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In the Arena
The Sweat over Debt; Vote on GOP Debt Plan Postponed
Aired July 28, 2011 - 20:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
TOM FOREMAN, CNN ANCHOR: Good evening. I am Tom Foreman, and we are waiting and watching minute-to-minute right now for a crucial vote to begin in Washington tonight.
This is the battleground for Republicans in the quest to head off what some fear could be a catastrophic budget default affecting all of us. And there are signs of deep trouble in the House of Representatives.
Speaker John Boehner has been struggling all day to rally enough votes to approve his plan for the debt crisis. His Republicans, in red over here, hold a substantial majority. But at least 60 of their members shown here in yellow are also affiliated with the Tea Party.
Many of them have been furiously pushing against any compromise with the Democrats over here. And they appear to have risen in revolt once again. How many? We don't know. But the speaker has to bring roughly two-thirds of them into his camp if he's going to out-vote the Democrats who are standing firmly united against his plan.
He's been delaying the vote for hours now and that's almost certainly a sign that he doesn't have the numbers he needs, at least not yet. We'll cover all of the angles on this story which is shaking the capital tonight along with other news, too. Here's a look.
(BEGIN VIDEO CLIP)
FOREMAN: If anybody kept has his head and his integrity through the whole budget brouhaha, it's Alan Simpson. A conversation with what may be the last reasonable man standing.
And the president's poll numbers. They're trending down as the clock ticks closer to the debt ceiling deadline. Even if there is an 11th hour deal, is Mr. Obama headed to the point of no return?
(END OF VIDEO CLIP)
FOREMAN: So we kick it off in Washington with the dramatic events unfolding on Capitol Hill this evening.
Our congressional correspondent Kate Bolduan is there tonight.
Kate, what is your read? What is holding this up?
KATE BOLDUAN, CNN CONGRESSIONAL CORRESPONDENT: I think it depends a little bit on member-to-member, I'll tell you that, Tom. But let me tell you what we've been seeing this evening since it became clear early this evening that they did not have the votes at least yet or they were still working to secure the votes.
The House Republican leaders, they took to their offices and we started seeing member after member really being called into their office. And the leaders speaking with them about their position.
Many of them that went into their offices were either leaning no or were firm no or maybe leaning yes. It seems clear that what they want to know with 100 percent certainty that they have got the votes to pass this bill before they take back to the House floor to vote on it.
While we are inching into later into the evening, we are still hearing, though, from a spokeswoman for Eric Cantor, the majority leader. I'm telling my colleague Georgia Walsh saying very clearly the vote will be tonight. So they still seem confident they will get there. But they are still working on it at this late date.
I'll tell you -- their members are very different on kind of where their positions are. I've heard from conservative members. They are still unhappy about this bill. They don't think it goes far enough. They want to see more dramatic, stricter cost-cutting measures. More structural change to what they say is how Washington spends their money, really.
But what I've also been hearing from members with a tone of -- I'll have to say some frustration as they're coming out of these meetings, they basically said if they know that the bill is not going to pass in the Senate, that is the Senate majority leader Harry Reid has said it's dead on arrival, then -- they basically said why am I voting it? Why am I walking the plank, one person said.
So there's -- it's clearly a fluid situation, Tom. They're continuing to try to twist these arms and get these votes. They seem confident at this moment, I can say, that there'll be a vote tonight. But of course, it's changing on a dime. So we're following it closely.
FOREMAN: How are the Democrats doing in all of this, Kate?
BOLDUAN: Sitting back quietly and watching. I will tell you that. They are very quiet for many Democratic officials and any Democratic aides this evening. We heard earlier today Democrats seemed -- if not unanimous opposition to this bill, near unanimous opposition to this bill.
And they've made a strong effort to try to make sure all members oppose this bill and to show that there's absolutely no way that this bill is going to pass with the help of Democrats. But late this evening, they have been -- they've been quiet.
(LAUGHTER)
FOREMAN: All right. Kate, I know you're going to be standing by there. You let us know the minute the vote begins and any new developments. Great reporting, we appreciate that. Thank you.
If you have wondered why it is taking so long for this vote to get under way tonight, it's because of likely my next guest and a handful of his colleagues. He refused to vote for Speaker Boehner's plan.
Republican Congress Tim Huelskamp of Kansas joins me now live from Washington.
Congressman, good evening. Thanks for being here. Appreciate you joining us here. Tell me right now, if you can, you are not voting for this plan now, is that correct?
REP. TIM HUELSKAMP (R), KANSAS: No, sir.
FOREMAN: Why not?
HUELSKAMP: Not good enough. We have a very big problem. And I appreciate the speaker's effort to try to get something through when you have a Senate that won't have a debate even on our cut, cap and balance bill. But we need a bill that solves the problem long term.
And I don't think this does enough. And I'm optimistic we can still do a better job to solve our nation's problems.
FOREMAN: Have you been called in by the leadership this afternoon?
HUELSKAMP: They'll catch me on the floor, but I have not been in the office. I made it very clear very early on that I think we can do much better.
FOREMAN: What are you hearing from those other Republicans, though? I'm guessing what they're saying to you is, look, we need to pull together, you need to join with us. But specifically, what are they saying to you?
HUELSKAMP: Well, they are indicating that this is very important. That this is the only thing that can happen. Then we hear a word that may be tabled in the Senate, again. And my concern is still with the Senate that refuses to vote on any plan.
I think cut, cap and balance is the plan and the balanced budget amendment has to be done. When we hear about downgrades or defaults, my concern is that a bill like this is simply not good enough to avoid a downgrade.
FOREMAN: Do you -- is there anything out there that would satisfy you right now? I mean what if the speaker came back to you and said, you know what, we're going to delay this until tomorrow, or whatever, and we're going to have to vote. But I need to know what you want. What do you want?
HUELSKAMP: I want a solution, and not a deal. I want something that works long term. And that was cut, cap and balance. And I think it's still the answer, still the solution, and a balanced budget amendment has to be part of that, because we are in a huge debt crisis. We are in a huge overspending problem.
And we've got to solve that. And you know the first year of cuts, depending on how you count it, is less than the Post Office lost last year. That's simply not good enough.
FOREMAN: Yes, but Congressman, you and I spoke in Washington the other day. You seem like a very reasonable guy. And you know that there are many people who've watched Washington in a long time would say what you want simply cannot be accomplished right now. You don't have the votes for it.
Are you willing to walk away from the table with nothing rather than some compromise?
HUELSKAMP: Well, apparently there are no votes for anything right now. And -- but I think we have leaders in the Senate and in the White House that refuse to allow the process to move forward. So -- but we have to have a solution.
I wasn't sent here to do only what Washington thought we could do. I was sent here to represent 700,000 folks in Kansas that want significant structural changes in how Washington works. And that's the way I promised to vote and that's what they're looking for. I had to tell the town hall last night with about 20,000 constituents and they were very clear, this plan is not good enough.
FOREMAN: So what do you do now at this point? You guys also don't have the momentum to get what you want. Nobody seems to have it right now. How does the stalemate get broken?
HUELSKAMP: Well, we're working with senators -- conservative senators that are looking for a balanced budget amendment. I think that's the key thing, the key structural reform that Americans do support by wide margins and pushing that forward and trying to require Senator Harry Reid to let them vote on a balanced budget.
Let them have the vote. Let 22 U.S. senators get up on the floor of the Senate and actually vote against what they said back home. We have enough votes in the Senate.
FOREMAN: If you get to vote --
HUELSKAMP: If they would let it bring it to a vote. Yes, sir.
FOREMAN: If you get to vote, whether or not you succeed with the vote, will that satisfy you?
HUELSKAMP: No, it won't satisfy me and it won't satisfy our credit ratings.
FOREMAN: OK, last --
HUELSKAMP: They want something long term structural.
FOREMAN: One more question I want to ask you.
HUELSKAMP: Yes.
FOREMAN: Are you willing to let the federal government default whether it's in a few days or some people arguer it'll be in a couple of weeks? But nonetheless, are you willing to let it default or do you think something still has to be done before that?
HUELSKAMP: I believe something needs to be done and has to be done to avoid a default and a downgrade. And that's hard for Washington to do big things.
FOREMAN: All right.
HUELSKAMP: Because they're so used to the status quo.
FOREMAN: All right. Congressman Huelskamp, I wish we had more time but thanks so much for joining us. We appreciate your insight and let us know how your vote continues to progress as this goes on.
HUELSKAMP: Thank you.
FOREMAN: Now I want to bring in Congressman Connie Mack, a Republican from Florida. He's also planning to vote against the Boehner plan.
Congressman, good evening. What have you been hearing today? Have people been twisting your arm?
REP. CONNIE MACK (R), FLORIDA: No, you know, I haven't had my arm twisted. But you know, earlier on I made it clear to the leadership that, you know, for me this is about balancing the budget. And I have introduced a plan that would do just that by cutting 1 percent of spending a year for six years, capping spending at 18 percent of GDP. We balance the budget in eight years and we cut $7.5 trillion all by taking one penny out of every federal dollar.
FOREMAN: Sure, I've read over --
MACK: So I've been --
FOREMAN: I've read over your plan and it's an interesting plan, but it also isn't at a point now where it's the thing being voted on tonight. Is it -- is it a mistake that the leadership is not talking to you and saying look, is there some variation of this plan that could bring you on board? Because right now, the problem is nobody has a plan that can get approved.
MACK: Well, here's the problem. The problem is, we are $14 trillion in debt. We have a $1.4 or $1.5 trillion deficit a year. The plan that's coming before us cuts $900 billion over 10 years so that's roughly $90 billion a year. That means we still continue to spend more than we bring in. And after 10 years, we have a $20 trillion debt.
So I don't think anybody can look at those numbers and think that this is a good idea. We are not changing anything in Washington. And the problem that we're going to have is, where everybody is talking about our rating, our AAA rating, the problem is, is our debt to revenue is out of whack.
And all this is going to do and everything that the Senate is talking about is going to increase that debt to revenue. So we've got 14, possibly $17 trillion in debt, to $2 trillion in revenue, it doesn't make sense. If that was an individual, they couldn't get a credit card.
FOREMAN: You said that nobody could look at that plan and see that there's wisdom in it. An awful lot of people are also saying that you also can't look at the calendar and look at where we are right now and see wisdom in burning closer and closer to default.
What do you think about that?
MACK: Well, I will say this, that I think the date of August 2nd was picked by the administration, the Treasury Department, as -- knowing that it was the date before Congress went on recess and they chose that date.
FOREMAN: Do you --
(CROSSTALK)
MACK: I'm not saying -- wait, I'm not -- I'm not saying that we don't -- something doesn't need to happen, but I'm just saying that, you know, this whole thing, we could have avoided this. We knew it was coming but everyone wanted to posture. We need to balance the budget.
The American people are saying to the Congress and to the president, balance the budget. Do what we have to do at home. Everybody watching your show tonight has had to take more than one penny out of every dollar of their home budget. And every business had to take more than one penny out of every dollar of their business budget.
Why can't Washington do the same thing?
FOREMAN: I do understand that, Congressman. And you're absolutely right. That's the reason that so many of you are in Congress right now because many Americans very much feel that way.
But our polls also say that right now, at this time, whether the deadline is August 2nd or a couple of weeks down the road, that what the majority of Americans are saying is make some kind of deal so the hole doesn't get deeper while we try to address this.
What do you say to those people right now?
MACK: I'm saying that the deal is on the -- that is on the table makes the hole deeper. And so don't -- you shouldn't expect people who believe that we should balance the budget to vote for a deal that makes the hole deeper.
FOREMAN: So are you ready to take it this right up to the doorstep of default? Or what -- I mean how do you feel about this idea? Do you believe default is a genuine threat at this hour?
MACK: I do believe that some sort of default defined in one way or another is possible. But I also believe that the leaders in the Congress need to start listening to what it is that the rest of us are saying. We want to balance our budget.
FOREMAN: Is there a chance that your vote will change in the next few hours or in the next 24 hours?
MACK: Only if the bill changes to something that balances the budget.
FOREMAN: All right. Congressman Connie Mack, thanks so much for being with us this evening -- on a busy evening. I know you've got a lot to tend to as well.
Up next, how are the Democrats in Washington feeling tonight? They will be casting a vote as well. But what will it mean?
Democratic National Committee chairwoman Debbie Wasserman Schultz, highly influential in that party, joins me when we come back.
(COMMERCIAL BREAK)
FOREMAN: There's the clock that all of Washington is watching tonight. An awful lot of us out of Washington, too. The countdown to the debt limit. And it is getting closer, closer, closer.
We've been waiting all day to see if the Republicans are going to vote on Speaker John Boehner's debt plan. We have been told earlier this evening, our Republican sources, that a vote will still come. But it has been delayed over and over for hours now suggesting that the speaker simply does not have the vote.
Now that said, earlier today the Republicans had a little presser where they wanted to make sure that voters knew that they at least had something on paper. Take a listen.
(BEGIN VIDEO CLIP)
REP. JOHN BOEHNER (R), HOUSE SPEAKER: There are no gimmicks, there are no smoke screens.
REP. KEVIN MCCARTHY (R), MINORITY LEADER: Americans deserve an honest approach. No more tricks. No more accounting gimmicks. No more broken promises.
REP. JEB HENSARLING (R), TEXAS: Mr. President, we still don't have your plan. Mr. Reid, we still don't have your plan.
(END OF VIDEO CLIP)
FOREMAN: Much more confident times. That was only a few hours ago. We're monitoring it minute by minute. As soon as the voting begins we will let you know.
But what about the Democrats? What do they have to offer right now? What are they doing this evening?
Right now someone who knows, Democratic National Committee chairwoman Debbie Wasserman Schultz, congresswoman from Florida.
Congresswoman, thanks so much for joining us.
REP. DEBBIE WASSERMAN-SCHULTZ, DEMOCRATIC NATIONAL COMMITTEE CHAIRWOMAN: You're welcome, Tom.
FOREMAN: What is your reaction to what's going on right now with the Republicans?
SCHULTZ: Well, you know, as I watch this train wreck that the Republicans are engineering as we hurdle toward default, the word that comes to mind is irresponsible. I mean this is just not a responsible way to deal with addressing our deficit and making sure that we can strike a balance between getting a handle on our long term deficit and making sure that the nation doesn't default on our obligations.
And that's what the Republicans, I guess, don't grasp. I mean, Tom, you know I'm as committed -- committed a Democrat as they come. Obviously, I'm the chair of the Democratic National Committee. But one of the things that I understand as a member of Congress who was elected to represent constituents and be responsible is that it can't be my way or the highway.
I mean the cuts that we are going to have to vote for in order to reduce the deficit are painful. Ones that Democrats would not normally want to vote for as the president has said. But we understand that we're going to have to compromise in order to make sure that we can continue to get our economy turned around, get a handle on the deficit, avoid default and make sure that our credit rating doesn't go down.
And what the Republicans don't understand is that compromise is an absolute necessity. It's just shockingly irresponsible. At the end of the day, we need to sit down at the table, find a reasonable compromise that strikes a balance and pass a balanced plan that doesn't pile all the pain on our seniors, on children, on the middle class and working families.
FOREMAN: Congressman, let me ask you a follow-up question on this.
SCHULTZ: Sure.
FOREMAN: One of the things the Republicans were saying today and it wasn't just today. I've heard others saying it in recent days. They have been saying that the corollary of this is that the Democrats, to their mind, are not leading, specifically President Obama.
They are saying he needs to come out and say what he wants in a plan and he won't do it. I mean how do you respond to that?
SCHULTZ: That's just simply not true. FOREMAN: Real numbers, written down. Written down numbers.
SCHULTZ: President Obama has offered plans, has worked with Speaker Boehner. They were -- they were negotiating a full plan and then twice now, Speaker Boehner has walked away from those negotiations where they were developing a plan, one that would have had balance, one that would have had revenue as well as cuts.
And John Boehner got cold feet. Unfortunately, allowing the extremists in his party to control what happens, to jeopardize our economy, to hurdle us toward default. And you know it's time to let the -- to let the extremists go and find some reasonable common ground in the middle and make sure that we can come together and strike a balanced compromise.
FOREMAN: Are you satisfied, then, with the president's leadership on this? Because I have to tell you, there have been Democrats in recent months who have said to me, they are not satisfied because they feel like the president should, again, much more explicitly say what he wants with the numbers next to it, not merely, I would like things to be better.
SCHULTZ: I'm proud of the president's leadership. I think he's done an excellent job. He has clearly laid out in numbers and in broad terms exactly what should happen. That we should make sure that we -- when it comes to cuts we don't pile all the pain on groups of people who can least afford it on the middle class and working families. That we can make sure that we preserve education and look for cuts, significant cuts that we'd all prefer not to have to make but cuts nonetheless that ensure that we can continue to educate our children, take care of seniors, make sure that people can remain healthy.
And at the same time, also ask something of the wealthiest and most fortunate Americans. That's something that the Republicans simply refuse to do. Instead, they are insisting and scrounging for votes tonight for a bill that is dead on arrival in the Senate. That the president has said that he does not support.
For what? To satisfy their extremists in their party.
FOREMAN: We're going to have to go, but I have one last quick question from you.
SCHULTZ: Sure.
FOREMAN: Do you think we're going to have a deal and if so how soon? Short answer.
SCHULTZ: I absolutely hope so. Democrats are ready to be at the table. We have been at the table ready to compromise. We need partners. And right now they simply refuse to be there.
FOREMAN: How soon?
SCHULTZ: We need them right away. Right now. FOREMAN: But how soon do you think we'll have a deal?
SCHULTZ: If you look and listen to your guests tonight on the other side of the aisle, it doesn't appear that we're going to have one very soon.
FOREMAN: All right. Congressman Wasserman Schultz thanks so much for joining us this evening.
SCHULTZ: OK. Thank you, Tom.
FOREMAN: When we come back, looking for a sane voice for the budget with clearness. Boy, you can look a lot. But you might not need to look any further than Alan Simpson. He doesn't suffer fools or change his views to match the latest polls. He joins us with some straight talk when we come back.
(COMMERCIAL BREAK)
FOREMAN: There is the clock counting down the hours until the debt limit is reached. And there's the capital where tonight Republicans are frantically counting votes to see if they can get enough support to pass the speaker of the House plan for dealing with the debt.
It does not look like they have the votes yet. But we're told they will have a vote. We'll take you to it the moment it begins to happen.
People in both parties keep telling us that D.C. is desperate for some voices of reason tonight. Many will also tell you that the most respected of those voices is former Senator Alan Simpson of Wyoming.
He is a Republican but he was chosen by President Obama to head up the deficit reduction commission with former Clinton chief of staff Erskine Bowles.
Months ago their group recommended bold measures including changes to entitlements, taxes and more suggestions that in large part have been ignored. Maybe someone might have listened.
Senator Simpson joins us now from Cody, Wyoming.
Senator, thanks for being here. A few weeks ago --
ALAN SIMPSON (R), FORMER U.S. SENATOR: Sure, you bet.
FOREMAN: -- you said, and I quote, "If there's anybody in America who wants to solve this son of a bitch, show me your favorite sacred cow and shoot it."
Senator, with all respect, I see a lot of cows that are a little bruised in Washington, but I don't I've seen one get shot yet. What do you think?
SIMPSON: No, it's sad. And I admire the woman I was listening to in the earlier part of the program. The national committee woman. You see she went to the flash words that they're going to take care of the seniors, and the poor, and the vulnerable and the veterans.
Well, who doesn't want to do that? Come on. Let's get off that kick. If you look at what Erskine and I did, we said, look, if you don't do something to Social Security to make it solvent, we are not balancing the budget on the backs of poor old seniors, we didn't steal the $2.5 trillion of the trust fund.
We say, do nothing and you're going to waddle up to the window in the years 2036 and get a check for 23 percent less. Now if that's sensible, the drinks are on me. That's nuts.
You have things -- the Defense Department has got fat in it that you wouldn't believe. They have contractors between one million and 10 million. They have a health care plan for 2.2 million retirees, and the premium is 470 bucks a year, no co-pay and takes care of al the kids.
Let's get serious. Let's quit -- let's quit saying the Republicans are interested in throwing bedpans out of hospice crippling old people, stealing from Social Security. This is nuts. And the Republicans are just as goofy to say that if you get rid of a tax earmark, getting rid of -- $6 billion in subsidy for ethanol, that's half the tax increase, I mean you've got to goofy to get that kind of math.
FOREMAN: How do you get people in Washington talking this way, though? Now I'll grant you also, I know that not everybody in Washington thinks you're the sage in the mountains, I guess they don't think that of anyone.
SIMPSON: No.
FOREMAN: But how do we get those voices to the forefront now? Because so many Americans in the polls and everything else are saying this is what we need. We need to get these people who are beating on the talking points and demonizing the other side --
SIMPSON: Well --
FOREMAN: -- to off the table, so a reasonable solution can be reached.
SIMPSON: I slipped out of the witness protection program from time to time like Erskine. But let -- all they have to do, all they have to do before they whine and bitch to me is read a 67-page report which is in English. It's not for pundits or panderers or journalists or anybody. It's for the American people. Uses phrases like going broke, sharing the pain, sharing the load. We're all in this together.
And it was signed by five wonderful Democrats including Dick Durbin who was the print. He deserves the Medal of Honor. And Tom Coburn who is another great American. When you mention Durbin or Coburn to people, they go crazy. Let me tell you Five Republicans, five Democrats, one independent that's 60 percent of this commission voted for it. All you have to do is read it. It hits everybody.
So don't give me the smoke about hurting the poor. We took care of Social Security. We gave the lowest 20 percent, 125 percent of poverty and we get called the cat food commission by goofy people who can't even think straight.
Then you got veterans and you got defense contract. You can't do anything. The mess in the kitchen is Medicare. I don't care if you call it Obama care or Elvis Presley care, I don't care care. It's on automatic pilot.
So then Ryan whether you like him or not comes up with a plan to do something about it, they crucify him. We put our plan in and if Obama accepted it that day, they would have crucified him. I mean, so everybody is waiting to be eaten by alive rats, snails and toads. That's unbelievable.
TOM FOREMAN, CNN ANCHOR: Senator, let me ask you a question about this, I've always wondered when you put in the kind of effort to be on a commission like this, you guys consider your thoughts, you write them down, you present them and in my experience, maybe most of the time.
The political powers who ask for it then promptly stick it on a back shelf and forget about it. How does that feel? What do you think?
SIMPSON: Well, it's very sad because part of the proposals now in the House and Senate, at least in the House, is to have an appointed commission of people who are going to suggest recommendations in spending and revenue.
Well, have a drink. That's what we did. We spent a year and we worked hard. Every one of us barred when we signed our name to the damn thing because it hit everything. It hit things in my state.
If you can't get rid of these tax expenditures and use the money to spend on more stuff, but to reduce the debt and then get a tax code that goes into three separate tax, 0 to 70 grand you pay a percent, 70 grand to 210, you pay 14%, over that you pay 23% and reduce the corporate rate from 26 to 36. It's all there.
So I say to people, bitch, moan, you ought to see the crap I get. I say read it then call me back and whine. I didn't know you meant that. Good God.
FOREMAN: Both sides keep saying, keep saying, keep saying they are protecting the little guy. Do you think anybody in Washington is protecting the little guy?
SIMPSON: The saddest and terrible irony of all of this, terrible stuff, is that if we, even if the debt limit is extended and I hope and pray it will, but even if we lose our credit rating and it gets dropped down, do you know who gets the worst when inflation goes up a little, all this, inflation and indexes pop up?
The little guy is the one that gets hurt. It actually has a stench to it. The little guy is the guy that is going to get cremated. It's Bs to listen to both sides talking about that person.
FOREMAN: Senator, you dedicated your life to this kind of work. I wonder how you are feeling tonight when you think of how many Americans are sitting in places Rapid City and Nevada, Reno, places like that looking at Washington saying what on earth is wrong with those people?
SIMPSON: It's terrible that it's reached a single word. It's called disgust, absolute disgust. Both parties are at blame. I can't believe how they can't get in a room together and talk. I can't believe that they don't believe compromise is not a dirty word.
It doesn't mean you are a wimp. You can compromise an issue without compromising yourself. What in the world even happened? I would go across the aisle and talk to Tip O'Neill. He had horsepower and I worked with him. He was good with me.
I worked with Kennedy. These people who say I don't talk to Democrats or I don't talk to Republicans, hell, that's why we are in trouble around the world. We won't talk to people. We give each other the ice treatment.
It destroys everything. It destroys marriages, destroys relationships and destroys diplomacy.
FOREMAN: Senator Alan Simpson, thanks for joining us tonight from the lovely town of Cody, Wyoming. I wish I was there with you. Appreciate your time.
SIMPSON: Thank you very much.
FOREMAN: Still ahead, we are told default means catastrophe. So we have to take our medicine right. Whatever form that medicine takes. There's only one problem says Robert Reich. The cure may be even worse than the disease. That and much more is still ahead as we watch the clock in Washington to see if we get any closer to a deal tonight.
(COMMERCIAL BREAK)
FOREMAN: There is the clock. There's the capital. Republicans are counting votes tonight to see if they can keep the speaker of the House's plan for dealing debt ceiling alive. It has not looked good for hours. We'll see if they can actually get around to a vote. We'll take you there immediately if they do.
Despite the frantic calls in Washington that the nation must not go into default and must not stop making payments on the money it has borrowed. The simple truth is some fear we are still headed that way, especially with what we are seeing tonight. They say default will be an economic calamity causing a spike in interest rates, which will make it hard for everyone to borrow money, driving up prices, forcing businesses to shed jobs and possibly reigniting the recession.
One person who believes that former secretary of labor under President Clinton, Robert Reich. He joins us now. His latest book is "Aftershock, the Next Economy and America's Future." He joins us from Berkeley, California.
Mr. Secretary, thanks for being here this evening. Listen, do you think we are closer, closer, closer to a default tonight?
ROBERT REICH, PROFESSOR OF PUBLIC POLICY, UC-BERKELEY: Well, it seems like we aren't closer because there doesn't seem to be any agreement among Democrats and Republicans. Harry Reid put on the table at least a proposal that we might call Republican like. There are no tax increases at all in it, but Republicans are very far away from that.
Even speaker bone -- Boehner can't get near Harry Reid's proposal and tonight we're going to see if he has enough - enough votes. It doesn't like he has enough votes. You know, they would go to a vote the moment he had enough votes. The fact they are not going to a vote suggests they are not there yet.
FOREMAN: And you fully believe that default if we go to it would be as catastrophic as many fear?
REICH: Well, the unfolding catastrophe, Tom, because interest rates will start trending upward. The dollar will continue to go down if the credit rating agencies, that is, Fitch and Moody's and Standard & Poor's, if they say that they are going to downgrade the Treasury bill, actually, the safest investment anybody has ever had in the world, if they downgrade the treasury bill because they are afraid of a default or think that somehow our fiscal House is not in order, then definitely all interest rates go up.
The little guy is hurt. As Alan Simpson is 6'5", I don't know what he's talking about little guy for. I'm under five feet, I know about little guys. But if that should happen then obviously everybody is going to be hurt. Little guys will be hurt the most.
FOREMAN: Let me ask you about these plans because one of the other things that I think is being overlooked in all of these. If we get a deal, it's not like the world is fixed. It just stops the immediate catastrophe in front of us.
Talk to me about some specific areas. Housing in this country, I want to bring up something here. We're going to talk about how we've got so many houses, 25 percent of home loans are now underwater in this country.
If one of these deals is approved, whether it's the Reid deal or the Boehner deal or something that looks like it, what happens to the housing market, better or worse? REICH: Well, look, the jobs market, the housing market, what we are confronting right now in the country is an economic emergency. We are still particularly on the jobs front in the gravitational pull of the great recession.
If the deal that comes out of Congress means that the government is unable to spend any more money, unemployment insurance, it cannot provide any more jobs, it cannot expand in terms of really responding to the contraction that is going on among consumers and businesses.
If government can't response, we are in worse trouble. Now hopefully, the deal that comes out is a deal over 10 years. Hopefully, the economy begins to come out of the trough we are in and then budget deficit reduction makes a lot of sense.
But it makes no sense right now. I mean, the real crisis right now, Tom, is not a budget crisis. Today, the real crisis is a jobs and housing crisis.
FOREMAN: With housing, if interest rates go up, that makes it harder for people to buy, which has nothing to restore the value of houses. Let's look at jobs, unemployment, the current rate is 9.2 percent.
If we have some kind of a back room budget deal, with the kind of deals you're looking at now, you think the unemployment rate maybe gets worse, certainly doesn't get better?
REICH: I'm afraid, again, you have two things. Number one, that is a deficit reduction right now. Austerity right now, pulling in the government's belt right now would mean a less capacity, fewer jobs, less capacity of the government to generate any economic growth at all, fewer teachers, fewer firefighters, fewer government contractors.
That might be OK sometime in the future, but right now, that would be disastrous. If interest rates surge, if interest rates go up because there's no deal or because the deal was a pretty bad deal, that also is going to create a slowdown in the economy.
That means that everybody is going to have to pay more for mortgages, for credit card debts, for auto debt and that means consumers are going to be even less eager to go to the malls.
FOREMAN: Let me read the last category I want to talk about here. What about the markets? What is all these means to the markets? You know, the Dow has dropped the last five days on investor fears. Of course, we say it's on investor fears. Who knows at the market these days?
But what do you really think will happen with the markets if we move into one of these deals? Will they say great, we have a deal, it will get better or do you think they'll just say this is not a good plan we have to back off further?
REICH: Well, I think if there's a deal that goes through 2012, right through the election so we don't have to go through this kind of awful exercise again.
So we don't have to worry about raising the debt ceiling six months from now, I think the stock markets, credit markets, international capital markets will breathe a huge sigh of relief and I think they will do much better.
But if the deal is that we're going to have to go through this again in six months, that there is really going to be a continuous, agonizing, absurd process of partisanship, are we going to raise or not raise the debt limit, then I think markets are going to react very, very unfavorably and the credit rating agencies could downgrade the nation's debt.
FOREMAN: I have a feeling that downgrade maybe coming anyway. Robert Reich, thanks so much for being with us this evening.
REICH: Thanks, Tom.
FOREMAN: Coming up, we'll go back live to Washington with more on the breaking news story there. The stalled vote on the Republican plan in the House. Don't go away.
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FOREMAN: We are watching breaking news in Washington tonight. The House still has not taken up Speaker Boehner's debt ceiling proposal. That vote is supposed to happen tonight. We're told it will. But meanwhile, what is President Obama doing through all of this drama? We have not heard from him today.
For the latest, we're joined by chief White House correspondent Jessica Yellin. Jessica, what is going on there?
JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: A lot of waiting, like the rest of the town, Tom. The White House has been waiting for John Boehner, Speaker Boehner to get this bill through the House. So they can move on and focus on the Senate where a Democrat is in charge.
They are hopeful that a compromise can be fashioned between Harry Reid and Leader McConnell, the Republican in charge. A compromise that they hope is something that the president can sign and get through the House of Representatives by Tuesday.
But the longer this drags on in the House, the less likely it can be done by Tuesday. There's a lot of frustration, anticipation and delay and waiting, like the rest of the town hoping that Speaker Boehner can get something done tonight so everyone can move on. Tom.
FOREMAN: Jessica, I was asking Debbie Wasserman Schultz earlier on about the president leadership in all of this. Is the White House sensitive at all to these complaints?
Not just from Republicans, but also from Democrats that the president has either not led enough in this or has not led effectively, the mere fact that the talks kept breaking down being their evidence.
YELLIN: Are they sensitive to that? Certainly they find that claim galling. They would take issue with it. From their perspective, they would say that first Vice President Biden led the Biden discussions where he tried to negotiate a deal.
Then the president was personally engaged in conversations. You know, I could walk through this chapter first. So yes, they are highly sensitive to that. The point, you know, the counter point to that is others argue that he could have taken a deal long ago. He could have taken it as part of the, I saw you had Alan Simpson on.
FOREMAN: He could have taken that recommendation long ago.
YELLIN: So you can argue it both ways. The bottom line is we know Americans blame both parties. If something catastrophic happens and the economy takes a big hit, the president owns the economy in the end and no doubt politically, it will be a big thing on the president going into re-election.
FOREMAN: All right, Jessica Yellin, thanks for keeping track on what's going at the White House for us. Tonight, we will be checking with you later on if we actually get to a vote on this.
Coming up, we have been talking about President Obama keeping a low profile, but that could be a risky strategy. A new poll says that president's approval rating is sinking quickly just as his bid for re- election begins and the countdown clock ticks on. Stay with us.
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FOREMAN: So why is the debt ceiling so impossible to fix or is it? Is it partisan politics, faulty economics, fear or all the above. Joining me now are Harvard Economics professor Jeffrey Miron and Thomas Frank, contributor to "Harper's" magazine.
Welcome, gentlemen. You both have written some terrific thoughts about this. Let me turn to you if I can first, Jeffrey, what do you think right now is the fundamental problem in Washington? Is it the Democrats, the Republicans or the culture of Washington?
JEFFREY MIRON, PROFESSOR OF ECONOMICS, HARVARD UNIVERSITY: I think it's the incentives that are facing the congressmen on both sides of the aisle. People who are running in Nancy Pelosi's district like Pelosi, they want to run on let's redistribute, let's tax the rich.
Because that what makes sense for Nancy Pelosi given her constituents. John Boehner, he's campaigning. He has to get elected by completely different people with completely different views.
So for him and for various Tea Party representatives, it makes sense to say slash spending, slash spending, slash spending. It's not easy how we're going to reconcile those, how they are ever going to compromise because each one is doing what's rational for themselves. FOREMAN: Nancy Pelosi is an interesting case. I remember some time back seeing of some polls that indicated that Nancy Pelosi who remains highly popular in her district back when she was speaker of the House was not liked anywhere else in the country. She could not come close to winning any kind of national or even a state wide election, but in her district, hugely popular.
THOMAS FRANK, CONTRIBUTOR, HARPER'S MAGAZINE: I didn't know that. I don't really follow. Her district is San Francisco, right?
FOREMAN: Yes.
FRANK: I would not emphasize the rationality factor here. There are all kinds of funny things that happen in politics. A lot of times it's rational, but a lot of times, it really isn't. I wrote a book some years ago called "What's the Matter with -- the idea of the book was to talk about working class conservatism. Now when our parents were young that would have been the working class conservatism, what is that?
FOREMAN: Exactly.
FRANK: And today, it's everywhere. On the surface, it doesn't make a lot of sense. So my idea was to try to unravel it. I have problems with both of the parties.
FOREMAN: Sure.
FRANK: I have a critique of what is the matter with both of these guys. I mean, obviously the people that you need to start with are the Republicans because what's changed from two years ago or one year ago, they have a Republican House.
They had a landslide in 2010. There are two ways I think of looking at what they're doing. First of all, do you remember a book that came out a couple of years ago called, "The Shock Doctrine"?
FOREMAN: Sure.
FRANK: Every time I have been watching your countdown clock. We are in an emergency. We're in a crisis. We got to do something. All around the world, whenever there's a crisis like this, that's the time that you drive home the austerity measures. You know that's when you the leverage to do things that are otherwise extremely unpopular.
FOREMAN: A lot of this is being driven by politics. But here is something I saw that puzzled me. Many, many people are saying the politics are driving it. Republicans want to win. Democrats want to win and then people say the president is looking better than the Republicans on this.
Here's a new Pew poll that's out. Take a look at this. This was the president's support back in May, 48 percent against a Republican, 37 percent. Now though if you move it up to today, 41 percent against the Republican 40 percent. It's much wider when you get to the all important independents. Is anybody going to win this thing? FRANK: I blab too much, but let me say two things.
FOREMAN: Sure.
FRANK: First of all, the Republican Party as we know it today and to reference another book that came out a couple of years ago. This is one that I wrote called "The Wrecking Crew," the title says it all.
The Republican Party rules by destroying. OK, they jam the wrench into the works in Washington. They mess things up. They throw the train into reverse. They leap out of a speeding locomotive.
All these metaphors, right? Something that they figured out 20, 30 years ago, in the early 1980s, the late 1970s, is that when you make politics disgusting and you turn people away from politics, why can't they get together and agree? When you make politics disgusting, it goes to the favor of the anti-Washington party.
FOREMAN: Talk to me about that.
MIRON: The issue is that both sides are stuck. Both sides have to do what's going to work for their parties. I think saying it's more the Republicans than the Democrats is not fair. They are some distance apart.
Why is the fact that one is so -- the compromise in the middle? They are equally guilty of sticking to things, which are not sustainable. Why is it not working for Obama more than you may have thought?
I think because one, as a president, if things are going badly, you end up owning it. The country wants it fixed. The country wants somehow it to be better. They are bored with it. They're frustrated. So he's going to suffer.
FOREMAN: We have to bail out. I wish we had more time to talk. Thanks for joining us here today. Thomas Frank, Jeffrey Miron, we'll have to have you both back. Thanks for joining us. We'll have a lot more coming up tomorrow night. No doubt that's good night from New York. "PIERS MORGAN TONIGHT" starts right now.
