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In the Arena
A Question of Fairness; Shutdown Showdown
Aired April 06, 2011 - 20:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ELIOT SPITZER, CNN ANCHOR: Good evening. I'm Eliot Spitzer. Welcome to the program.
Take a look at the clock there at the bottom of your screen. The count down has started, folks. We are now just 52 hours from a government shutdown. Our democracy is simply dysfunctional right now. Sort of like watching a train wreck in slow motion.
You know what else it makes me think of? That movie from the 1970s, "Network." It starred Peter Finch as a crazed anchorman. I know the feeling. Take a look.
(BEGIN VIDEO CLIP)
PETER FINCH, ACTOR, "NETWORK": So I want you to get up now. I want all of you to get up out of your chairs. I want you to get up right now and go to the window, open it and stick your head out and yell, I'm as mad as hell and I'm not going to take this anymore.
(END OF VIDEO CLIP)
SPITZER: I think we all know exactly how he feels. So just how dysfunctional is Washington?
Keep in mind what we're talking about here is last year's budget. This bill should have been passed at least six months ago. And what are America's leaders doing pointing fingers and shifting the blame? Just listen.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Somehow, we still don't have a deal. Because some folks are trying to inject politics in what should be a simple debate about how to pay our bills.
SEN. HARRY REID (D), MAJORITY LEADER: Every time we agree to meet in the middle, they move where the middle is.
REP. JOHN BOEHNER (R), HOUSE SPEAKER: I like the president personally. We get along well. But the president isn't leading.
SEN. MITCH MCCONNELL (R), MINORITY LEADER: The Democrats are more concerned about the politics of this debate than keeping the government running.
(END OF VIDEO CLIP)
SPITZER: By the way, John Boehner cried when he met with his fellow Republicans today. That's right, he cried.
I think we all feel like crying sometimes. But we're not going to.
Meanwhile, right now, at this the very hour, President Obama has called everyone back to the White House. There it is. The place where this will hopefully all be decided. We'll find out if there's going to be a shutdown while this program is on the air.
I hope President Obama is ready to crack some heads because this is ridiculous. We should all be mad as hell at both sides. And I'll go after both sides tonight on the show.
Meanwhile, the Republicans have been touting this budget designed by Congressman Paul Ryan. I'm not a fan which is exactly what I told Congressman Todd Akin who sits on the House Budget Committee. I talked to him just a few moments ago.
(BEGIN VIDEOTAPE)
SPITZER: Congressman, thank you so much for joining us tonight.
REP. TODD AKIN (R), MISSOURI: Pleasure to join you.
SPITZER: Look, I want to begin with the question that goes to a simple notion of fairness. And here's how I want to frame it for you.
The top 1 percent of income earners in our nation get 25 percent of the income and control 40 percent of the wealth. Those numbers have gone through the roof over the last decade or two. And yet Paul Ryan's budget plan imposes two-thirds of its burdens on the poor. Two-thirds. Right after we gave a big tax cut to the rich.
Does that violate your sense of fairness in a very base less?
AKIN: Well, no. And I think the problem that the way you're framing the question, it sounds like, well, of course it shouldn't be fair. But what you have to understand is that we have a very serious problem with the economy. We have a lot of people that are unemployed. And you can't deal with the unemployed unless you have a strong business sector that's hiring people.
SPITZER: Congressman, you presume in Paul Ryan's plan that unemployment rates are going to go down to -- what's the number here? Down to 2.8 percent.
Do you know when the last time was we had unemployment at 2.8 percent? That's 70 years ago. The Fed wouldn't let it happen. You're presuming that to say -- so you can then say we'll get revenue from lower unemployment. That's simply a false presumption, isn't it?
AKIN: Well, the employment rates currently -- and it all depends how you measure them -- are somewhere in the neighborhood of 8 or 10 percent. And if you want to get the employment -- you want to get people employed, which is what we absolutely have to do, there's two things we must do and we must do immediately.
The first is we have to address the fact that we're wildly overspending. The second thing is we have to grow the economy. You have to do both end to pull us back from the edge of the budget precipice.
SPITZER: Congressman -- Congressman, you didn't answer the question.
AKIN: And so --
SPITZER: Would agree with me that a presumption of unemployment of 2.8 percent in 2021 or 3.5 percent at 2016 is a wildly irrational presumption? The Fed won't even let it get below 5 because you have new inflationary pressure the moment that happens. So these presumptions that they need to keep to -- to say they're going to get the revenue even though they plucked (ph) the tax rates are simply false.
AKIN: Well, the presumptions that are built into the Ryan budget are the ones that came from the Congressional Budget Office.
SPITZER: No. No, they're not.
AKIN: My understanding was that the numbers were more like 4 percent is what they thought the unemployment rate would be.
SPITZER: No, no, this is -- Congressman, you're wrong. This is the line that is how -- the presumptions for the house budget resolution you passed for the Ryan bill, not the CBO for the other numbers. Those are different numbers.
I want -- I want to come back to something. You would agree -- just so if we can agree at certain numbers, prove to the public that we -- even though we disagree on policy, we agree on numbers.
You'd agree that the tax cuts to the wealthiest that you voted for last December were about 800 billion over a 10-year timeframe. Is that about right?
AKIN: Well, we extended the current Bush -- the Bush tax cuts.
SPITZER: Right.
AKIN: We extended them -- in some cases, I think it was like a year, sometime a year and a half, depending on which one.
SPITZER: But if you send that out over 10 years, that's an $800 billion loss of revenue, is that correct?
AKIN: I'm OK with that, so proceed.
SPITZER: OK. So the $800 billion -- and that is also exactly how much the Ryan plan wants to cut Medicaid, which is health care for the poor, is that correct?
AKIN: No. The other thing that you have to understand is that in terms of the Ryan plan what we're doing is we're moving to a model that is perhaps the only government program which has come in under budget which was part D Medicare. That was 40 percent under budget.
We have to do something with Medicare because it's blowing up. At least the Republicans have been honest enough to say we have a problem and we're trying to solve it instead of running the train off the end of the tracks.
SPITZER: But look, trust me, I'm not in favor of continuing much of anything the way it's been done. I want all sorts of changes. I just don't want changes that are all on the backs of the poor.
$800 billion. These are numbers right out of his plan. That's how much he's going to reduce Medicaid spending.
(CROSSTALK)
SPITZER: Am I correct about that? I mean that's what -- his own charts say that.
AKIN: If you're talking about Medicaid spending, what's going to happening there is we're going to try to create efficiencies by moving that closer to the people and block grant --
SPITZER: Right.
AKIN: -- to the various states.
SPITZER: Right.
AKIN: That allows the states to tailor the programs to fit more their unique situations rather than having this attitude that every answer to every problem has to come from Washington, D.C.
SPITZER: Right. Right. OK, only somebody in Washington would believe you block grant and sent it back to the governors. I've been there, you're going to save $800 billion.
Doesn't his plan -- simply yes or no on this one. Doesn't his plan say we will spend $800 billion less on Medicaid? That's there, black and white, on a piece of paper, right?
AKIN: Well, my understanding is that we do make savings in Medicaid. And we do that by block granting. And the exact number, I don't have that memorized.
SPITZER: OK. OK. But $800 billion less in spending which is identical to the amount that we're giving back to the richest 2 percent?
AKIN: Well, yes, except the trouble is that if you decide to get rid of those tax cuts --
SPITZER: Right.
AKIN: -- what's going to happen is the reverse of what I just explained in May of 2003, and what you're going to have is more unemployment, you're going to have less GDP growth, and you're not going to have as much federal revenue growth.
SPITZER: I see.
AKIN: So what you have to understand is, is that if you are careful in what you do in terms of tax cuts, you can get the private sector to start hiring and investing, and that's what gets more people working, and that's what grows us, to some degree, out of the problems.
SPITZER: Right. Because that worked so well under President Bush. We went into the worst recession we've ever had. All right.
AKIN: It worked very well under JFK. It worked very well under Ronald Reagan. It worked --
SPITZER: That's was -- totally different fiscal --
(CROSSTALK)
AKIN: No, it's not. It's the same principle.
SPITZER: Totally different fiscal situations.
AKIN: It's the same principle.
SPITZER: All right.
(CROSSTALK)
AKIN: You cut taxes --
SPITZER: Look, we disagree on this one, too.
AKIN: OK.
SPITZER: Can I move to another section? Maybe something we can agree on.
AKIN: Let's find something else we can disagree on.
SPITZER: No, no. I'm looking for something we can agree on. It's mean a lot more fun.
AKIN: That may be hard.
SPITZER: I know.
AKIN: OK.
SPITZER: I'll find it. Look, in the Ryan plan, he says he wants to eliminate a lot of the loopholes, tax loopholes, broaden the base, and as a consequence of that he says we'll be able to lower both the individual and the corporate top marginal rates down to 25 percent.
You like that concept?
AKIN: Yes, I do.
SPITZER: OK. So do I. A lot of people like it. Look, I could argue for higher marginal rates but let's take that as a premise for right now.
AKIN: Good.
SPITZER: Which loopholes -- which loopholes are we eliminating? Because here's one word that the devil is in the details. Are you going to eliminate the mortgage tax deduction that homeowners take right now?
AKIN: Well, one of the things you have to understand about the nature of the Budget Committee and the budget is what we're talking about is we lay out in very broad generalities what's going to happen and then that becomes the jurisdiction of the various committees.
In this case, the Ways and Means Committee works on exactly what the tax policies are going to be. That's unfortunately not the job of the Budget Committee, so we don't do that. But we're saying, though, is you have examples of corporations that are paying almost nothing in corporate taxes. That's a problem.
We also have the corporate tax rate sitting at either the highest or second highest in the world. That's also a problem. So the point of the matter is, we want to get something -- get rid of the loopholes, simplify the tax code, bring it down in that 25 percent range, that then makes our corporations more competitive, brings jobs into the country, and basically helps to get the economy growing and started. So that's the logic.
SPITZER: But Congressman, as I said this is one we agree on conceptually. But until we actually know which loopholes we're talking about --
AKIN: Well, I think -- I think that in terms of trying to work together between the House, the Senate, the president I think we need to look at all the ideas. I think it's in everybody's worst interest to have a government shutdown. I think we do better to try to handle this responsibly as adults.
SPITZER: All right. Congress, I told you I knew we could find some point of agreement between the two of us.
AKIN: We had to work at it.
SPITZER: We had to -- that's all right. I'm up for that. I appreciate you coming on the show.
AKIN: Thanks.
(END VIDEOTAPE) SPITZER: I always enjoy talking to him.
And what we're going to take a look at in a moment I think is Air Force One. There it is. Just landed back in Washington. I guess Andrews Air Force Base. The president was in Pennsylvania and New York today on some political business. Now coming back to D.C.
He will be heading over to the White House hopefully to crack those heads we were talking about earlier. I don't want John Boehner to cry again, though. We don't want to crack him that hard.
Coming up, something that makes me really mad. The two sides aren't even that far apart on the numbers. We'll break it all down for you on the magic wall with Tom Foreman.
Will Cain, you're here. What do you have for us tonight?
WILL CAIN, CNN CONTRIBUTOR: I'm trying not to cry every time you make a crying crack on the show.
Right after you and Tom Foreman talk about how little or -- how little money is involved and how far apart they are right now, I'm going to put it straight to the Democratic senators, why can't you guys make a deal then?
SPITZER: All right. Let's hope we can. All right, stay with us.
(COMMERCIAL BREAK)
SPITZER: We are just moments away from a White House meeting among President Obama, Speaker Boehner and Senate Majority Leader Reid. And like students sent to the principal's office, Reid and Boehner are being summoned to make up and place nice and of course to figure out a way to keep the government running.
But just how far apart are the two sides? Tom Foreman is in Washington where he's been crunching the numbers.
Tom, what have you found out?
TOM FOREMAN, CNN ANCHOR: Man, Eliot, I found a mess. That's what I found.
Listen, I want to make one thing clear from the beginning here. People keep talking about the Paul Ryan press conference yesterday, about all these gigantic cuts, Medicaid and all that. That's the 2012 budget.
The debate at the White House right now is about the 2011 budget which is proposed by the president last year. It runs from October of last year to October of this year. It was not passed back then. What they did is they kicked it down the road with these resolutions we've heard so much.
Let's keep going on with the continuing resolution. In the process of doing that, Democrats and Republicans both agreed they needed to cut the budget somehow so they agreed to about $10 billion in cuts. So far as they've extended this.
Now the House Republicans have passed this version of $61 billion in cuts, Eliot, and this is the fighting ground right now.
SPITZER: You know, it is -- you're absolutely right. People shouldn't get confused between these continuing resolutions that will carry us through October and next year's budget which is the subject of so much screaming and shouting in the Paul Ryan budget.
But look, it's pretty clear this isn't also just about the cost of government. It's about manipulating policy through the purse strings. What do you -- can you tell us about that?
FOREMAN: Absolutely. And Eliot, that's on all sides. They can both point the finger. This is completely about politics and policy and price intersecting.
Look at this. This is what the -- what the Republicans want to get rid of here. $5 billion from Amtrak, $1 billion from Head Start and Even Start -- it's Amtrak and high speed rail, by the way -- $400 million from National Public Radio effectively killing their funding from the government, $300 million from NASA, $300 million from Job Corps, $69 million from the Peace Corps.
Eliot, you know Peace Corps, Job Corps, National Public Radio, Head Start -- these are things that Democrats love. There's no question that the Republican budget plan says not only do we want to cut the budget down but let's do it by destroying programs that the Democrats like. That's what the Republican attack is all about here -- Eliot.
SPITZER: Tom, maybe you can answer a question I've been asking of so many people and I can't get an answer that satisfies me. Why are all these cuts in what we call nondefense discretionary parts of the budget? That 12 percent that has the types of projects you're just talking about?
Nobody is talking about cutting defense spending --
FOREMAN: Yes, they are.
SPITZER: -- even though everybody -- well, everybody says we need to but that's not in here, is it?
FOREMAN: Yes -- well, that's because that's the Republican proposal.
SPITZER: So --
FOREMAN: You can bet that's the Democratic proposal. What's going on behind closed doors is talks about defense spending and saying, come on, you've got to back off on some of these things as well. Although, Eliot, I will say, you know, one of the things that you hear from Republicans here is they often say to the Democrats, hey, you were in charge of the House and the Senate and the presidency before the last election and you guys didn't have the nerve to do this before the election.
Don't blame us now for beating up on you because you could have done it back then but you were afraid of paying the price.
SPITZER: Well, look, I think they're right about that critique and in fact the Democrats should have done it last year. But in the continuing resolutions that had been passed thus far, there haven't been cuts in defense spending. And that is what beguiles me anyway.
Tom, thanks so much for those numbers.
FOREMAN: That's right.
SPITZER: Always fascinating to see you use that magic wall, all right.
FOREMAN: I will tell you -- I will tell you, Eliot.
SPITZER: Yes, sir.
FOREMAN: Keep this in mind, because this is what it's all about. As we go on here, and we're talking about this target of maybe $33 billion, it all comes down to this. I've been saying it all day. Just keep remembering the three P's. This is about politics, it is about policy and it is about price. Everybody knows the price must be controlled at some point but they can't get past these two to do it.
SPITZER: All right, as always, Tom, thank you for that wisdom.
We've got two passionately opposing view points here to battle about the issues we're talking about just the way they're doing in Congress.
Katrina vanden Heuvel is editor and publisher of "The Nation" and Tim Phillips is president of the Tea Party group known as the Americans for Prosperity.
All right, Tim and Katrina, welcome back. You've been here before. I'll referee this, make sure there's no blood on the table.
Let me ask you the question of you, Katrina, that I asked of Tom. Why haven't the Democrats managed to get defense spending and defense cuts to be integral to these continuing resolutions that will take us through the October end of this fiscal year?
KATRINA VANDEN HEUVEL, EDITOR AND PUBLISHER, THE NATION: Well, wait, but I think we're looking at two fundamentally very different conceptions of this country in these different budgets.
Budgets are not just numbers. They are statements about national priorities. And the Democrats have tried to get budget cuts in the defense spending into this. I think what you see in the Republican budget is an absence of fair share politics, national sacrifice and fiscal responsibility.
If you were fiscally responsible, you would get tax cuts for the richest in there and defense cuts.
SPITZER: All right, look, Katrina, we're going to get --
VANDEN HEUVEL: And Republicans on board. Barney Frank and Rand Paul, great 10-year plan, trans-partisan, to cut the defense budget by a trillion and keep this country secure. Why isn't it on the Republican budget side?
SPITZER: All right. OK, so, Tim, let me turn it back to you then because Katrina's point is well taken.
TIM PHILLIPS, PRESIDENT, AMERICANS FOR PROSPERITY: Sure.
SPITZER: Republicans as well as Democrats, left, center, right, everybody looks at the defense budget. Secretary Gates looked at it and said $178 billion that he saw that could be cut over a couple of years.
PHILLIPS: Right.
SPITZER: Why hasn't that been part of these continuing resolutions as proposed by the Republicans to make this bipartisan? Let everybody pay a price out of the sector they care most about.
PHILLIPS: I think people are, frankly, afraid to do it. It's 19 percent of spending for federal outlays. We have to do it. And I applaud Secretary Gates for saying we have to make these cuts. We can do it. We can sustain it without losing -- or harming the National Security Agency. So we have to do that. And we've called for that in Americans for Prosperity. Absolutely.
SPITZER: Well, let me put it to you a little harder then. The Tea Party hasn't been saying recently --
PHILLIPS: We have.
SPITZER: Well --
PHILLIPS: We said it today with over 1,000 cheering folks on the Capitol Hill.
SPITZER: Cutting defense spending?
PHILLIPS: Absolutely.
SPITZER: So why hasn't the Tea Party leadership in -- on the Hill --
PHILLIPS: But I'm just one guy but we absolutely. And I think there are going to be cuts. And by the way --
VANDEN HEUVEL: In defense -- in defense spending?
PHILLIPS: I certainly hope so and I think there will be. And I'll tell you this, though. For the last year, this president had a 59-seat number in the Senate. He had a massive majority in the House. It is outrageous they never got a budget done this year.
For him to walk out -- hold on.
(CROSSTALK)
PHILLIPS: For him to walk out there last night -- for him to walk out there last night and go, let's all be adult about this. Come on, Eliot, he had a whole year to be an adult --
(CROSSTALK)
SPITZER: Respond to that.
VANDEN HEUVEL: I want to say something about -- no, no. I will
SPITZER: I think Tim's right.
VANDEN HEUVEL: Because I think what we're looking at is a political landscape where you have Republican cruelty and cowardice and Democratic timidity. And I do think that the Democratic leadership has not put forth an alternative vision of the kind of budget this country needs.
We don't need the massive cruel spending cuts that we're seeing in the Republican budget. We need an economy that will speed along the very weak recovery and the debate we are having in this country is so wrong headed, so narrow because it is not a deficit crisis or a debt crisis. It is what a majority of Americans say it is, a jobs crisis, and where's the attention to that?
SPITZER: OK. Look, Katrina, I agree -- I agree with your formulation. Cowards versus the timid. This is not a pretty picture. But I also agree with Katrina, we've got a short-term jobs crisis, a long-term health care cost containment crisis. But I think Katrina's point is very well taken.
There is a fairness crisis as well. The top 1 percent gets 25 percent of the income, has 40 percent of the wealth, getting more and more of it every year. We gave the rich a huge tax cut last year. Yet two-thirds, two-thirds of the cuts that Paul Ryan proposes are on the backs of the poor.
Isn't that unfair?
PHILLIPS: Eliot, Americans have rejected this class warfare stuff. It doesn't work --
(CROSSTALK)
VANDEN HEUVEL: It's not class warfare. PHILLIPS: It totally is. It totally is. And that's what they've rejected. The president and all that love went around screaming in the last election cycle. It didn't work. Americans are beyond that. They know that if we're going to get unemployment down, we have to make sure job producers are out there producing.
We've seen an uptick in job numbers since the president -- and good for him, by the way, for signing that tax cut extension.
SPITZER: Listen --
PHILLIPS: We've seen an uptick since because of the confidence.
(CROSSTALK)
VANDEN HEUVEL: But Tim, it's not class warfare. It's about fairness --
PHILLIPS: Sure it is. Let's be candid, it is.
VANDEN HEUVEL: It's about fairness in the country. And I recoil when I hear commentators talk about Paul Ryan's courage because to me it is the ultimate in cowardice to ask those who have the least to make the most sacrifice. We could go back to the Clinton era tax levels when we had jobs --
PHILLIPS: We have a succumb state --
(CROSSTALK)
SPITZER: Let me --
VANDEN HEUVEL: No, but the wage stagnation, 30 years of an assault on the working class in this --
PHILLIPS: Having --
VANDEN HEUVEL: And now Paul Ryan and the Republicans are asking for tax cuts for the richest?
SPITZER: Katrina --
PHILLIPS: Let me just --
(CROSSTALK)
SPITZER: But wait. Let me just show you something because, look, I'll give you your fair shot, trust me, I will. But Katrina is right. When we're putting the tax rates merely back to where they were -- I would like to see them go back to where they were under President Clinton.
During this period, here are the numbers. Can't see it on TV. 22.8 million jobs created when marginal rates were 39. We lower the tax rates and we lost 653,000 jobs. The argument of the causation between lowering marginal rates, job creation, simply isn't born out economically. This isn't class warfare --
PHILLIPS: What about the Reagan tax cuts? What about the Kennedy tax cuts? They did create jobs --
(CROSSTALK)
VANDEN HEUVEL: The Bush tax cuts did not create jobs.
PHILLIPS: What about Reagan and Kennedy?
VANDEN HEUVEL: Those are the jobs --
SPITZER: One at a time, one at a time.
(CROSSTALK)
VANDEN HEUVEL: The jobs numbers increased --
PHILLIPS: What about the Kennedy tax cuts?
VANDEN HEUVEL: Well, let me go back to Eisenhower for a moment. A moderate --
PHILLIPS: Well, I'm asking about Kennedy but if you want to --
VANDEN HEUVEL: -- Republicans, 90 percent marginal tax rate. No one is talking about that because --
PHILLIPS: But you're not going to answer the Kennedy increase in jobs?
VANDEN HEUVEL: I want to talk about Bush, though.
PHILLIPS: You're not going to answer that? What about --
SPITZER: One at a time, guy, please.
VANDEN HEUVEL: What I want to do -- I admire President Kennedy but I want to do recent contemporary history. But President Bush's tax cuts did not, in trickledown terms, nor did Reagan's tax cuts, increase jobs. Jobs numbers increased after Clinton's tax increase.
I don't -- I think we need a larger fundamental conception of what kind of country we want to be. Do we want to have a sense of fair share politics or are we going to really ask, in false fiscal responsibility terms, that the poor, the middle class, are the ones who have to bear the burden of balancing the budgets?
(CROSSTALK)
SPITZER: Let me frame it in a different way.
PHILLIPS: OK.
SPITZER: Then you can get the last word before we take a break.
PHILLIPS: All right. Thank you, I'll hold you to it.
SPITZER: Yes, good luck.
PHILLIPS: It's your show.
(LAUGHTER)
SPITZER: Here's the point. Let's concede that the causal link between the lower and marginal tax rates in job creation, ambiguous at best for both sides. One thing we know with certainty. It's going to cost us $800 billion to extend those tax cuts for the top 2 percent over 10 years. And that's how long they're going to be extended.
That's how much --
PHILLIPS: Not yet.
(CROSSTALK)
SPITZER: That's how much we're talking out of Medicaid. Almost the identical amount. Health care for the poor. I just ask you, somebody who is a very fair, good person, doesn't that bother you?
PHILLIPS: It's not necessarily being good to have a failed social welfare program, Eliot. That's not helping people. The current system doesn't work. The great society of the '60s, are you telling me it worked?
SPITZER: This --
PHILLIPS: Of course it didn't.
(CROSSTALK)
PHILLIPS: It's not working today. It's not working today. It certainly is. It's the same premise. It's not working today. And to say that we're going to keep doing things the way we're doing them and anything else is somehow cruel is silly.
SPITZER: OK --
PHILLIPS: Block granting the governors, letting people at the local level to have more decision-making process is better -- Eliot.
SPITZER: I said - I said I'd give you the last word, I didn't say you could go on forever. All right.
Katrina and Tim, stick around. We're going to come back to you in a minute. Unfortunately we haven't resolved all the problems. We will when we come right back.
(COMMERCIAL BREAK)
SPITZER: We're back with Katrina vanden Heuvel and Tim Phillips. Continuing this discussion about the budget. And Paul Ryan's proposal. Now one of the things in there, which is I certainly support, is the concept of lowering marginal rates if you eliminate all the loopholes that he says are distortive. But the devil is in the details in this. You could lower personal rates to 25, corporate rates to 25 as well, if you eliminate all the loopholes.
Look, I could make an argument, I'm sure you could, Katrina, for raising the rates, but let's put that aside. Let's see if we can agree on closing the loopholes which you agree would be a good idea.
VANDEN HEUVEL: Absolutely.
SPITZER: OK.
VANDEN HEUVEL: Absolutely.
SPITZER: Tim, you agree?
PHILLIPS: Absolutely.
SPITZER: OK, so let's put some out on the table.
VANDEN HEUVEL: But do you agree on Bernie Sanders, close all corporate tax loopholes and you bring back into this country $400 billion in revenues over 10 years?
PHILLIPS: As long as you don't have the double taxation of foreign profits. I don't think that's a good thing. There were that --
VANDEN HEUVEL: And you bring it back into those profits, those corporate profits?
PHILLIPS: If they'd already --
VANDEN HEUVEL: Back into this investment in this country.
(CROSSTALK)
PHILLIPS: They've already paid taxes --
SPITZER: OK. We've agreed on the concept here. Let me put out a couple of other ones. There is something that we -- a lot of people like which is the deduction for interest you pay on your home mortgage. You favor of getting rid of that?
PHILLIPS: That's a tough one. That's a tough one. I'm not going to say that. That's a tough one.
VANDEN HEUVEL: I think it's -- I think it's unfair and it hurts lower income people in this country who don't have homes --
SPITZER: Yes, the fact of the matter is people benefit from this are usually higher income people.
VANDEN HEUVEL: Higher income. PHILLIPS: Yes, but we want to encourage home ownership with some -- with 13 percent of all houses sitting vacant right now.
SPITZER: We did that through Fannie and Freddie, that worked out well, right? I know you're a fan of --
(LAUGHTER)
PHILLIPS: No, it didn't.
VANDEN HEUVEL: But I also -- I want to raise one tax which you knew of when you were --
PHILLIPS: Right.
VANDEN HEUVEL: You know -- financial transaction tax.
SPITZER: Right.
VANDEN HEUVEL: Wall Street has made out like bandits. I would say half of a percent --
SPITZER: OK.
VANDEN HEUVEL: A tax on the transactions you would bring in, billions of dollars.
SPITZER: Katrina, I'm for it but I want to focus right now on eliminating loopholes which is where I think there's conceptual agreement rather than creating a new tax because I want to see if we can forge some agreements here.
Another one that the Bowles-Simpson reports say to get rid of is the capital gains tax. They said --
VANDEN HEUVEL: Absolutely.
SPITZER: And follow me on this. Instead of treating some income like capital gains and taxing it at a lower rate, tax it all at the ordinary income rate so it would be a tax increase for people who do nothing but trade stocks back and forth. Bowles-Simpson was for it. It's kind of hinted at that Paul Ryan would say get rid of it.
Do you favor of getting rid of that differential so the tax on capital would go up to the ordinary income level?
PHILLIPS: I don't. It's going to be a tax increase on people. And we're not --
VANDEN HEUVEL: Hedge funders.
PHILLIPS: We don't need tax -- well, so they're bad guys. You get to -- bad people who -- we don't like those cuts, we're going to raise the taxes --
(CROSSTALK) SPITZER: No, no --
VANDEN HEUVEL: They pay fewer taxes than their assistants or secretaries as Warren Buffett said --
(CROSSTALK)
PHILLIPS: The top 1 percent --
SPITZER: One at a time.
PHILLIPS: -- paying half of all the --
SPITZER: But Tom -- Tim, here's the problem.
PHILLIPS: To say that they're somehow not paying is just not accurate.
SPITZER: The concept though is let's treat all income the same. The moment you start differentiating, you distort the marketplace. You're creating some incentive for people to do all this trading that doesn't actually create wealth. But you're not for that one. I don't want to linger on this too long.
VANDEN HEUVEL: It also increases speculation which was a problem in the greatest financial crisis since the depression. All of the speculation. And I think hedge funders, private equity people who are literally just doing speculation, let them pay fair taxes but that should not be 15 percent as opposed to normal income tax.
SPITZER: OK. Let me come to another point. The only thing Paul Ryan does is cut spending. He doesn't raise any revenue at all. Sensible people.
PHILLIPS: Good for him.
SPITZER: OK. I know you like the Bowles-Simpson report. Alan Simpson, the most conservative senator out there for a lot of years, from Wyoming, this guy is not some Democrat liberal. He's an arch conservative Republican. He said for every dollar, $2 of cuts, we want $1 of revenue. That's what he said. Isn't that reasonable?
PHILLIPS: Government took in $2.1 trillion last year. Fourteen percent of our economic outlook taken in from the government. That's already high enough. We're spending at 25 percent of GDP. Simply giving more money to the government with folks on the left saying that we don't want any more cuts is a recipe for just bigger government that doesn't really do anything to help people.
VANDEN HEUVEL: You cannot slash -- you cannot slash your way to prosperity and I would argue --
PHILLIPS: You can't bloat your way there either with big spending and big government. We've seen that in the last three years.
VANDEN HEUVEL: It's not to prosperity. It's a road map to national decline because this country desperately needs investment.
PHILLIPS: Like the late three years.
VANDEN HEUVEL: And we need revenue. In the short term, while this country recovers. Then there is a discussion in the longer term about what we do with what I would argue is not a crisis.
PHILLIPS: Eliot --
VANDEN HEUVEL: About budgets and debts --
PHILLIPS: Obama raised discretionary spending 25 percent in the last two years -- 25 percent. That doesn't include the stimulus bill of $814 billion. You add that in, that's over 55 percent. This idea that somehow we haven't been spending enough, that's silly.
SPITZER: Look --
PHILLIPS: Government revenue --
SPITZER: Can we agree on this? Can we agree on this?
We all appreciate that right now there's an issue of fairness you've got to confront in this. We disagree how we come out on that. We agree that we've got a competition problem going forward in terms of the rest of the world, whether or not we have the people skills here, the intellectual capitals could be. How do we get that if we don't invest in education?
VANDEN HEUVEL: Education.
SPITZER: If we don't invest in infrastructure?
PHILLIPS: We've more than doubled education spending in the last eight years. More than double.
VANDEN HEUVEL: I have not seen those figures. We may be reading --
PHILLIPS: This is absolutely accurate. Go back and look at them. Please do.
VANDEN HEUVEL: I mean, there is --
SPITZER: One at a time. One at a time. You've got 30 seconds.
VANDEN HEUVEL: I mean, I have noticed in the larger debate that goes on in this country. First of all, the wrong debates. But then we have economic zealotry versus economic reality. And I think that's what we're seeing with Paul Ryan's roadmap to national decline.
SPITZER: OK. Let's come back. Leaving Paul Ryan aside, with Bowles-Simpson, do you think there's any fundamental merit to what it said we've got to apportion the burdens between not just the poor but also defense and the wealthy? Which is something that Paul Ryan didn't do. And give me the last 10 seconds -- PHILLIPS: The tax code already does that. And Bowles-Simpson pointed out the spending problem is the spending problem. It's not a lack of revenue.
SPITZER: All right. Tim, Katrina, as always, thanks so much for being here. When we return, a special appearance IN THE ARENA. CNN's Fareed Zakaria joins us have a conversation with two people who know more about America's budget than just about anyone on the planet and we'll let you know as soon as that meeting at the White House starts. A lot going on. Stay right there.
(COMMERCIAL BREAK)
FAREED ZAKARIA, HOST, CNN'S "FAREED ZAKARIA GPS": For days now, CNN has been covering the looming government shutdown. But I am more interested in what's behind it substantively, the specifics of the budget crisis America faces.
Tonight, I have two powerhouse voices to delve into that. Columbia University's Jeffrey Sachs is one of the world's leading economists, the go-to man for guiding countries out of economic crises. David Stockman served in the Reagan White House as budget director. He has never shied from criticizing his own party or his own boss when it comes to doing what he thinks is best for America's fiscal crisis.
Gentlemen, thank you both.
David, do you think the Republicans are playing too hard ball with the president on this budget crisis?
DAVID STOCKMAN, FORMER WHITE HOUSE BUDGET DIRECTOR: No, I don't. Actually, given the fact that they've been bloviating, for want of a better word, for 30 years about spending cuts, given the really impossible position they've taken, no taxes, no revenues anyway, then they have no choice but to hold the line and not give an inch and if necessary, shut down the government. This is a litmus test to see whether they're real or not and whether they want to tell the American people that to go our way, spending cuts only will lead to the kinder result that will happen. So I think they should shut it down. We need a crisis to wake up both parties about how serious this fiscal issue really is.
ZAKARIA: I take it you disagree?
JEFFREY SACHS, ECONOMIST, COLUMBIA UNIVERSITY: Well, I think what David said is if you take the position, no taxes at all, in fact, tax cuts, then, of course, we get into this absurd situation and it is absurd. It's like watching a reality TV show. It's a melodrama. It's a sitcom. It's not the real world or at least it doesn't feel that way.
In December, the White House and the Republican leadership agreed on giving away a trillion dollars essentially of tax cuts by extending the unaffordable Bush era tax cuts. Both sides. This is a bipartisan mess created. And now we go on, after having given away a trillion dollars that everybody's saying, well, now we're in a crisis. Now we're in a crisis.
ZAKARIA: Isn't it fair to say that down to a few billion dollars, and this is peanuts, that the real money is all in the entitlement spending?
STOCKMAN: Well, I think that's true and that's a separate issue. But right here, it's not a few billion dollars. It's whether we're actually going to do something in the here and now that can make a difference. And I think the Republicans need to challenge the White House.
President Obama is weak. He's demonstrated that. He will fold like a lawn chair if they simply hold the line and say we're shutting down the government unless we get our $60 billion. Once they get their $60 billion, then the question is going to be, you've solved three percent of the problem, what are you going to do now? And that's where it gets interesting.
ZAKARIA: I'm guessing you agree with him, that Obama is weak?
SACHS: Well, yes, they know that he compromises, compromises, compromises. And David and I also agree on the bottom line, that the deficit is really a major problem and needs to be closed.
ZAKARIA: So let's talk about that. Paul Ryan put out this big plan. This is being hailed by many Republicans as the answer. What do you think?
STOCKMAN: Well, I think it's a nice plan for the fiscal hereafter, if you believe there's such a thing. But in terms of the here and now fiscal crisis, the wolf is at the door, what's going to happen two years and five years down the road? I think it punts, it whiffs entirely.
There are four issues. REDD -- revenue, entitlements, defense, discretionary. It whiffs on three of the four. It doesn't raise -- let's take revenue.
ZAKARIA: Right.
STOCKMAN: It doesn't raise revenue. In fact, it cuts taxes from current law by $4.6 trillion over the next 10 years. It puts us backwards. E- entitlements. Medicare, social security, nothing for 10 years. All right. Those two programs together in the base law will cost 17.4 trillion and the Ryan plan cuts 0.002 percent. It simply whiffs on entitlements.
Defense. It raises defense compared to the current baseline and embraces what the president has proposed. It's pretty clear we don't need an $800 billion defense and national security program in the world we're in today.
ZAKARIA: Discretionary.
STOCKMAN: Discretionary. They do cut that. And everybody is, you know, waving their arms, this is terrible. It's not so bad. In 2000, we spent $300 billion on discretionary programs. Today, a decade later, it's $600 billion, up 100 percent. Inflation is up 30 percent. We can cut back to the level that Ryan proposes and it would -- and if you make the right priorities, the country could live with it, given the austerity that we need.
ZAKARIA: And you were, of course, with Jeff Sachs, in favor of repealing all the Bush tax cuts to gain revenue.
STOCKMAN: Absolutely.
ZAKARIA: What do you think of the Ryan plan?
SACHS: I think it's absurd. I don't think it's going nowhere. It's nothing but an excuse to basically close down half of government and do as much damage to the poor as possible. When you look at what's really -- their social security's not touched. Medicare is basically not touched for the next 10 years. Defense is not touched, so what's the whole plan? The whole plan is slashing Medicaid, slashing programs for the poor, slashing programs for the environment, doing nothing about our energy needs and all the rest. It's preposterous, what it is. There's not a clever idea in the whole thing. And it is absolutely going to go nowhere as a result of this.
It's interesting. I think most of America actually is pretty reasonable. We agree on a lot. We don't agree on the last part about the discretionary spending but on what could be done on defense. What absolutely needs to be done on revenues, the full agreement. The American people agree too. Raise the taxes on the rich? Absolutely. Cut the military spending tremendously. Get health care costs under control. We all agree on that. But none of that's happening.
ZAKARIA: None of that's in the plan.
SACHS: That's not in the plan.
ZAKARIA: What about Jeff's point? Clearly, there have to be some investments made for growth, and there are some things only government does. Infrastructure. Education. Not -- clearly, there are some things that government does. Perhaps not the only one but crucially government does, infrastructure, education. If entitlements take up so much space that you have almost no room left for anything else, will it not affect growth in the future?
STOCKMAN: Well, I don't think so, for this reason. One, we don't have bad roads in this country except for New York City. And that's where people think the roads are bad. The rest of the country is OK. We spend 140 billion a year on highways and other transportation. Secondly, even after the cuts that Ryan makes, it's 400 billion a year for domestic discretionaries, which is the same amount we spend adjusted for inflation, in 2000.
Now in 2000, the year 2000 when Bush, unfortunately, took over, the country wasn't falling apart. We're spending a lot of money but I'm not sure we're spending it that wisely.
ZAKARIA: Finally, Jeff, if this plan isn't right, at some point don't we need a serious plan that deals with the deficit?
SACHS: Of course, we do. We need it now. We're not going to get it from either party because both parties feed at the same trough. Both parties are after the big campaign contributors and the powerful lobbies. They need to fund -- Obama's raising $1 billion for his re- election campaign. But where's he going to go? He's going to go to the major lobbies. He's going to go to Wall Street. He's going to make sure that he has support from the people who ought to be paying taxes but instead are getting the tax cuts and the tax loopholes.
ZAKARIA: We're going to have to leave it there. Fascinating conversation. More agreement than I would have thought. We will be right back.
(COMMERCIAL BREAK)
SPITZER: All right. We are back. And it is witching hour tonight on the budget. Let me read to you a tweet that was sent out by the president of the United States. This is how we now communicate.
He says meeting with VP Biden, Speaker Boehner, Majority Leader Reid now to discuss a funding bill to bring us through the end of the fiscal year. So the meeting where we hope he will knock heads has begun. We have Dan Lothian at the White House. Dana Bash up on Capitol Hill.
Dan, let's start with you. What are the expectations? What do you know about this meeting? Any screams and shouts coming out of the White House yet?
DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: You know, I can probably hear some right now. Listen, the bottom line here is that according to aides here at the White House is that some important gaps still remain. There was a much more optimistic tone this morning when President Obama made a phone call to congressional leaders and at the time, there was a sense that progress was being made, that there was no need for the president to get involved. But White House aides say that throughout the day, they've been monitoring the talks, and it became clear that the president needed to get involved again.
You heard him yesterday say that he wanted, if they couldn't reach an agreement or make any progress, he wanted to invite them back to the White House today. If they couldn't do anything today, he would invite them back again tomorrow. So that's what's happening right now. The president realizes that this is a critical moment. He wants to hammer out a deal. He hopes that he can start moving in that direction tonight.
SPITZER: You know, Dana, this sort of the rhetoric over the course of the day was edgy to say the least. It was not rhetoric that makes you think people are getting closer together, not warm and fuzzy commentary. It was sort of antagonistic and they were going at each other. So what are you hearing up on the Hill? Anything that there's a preordained resolution and they can all look good and have some big, you know, moment where they all appear in front of the cameras or is this really hard and fast tough negotiating?
DANA BASH, CNN SR. CONGRESSIONAL CORRESPONDENT: Boy, don't they wish there was kind of preordained deal going into this. I'm told that we should not expect a deal coming out of this meeting tonight. Miracles do happen but that is the expectation going into that. The words were nasty on both sides of the aisle. But despite that, over the past several weeks there has been, I'm told by sources who are negotiating on both sides of the aisle, a pretty good-faith effort, and it has had trouble, as we have seen, over the last couple of days. So that is why they have enlisted the president in the series of meetings.
Dan at the White House heard that there was not a lot of progress today. I was told by the congressional sources who were negotiating that more progress had been made in the past few days, that they do, as Dan said, have some gaps, important gaps, on how much to cut, more importantly, Eliot, what to cut, where to find the cuts from. And then those policy riders that House Republicans put into their legislation, things like abortion funding. And the environmental -- the EPA saying that they can't regulate greenhouse gases. Those are some of the really hot button issues they talked about today but they really need the president's help with.
SPITZER: You know, Dana, I think you just laid it out very well. There are basically three different issues. You got to agree how much.
BASH: Yes.
SPITZER: Then you've got to agree where. And then those pesky riders, those things that set out policy that are going to be pretty disruptive.
BASH: Exactly.
SPITZER: Because these are fundamental ideological differences.
BASH: They sure are.
SPITZER: And so, they haven't even agreed on issue one, which is the number -- or maybe they have and we just don't know about it. But certainly issue three is going to be a tough one because you've got issues relating to choice, abortion.
BASH: Absolutely.
SPITZER: Environmental -- so how are they going to sort those out in 24 hours?
BASH: That's a good question. It's a good question. But you know what, all those three issues, the thing that even makes it harder is that they're all related.
For example, I have been told by negotiators over the past several days and weeks that on -- the number on how much they're going to cut in spending that if Republicans don't get what they want, which they won't get everything they want, but if they don't get enough of what they want on those policy issues, they're going to expect to get a little bit more on the numbers, on how much they're cutting and what they're cutting. So that is what is going on and that is part of the reason why this is so difficult, because everything fits together as part of a big puzzle.
SPITZER: You know, it is like a jigsaw puzzle and you lose one piece, the whole thing falls apart.
BASH: Yes.
SPITZER: And I guess on the other hand, as you point out, when you got three issues, you can horse trade among the issues.
BASH: Yes.
SPITZER: It's not just a matter of the number.
Let me go back to Dan at the White House. Dan, any word, any screams that you're hearing now? And, also, let me ask you this, are you hearing from the White House why tonight? I mean, does it look good or bad to have this late-night meeting? Does it look as though things are out of control and does the White House feel it's playing defense because all the ideas seem to have been coming out of the Republican side of the aisle?
LOTHIAN: Well, look, I think that clearly, by the fact that the president did this after returning from a trip to New York and to Pennsylvania, that they felt that it was important for the president to get involved because not enough progress was being made.
Listen, the bottom line here is that neither side wants to see a government shutdown. You heard that from Republicans. The president and other Democrats have said that as well. There's a lot of concern that this momentum that the administration has been seeing with the economy, the good more positive job numbers late last week, that all of that could come to a halt or certainly be negatively impacted if the federal government does shot down. So both sides really wanting to see a resolution but as Dana pointed out, you know, there's no indication that they'll be able to get that magic number tonight and really walk away from here with an agreement. But as the president said yesterday, he's willing to call them back here tomorrow if they can't hammer anything out.
SPITZER: You know, Dana, what are you hearing up on Capitol Hill? Because clearly, it's the Tea Party that's pulling Speaker Boehner, sort of pushing him into a corner. He's got a very vocal and powerful group of his caucus, conference, whatever he calls them that is making it hard for him to sign off and a deal. Are they willing to go with anything?
BASH: Look, there's pressure on both sides of this, Eliot. There's no question about it. I talked to so many conservative members of Congress, whether you want to call them Tea Party, Tea Party-backed or just conservatives, especially the freshmen who came in here saying we're going to cut spending who have told me even up until this afternoon in the hallways here that they are making clear that they want the speaker to stay, to stand firm and to not compromise on these spending cuts. And certainly he is hearing that. But you're also seeing it on the other side. You are seeing some of the Democrats pushing the Democratic leaders and the White House to say, wait a minute, we're already giving a lot on spending cuts. We don't want to cut some of these programs that we think are really vital to the American people. So the pressure is really on both sides of this. And that is what is making the leaders and the president having such -- they have such a tough time getting to an agreement.
SPITZER: All right. Dan Lothian, up at the White House, and Dana Bash, up at Capitol Hill, thank you so much. We'll be checking back in with you later. Hopefully they'll be a break through tonight.
All right. We'll be right back.
(COMMERCIAL BREAK)
SPITZER: All right. We are poised to report anything that breaks out of the White House or anybody who breaks out of the White House, if there's a deal, an agreement on this tense issue of whether or not the government will be shut down. Dana Bash is up at Capitol Hill. Dan Lothian at the White House. But as soon as there's news, we will go back to them.
So, Will, let me ask you. As they ask that famous question on a TV show a couple years ago, deal or no deal? What happens tonight?
WILL CAIN, CNN CONTRIBUTOR: Tonight, you boxed me in on about a four-hour window here. Deal.
SPITZER: You think so?
CAIN: The absurdity of it all, the embarrassment of it all has to weigh on these guys. Democrats and Republicans alike. As Tom Foreman described earlier, the number we are residing at, just keeping these two guys apart, these two sides apart, that's threatening a government shutdown has gotten so small, Eliot.
SPITZER: But think back to what Dana just observed. Critical point. We've been focusing on the numbers. Three distinct issues. One, how much is going to be cut? Two, where do you -- how do you allocate these cuts? And three, these riders that are on very tough issues that always take time to work out. And that's why I think if it were just numbers, you're right, it would be pretty easy to cut this down the middle.
CAIN: Yes.
SPITZER: Numbers can always be compromised. Issues of choice, regulatory disputes, much tougher. That's why I'm not so sure they can do this.
CAIN: Let me say, OK, the third one is the big hinging point, the riders. On the numbers, look, at this point Democrats have suggested we've heard they'll give in on $33 billion. Right? The second issue. So there's a number. Republicans have said we need 40.
The second issue is where does it come from? I don't see the Democrats really making a principled stand on this. If you're willing to give on 33, seven more aren't going to kill your principles. The last issue is the riders and that does reside more on philosophy. I'm for this, you're for that. We can't agree on it.
SPITZER: Here's the thing. The Democrats may be saying to the Republican leadership, to John Boehner, we'll give you the cuts you need but you can't bring riders in. In which case, Speaker Boehner needs to go back to his conference, some very powerful and unified conservative voices and say to them, we've got the numbers but not the riders. These principled policy statements from their perspective, not principled from my perspective. The question is, does that work for them? And I have no answer to that right now. Yes or no?
CAIN: You're right. Because they are principled issues, these things like cutting Planned Parenthood, which is tied to funding abortion, these are big deals. These are big philosophical divides. Let me just say this, I'm ready to not have that fight right now. I'm ready to get to the big fight, which should start yesterday with Ryan.
SPITZER: Well, this is perhaps the critical point. This is merely the AAA game that's going to lead up to the major league debacle --
CAIN: Right.
SPITZER: -- starting about the debate about next year's budget because that's where the big money has to be dealt with. We've got another trillion dollar deficit. That's where you're going to have issues of fairness, issues of tax policy. Do you go with Bowles- Simpson which said raise some revenue, which is what the Democrats want, a very principled perspective on that part? Or do you go with Paul Ryan, which is saying we do everything by cutting and pushing it off on the backs of the poor. You've got eight seconds to tell me why I'm wrong.
CAIN: Because you always are wrong.
SPITZER: All right. There you have it. That is the principled argument from the other side.
CAIN: I had eight seconds. I had eight seconds.
SPITZER: All right. Guys, stay right there. CNN is going to be covering all the excitement out of the White House. The screaming, the shouting, the possible agreement, we'll see if it's there.
Thank you for watching. Good night from New York.
"PIERS MORGAN TONIGHT" starts right now.
