "Sarah Palin's Alaska," Jersey.

COOPER: Her greatest success was when she took eight at-risk youths and made them stars.

(END VIDEO CLIP)

MALVEAUX: We want to go directly to the White House. The briefing has just started. And Treasury Secretary Tim Geithner is taking some question. So let's listen in.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Any details about it. And it seems like an important part of the plan that he's trying to emphasize.

TIM GEITHNER, TREASURY SECRETARY: What the president's proposed is that Congress shape comprehensive reform of the individual in the corporate tax system. So that, again, we're not just making our country more competitive, strengthening for investment but we do something to contribute to deficit reduction and asks the most fortunate Americans to pay a larger share of their income in taxes.

The basic principle at the heart of the Buffett Principle is that if you're among those fortunate few in the United States, we should make sure you pay as a shared income of taxes more than what a middle class family pays.

Now there are lots of different ways achieve that principle. How you do it depends on what you do as a broader tax system as a whole. We're not going to give the economists the detailed proposal for how to meet that specific principle now because there are lots of different ways to do that. But we think it should be that basic foundation of tax reform, and we're going to fight to make sure that's a part of what Congress considers and ultimately delivers.

UNIDENTIFIED FEMALE: Why not give a specific recommendation? You spelled out how much revenue you want to raise overall, why not be specific on that one?

GEITHNER: You know, in some ways you could say we're having a debate about whether you should try to reform the overall system, corporate and individual, to meet the basic principles laid out in the president's proposal, or you should try to get more revenue out of the current system.

Now, the president did lay out very, very detailed set of changes, specific changes for individuals and corporates, if we're trying to get more revenue out of the current tax system. But I think the best strategy for the country is to try to reform the overall system so that we're bringing rates down where we can.

We're eliminating all the wasteful subsidies and preferences in the tax code. We're helping contribute to deficit reduction by making the economy more competitive in the long run and, again, we're going to make the system overall more fair than it is today. And we think that's the best way to go and, again, we think it's better than the alternatives.

UNIDENTIFIED FEMALE: Can I ask you a question about the European side of this? You said that the Europeans cut the fire power to tackle this crisis. If there are the political will there, and how worried are you that this is going to spill over to the U.S. economy at a time when the economy is already very fragile?

GEITHNER: Europe is obviously under a lot of pressure and they face a lot of challenges. And it is affecting us. It is affecting confidence here and around the world. Not just in Europe. And we have a huge economic stake as a country in helping them yield at those challenges.

We have a huge economic stake, financial stake and it is not in the interest of the United States for Europe to be weakened by protracted economic and financial crisis. So we are working very closely with them and being very supportive and as they try to craft a more effective strategy, you ask the question, is there political will there? I believe there is.

It's not a question of the financial resources, the economic resources of that great continent. This is with their capacity to solve, and I think you will see the leaders of Europe do what they've didn't doing over the last several months and weeks just try to reassure the world that they have the political will, not the economic capacity to manage this challenge. And again, it's in the interest of the United States for them to do that.

BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: Yes, Jack, a question for you. If the expiring Bush tax cuts, if that -- for the wealthy, if that is a scene of $800 billion, then what about the cost of not letting the rest of the tax cuts expire? How you would account for that?

JACK LEW, DIR. OFFICE OF MANAGEMENT & BUDGET: So the way we constructed our approach was to start from what would be the consequence of having all of it being extend. And then we said that the top rates should not be extended. The top rates should not extended.

So we've now projected with the impact on the deficit and the debt is of having the middle tax cuts continue. And a balanced approach will give you the ability to let the middle class tax cuts continue, and if you enact the entire program that we've proposed, bring our deficit down to the low 2s, like 2.3 percent of GDP, at the end of this period. And keep the debt as a percentage of the GDP in the low 70s, instead of climbing up into a dangerous range. So we've encompassed it by putting in the baseline the assumption that that will be extended.

KEILAR: So it's factored, it's factored in there?

LEW: Yes, it is factored in.

UNIDENTIFIED MALE: Secretary Geithner, just a couple of questions. One, is it -- are you maintaining that $1.5 trillion in tax increases, all of which would be on the top two tax brackets. As I understand it, will have no adverse impact whatsoever on job creation?

GEITHNER: Well, again, our proposal is through comprehensive tax reform, individual and corporate, to make the current tax system of the United States better for investment, better for growth and more fair to average Americans.

And if Congress were to meet those basic principles he laid out, then I'm very confident that the modest changes were suggested in terms of revenues would make the economy stronger, in the long term not weaker in the long term. Now obviously you want to do it carefully. And that's why the president laid out those specific principles.

It is very important that we find a way to get Congress to make this tax system better for growth, better for investment of the United States. Lots of different ways to do that, but we want to make sure we meet that basic test.

Remember, you know, we're a very large economy. And we're talking about estimates over 10 years. And $1.5 trillion in revenues relative to what would happen if you just extend all the Bush tax cut is roughly one percent of the entire output of the American economy over that period of time. It is a modest change in revenues. And if you do it sensibly through tax reform that's investment incentives, you'll make growth in the United States stronger, you make people more confident in the future, more likely to invest here and that's something we should all be looking towards.

UNIDENTIFIED MALE: OK.

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MALVEAUX: You've been listening at the White House, the briefing there. Treasury Secretary Timothy Geithner, OMB Director Jack Lew, both of them making the case for the White House that this is the appropriate time and the appropriate way to decrease the debt by $3 trillion over a decade or so, by raising taxes or at least for millionaires having their share be the same as the share of that middle class folks are paying their taxes.

We'll see how that goes over. A lot of people reacting to this today. Democrats and Republicans alike. We're going to have more on this story after a quick break.

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