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In the Arena
Coming in Under the Wire
Aired August 01, 2011 - 20:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
DON LEMON, CNN ANCHOR: Good evening. I'm Don Lemon. Welcome to the program.
Just moments ago the House of Representatives voted to pass a historic budget bill that almost nobody likes. It was a clear win. Sort of. Two hundred, sixty-nine for and 161 against. But that doesn't tell the whole story.
It's also a tale of two leaders, the president of the United States, Barack Obama, and the speaker of the House, John Boehner. Two men who have staked their political careers, not to mention America's future, on their separate visions of how much this country should spend and on what.
It has been a fierce battle of wills. And tonight, it is very difficult to say who won if indeed anyone did.
All day both parties have been venting their anger over an unhappy compromise, but during the vote, a rare moment of unity and joy, when Congresswoman Gabrielle Giffords returned to the floor to cast her vote, her first public appearance since she was shot early this year.
Amazing moment. A standing ovation and lots of hugs and tears all around. Gabby Giffords returning to the floor of the House for the first time. Her first public appearance since she was shot earlier in the year.
Meanwhile, we're still staring, though, at a debt ceiling deadline until the Senate votes tomorrow.
I'll have a lot more on all of this in just a moment, but first a look at the different angles that I'll be drilling down on tonight.
(BEGIN VIDEO CLIP)
LEMON: Everybody loves the Gipper. Since we can't ask Reagan what he thinks of the debt deal, we'll ask his former budget director and nobody will like his answer.
UNIDENTIFIED MALE: Thundering conflagration.
LEMON: And a lot of people are mad at the president, and we are not just talking Republicans. His own party thinks that he caved on a deal that could cost him re-election. Then the committee of 12. Who the hell are they? Deciding trillions in budget cuts? France had a committee of 12 once. How did those cuts work out?
(END OF VIDEO CLIP)
LEMON: Now for more on our top story, the long-awaited vote to raise the debt ceiling.
Kate Bolduan is on Capitol Hill for us.
Kate, this debt ceiling conversation has been going on since May, it's August now. Any chance that we'll put this behind us before, say, next year, January?
KATE BOLDUAN, CNN CONGRESSIONAL CORRESPONDENT: Well, I can promise you that the issues relating to the debt ceiling debate will continue for the -- for the coming year because that's exactly kind of how we've heard from the members that they want to continue this conversation about cutting spending and getting our fiscal house in order.
But in the House this evening the Republicans and Democrats, they passed this with a healthy margin, 269-161, the threshold is normally 216, so that is a healthy margin that this debt ceiling deal passed by.
Right after the vote, I had a rare moment to speak with House Speaker John Boehner. He rarely speaks to cameras in the hallway -- or actually speaks to cameras -- speaks to reporters in the hallway ever, but I had a rare moment to speak with him and get his reaction of the vote and the surprise of seeing Gabrielle Giffords enter on to the floor. Listen here.
(BEGIN VIDEO CLIP)
REP. JOHN BOEHNER (R), HOUSE SPEAKER: I feel great.
BOLDUAN: What do you think of the vote this evening?
BOEHNER: Strong vote but the first step and the many steps yet to go.
BOLDUAN: What do you hope that the American people take -- what do you think the message is for the American people tonight?
BOEHNER: The process works. It may not be perfect, but it works.
BOLDUAN: And your thoughts of the surprise of Gabrielle Giffords coming on to the floor.
BOEHNER: I was very surprised. It was nice to see her.
BOLDUAN: Did you say anything to her, sir?
BOEHNER: I met her when she got off the elevator.
BOLDUAN: And what did you say to her, sir?
BOEHNER: I said welcome back.
(END OF VIDEO CLIP)
LEMON: All right. Kate, what was that like?
BOLDUAN: Well, it was very nice. Normally, he walks past here and quite honestly ignores me every time I try to ask him a question as he does with all reporters. It's not just me, but it was nice to get a moment to get his reflection on this vote. You know that he has put a lot -- he's invested a lot of political capital in trying to push his bill through, and to try to gain support amongst his Republicans to push this compromise bill through, so you can definitely see relief on his face when we caught with him this evening.
But of course, all eyes turn to the Senate with a vote expected tomorrow -- Don.
LEMON: All right. We're all awaiting that. Thank you very much, Kate.
Now to the White House and our chief White House correspondent Jessica Yellin.
Jessica, the president turns 50 this week. Does he feel like celebrating right now?
JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: Well, I've got to say 50 probably is not the number that's been on his mind the most lately, Don. You know, there's been a lot going on. He will be celebrating raising -- also raising money in Chicago.
I think that they'll be maybe not a celebration, but a huge sigh of relief here. You could feel it in the body language and in the mood here at the White House already that they did their heavy lift, and already tonight, people starting to drive home for the first time at a reasonable hour from -- people have been working here until midnight and 1:00, all around the clock for weeks now. So yes, a little bit of a sense of relief and the president turning 50 in Chicago later this week -- Don.
LEMON: I have to ask you this, Jessica, what is this incident in which Democrats refer to the Tea Party as terrorists. Tell us about that.
YELLIN: So earlier today, Vice President Biden went up to Capitol Hill, because as you know many Democrats -- many of the liberal Democrats have been outraged with this deal. They feel that too much of it was a give to the Republicans. And he sat there to -- he went to a closed caucus meeting with the House Democrats and multiple Democratic sources who were in the room tell me that many of them were venting their frustration. And I'm just going to look down to quote, some of them told him, they felt, quote, "pick-pocketed by the Republicans in this deal," that the country was, quote, "being held hostage," and that the Republicans were, quote, "terrorists."
Now my sources are telling me that the vice president said in response -- at least in part, well, now we've taken away their weapons of mass destruction. And then he subsequently gave an interview to CBS News and says -- he said he did not use the word terrorists in return.
But there's been this back and forth whether he actually used that word. The bottom line is, obviously, a lot of anger, frustration. The vice president was there to placate and listen to them vent. He heard the fury this morning then he got the opportunity to see Gabrielle Giffords on the floor, so a lot of highs and lows for him in one day.
LEMON: That was a very nice moment. Very nice moment to watch it live and I'm sure to witness live as well.
Thank you very much, Jessica Yellin.
YELLIN: Thanks.
LEMON: And you heard the anger from the Democrats. Some very strong worlds used to describe Republicans and their negotiating tactics, but some Republicans say their leadership didn't go far enough.
Republican Congressman Joe Walsh is one of them. He voted against the deal, and he joins me now.
Good evening, sir.
REP. JOE WALSH (R), ILLINOIS: How are you?
LEMON: I'm doing great. Listen, before I ask you about your vote, what do you say to the Democrats who compared some Republicans to terrorists and who said Republicans held the country hostage?
WALSH: Again, fairly outrageous, and you know, we see often the media goes after Republicans and right-wing folks when they use this language. The other side does it as well, and they need to be called to the carpet. That's not at all appropriate, but you know, look, enough with the name calling. We're are all big boys and big girls. We're doing serious work up here. We should just focus on what we've done today and what we need to do.
LEMON: Yes. And listen, I don't want to get our eyes off of the ball here, because I think that we in the media will do it to both sides if they name-call here. It's not just Republicans here.
WALSH: I --
LEMON: I want to make that clear. WALSH: No, I agree with you, but I do think -- again in your profession, there tends to be a bit of a bias to go after our side. I mean, I think said -- and I could be off -- a month and a half ago that those Republicans aren't going to put a gun to our head. I mean -- and I didn't hear anybody in the media, the mainstream media, go after him.
LEMON: Yes, well --
WALSH: Again --
(CROSSTALK)
LEMON: Let me say this. I don't want to get, too, in the weeds but we did talk about that story and that's your opinion and I will allow you that. Let's talk about the task at hand now.
WALSH: You got it.
LEMON: Why did you vote no on the deal?
WALSH: Well, I give my leadership all the credit in the world. It's amazing to me how these troublesome House Republicans of which I am one have changed the entire conversation. And there's no talk of tax increases, there's no talk of a clean debt ceiling bill. Everyone acknowledges it's a spending problem and we need to cut.
My problem is this. And this was a great first step. The leadership deserves credit. We may cut $2 trillion over the course of the next 10 years with this compromise. No matter what, we are going to add $7 to $9 trillion in additional debt even with this plan. That's how serious the crisis is.
LEMON: And listen, I think everyone will agree that it is a serious crisis that we need to cut spending, we need to reduce our deficit, but here is the thing, a lot of the people are concerned, right, that maybe the right, the Republicans, have carried this too far and that by cutting spending that it will indeed hurt the economy.
You said that you wanted a big, bold deal. Was Speaker Boehner bold enough in his efforts to get that done?
WALSH: No, this was probably the best deal Washington could get right now. My argument is we don't need a deal. I mean, we are bankrupting future generations. We need a solution. And so this wasn't big and bold. It was the best deal the speaker could get. But we need something profound to change the way this town spends money or our kids and our grandkids will never forgive us.
LEMON: When you think about -- I watched the press conference today when the leaders came out, when Speaker Boehner came out and others and they talked about the change of tone at least that they had gotten in Washington. They wanted more. They said that this wasn't a perfect deal.
Is there a lesson in compromise here? Because if you ask someone on the left, they'll say the right is not compromising, if you ask someone on the right, they'll say the left isn't compromising. Is this a lesson here on compromise and the way things are going to happen henceforth in Washington?
WALSH: Well, ultimately, what was passed tonight and what will be passed tomorrow in the Senate is a compromise. I think you'd probably agree with me on that. All I'm saying is without this pressure, and it was good, you know, respectful pressure from these House Republicans, we'd never be here.
You know that. We would have raised the debt ceiling by how much, we'd be talking about spending money and not cuts. Ultimately, they arrived at a compromise. It wasn't profound enough or bold enough for me.
LEMON: Well, let's talk about this. Let's talk about this if you're going to bring the debt ceiling up.
There are many who say the debt ceiling and the deficit talks really have nothing to do with each other and that this crisis was manufactured. All you had to do is raise the debt ceiling and then promise at least some sort of talks or at least come to a consensus that we need to bring down our deficit, we really need to talk, let's get the president involved.
But by bringing in the debt ceiling that you in some way hijacked the American people for a time.
WALSH: Well, it's a great point. I take a contrarian view. I think it's pretty cool that this debt ceiling issue the last eight months became a big issue, and the reason it's a big issue is because this president has spent an incredible amount of money in 2 1/2 years and then what did the American people did? They sent us to congress, Republicans, to stop it, and the American people basically said, do not give government another blank check.
I mean we've raised the debt ceiling 100 and some times in the last 30 years. Why is it a big deal now? It's because the American people got upset with how much money this president was spending and they sent us there to stop it, and I think that's a great thing.
I mean, everybody -- what an educational process we've all had as a country these last three or four months.
LEMON: And I want to ask you something on a personal note, because I believe in full transparency here. It has been a very difficult week for you with your personal finances coming out that you owe $117,000 in child support that you haven't paid, yet, you haven't gone away. You still keep coming in front of the cameras and you still keep addressing it.
Tell America why you have done that.
WALSH: Well, again, I was sent here on a mission. This has been a pretty big time, probably the busiest week or two we've had here. This is an important fight and an important debate, and so, clearly, I was preoccupied and wanted to give my everything to this.
When it comes to personal family stuff, look, we've all got stuff. I'm going to take care of that stuff privately and quietly. As long as the people in my district send me here, I'm here to do whatever I can to help save this country for our kids and grandkids, because, again, this is just a deal, but until we as a country get serious about spending, our kids and grandkids I really believe will never forgive us.
LEMON: And I have to run here, but do you believe this crisis is behind you and that the people will support you and your constituents will support you the next time around?
WALSH: You know, as long as the folks back home agree with what I'm doing, and I do what I say I'm going to do, if I'm fortunate enough, they'll re-elect me.
Look, a lot of these freshmen are not here to get re-elected. We're here to respectfully stop this president and stop the spending. A if we have to make some tough decisions and that doesn't get us re- elected, then you know what? We've done important work.
LEMON: Hey, thank you, Representative, for answering those questions.
WALSH: Great --
LEMON: I really appreciate it.
WALSH: Great questions and great to be with you.
LEMON: And up next, given the Democrats' anger over the president's debt deal some are saying maybe Mr. Obama should run for re-election as a conservative. But first let's take one more look at that moving moment on the House floor as Gabby Giffords returned to Congress just this evening.
(COMMERCIAL BREAK)
LEMON: Liberals in Congress are not happy with the president's handling of this debt ceiling negotiation. One congressman, Emanuel Cleaver, even called the deal a sugar-coated Satan sandwich.
Joining me now is Democratic Congressman Earl Blumenauer who fears that this debt reduction agreement could actually do more harm to the economy than good.
Congressman, welcome to you.
What do you make of what he said, a sugar-coated Satan sandwich?
REP. EARL BLUMENAUER (D), OREGON: Well --
(LAUGHTER)
BLUMENAUER: Reverend Cleaver has a way with words. But suffice it to say, there are some very real problems involved with this. We're going to move toward additional cutting very quickly at a time when all the experts have told us that this is very likely to make the recovery delayed, maybe even set it back.
LEMON: Well, that's what -- that's what I want to ask you, Congressman. There are a lot of economists, conservative and liberal, who agree with you on this, so why this whole narrative lately about cutting spending, good, raising taxes, bad?
BLUMENAUER: Well, I mean, I listened to part of you interview with my friend, Mr. Walsh, earlier. You know, it's absolutely not true what he said. The majority of the public poll after poll said they wanted a balanced solution, that included some modest tax increases, particularly on the most well-off, reform the tax system, have a balanced approach. Have people share in this effort.
But what has happened, because they really were willing to hold the economy hostage, there were a number of them that were willing to drive it over the cliff, we've never ever had the debt ceiling held hostage like this to the exclusion of everything else.
And what's happened is that it really has shifted some of the discussion with some of the Washington insiders and I personally feel that the president and his team bought into that narrative too much.
The fact is that the Republicans, if they really want to reduce spending, have the tools available to them. They can control what comes through the House with the budget.
LEMON: So when you say that the president and his constituents -- bought into the narrative too much, what -- are you saying these are talking points or that will repeat so much that people believe them?
BLUMENAUER: Well, I mean I think -- I think the obsession on spending reduction, as opposed to having a balanced solution is a loser. That's not where the American public is and that's not ultimately where we're going to end up.
Ultimately sometime in the next few years, we will be forced to increase revenue. Not just because the public wants it, but that's the only way you can bring us into balance.
LEMON: So you think --
BLUMENAUER: Now I'll be the first to admit that we need to do things differently. We could have had a bipartisan effort to start drawing down some of the military expenditures. There's a bipartisan coalition that's developing to change agricultural subsidies away from large agri-business.
LEMON: OK, let's --
(CROSSTALK)
LEMON: Let's not get far off of the topic here. BLUMENAUER: OK.
LEMON: Because you called this an artificial crisis and doubly so because of what you say is a false narrative, what you just said -- and then tying the debt ceiling to deficit reduction.
BLUMENAUER: Absolutely. I mean, this is something that was a crisis of choice. The Republicans didn't have to bring us to the brink. Frankly one of the tools that I wished the president had not taken off the table was the use of the 14th amendment.
I don't think anybody here feels that if the roles had reversed and somehow Democrats had been irresponsible with George Bush instead of increasing the debt ceiling when -- seven times I think when he was president, if it got to the point where it was going to wreck the economy, I have no doubt that Dick Cheney would have thrown the 14th amendment switch.
LEMON: OK.
BLUMENAUER: We should have kept that -- those sort of thing should have been opened.
LEMON: Right. And we don't have a crystal ball, but it is -- I think it is fair to say that the previous administration was a bit more direct in their approach than the current administration.
BLUMENAUER: Yes.
LEMON: There's a perception that this president just sort of sits back from the sidelines and watches things and then steps in maybe at the last minute.
BLUMENAUER: Well, I think that the tax deal that we got last December, we could have gotten earlier and under more favorable terms.
LEMON: OK. So listen, do Republicans and Democrats have the same idea? Because we're hearing that some people don't really know what's in the bill. Do both sides have the same idea of what's in the bill? Because Biden is saying one thing and then John Boehner is saying another.
BLUMENAUER: Absolutely not. Though there is not agreement, and you've heard it, and Mr. Boehner indicating that there is no taxation increase that's ever going to occur, the administration feels that there are some opportunities for revenues. There are questions about how the trigger is going to be implemented.
I think as we go forward there will be great -- there'll be more clarification. One of the problems when you do something like this at the last minute on such a scale, it's very hard to tie down the pieces and I think we're going to learn more in the days ahead.
LEMON: And let me ask you this. So in November, when the party of 12 come back with their recommendations, revenues, taxes, you think will be in play then? BLUMENAUER: I think it's very unlikely that the 12 people the way that it's going to be structured will come back with Republicans and Democrats, and you know, there has to be at least one from each party that agrees with the proposal. I also think that you're going to find ways that there are ways to circumvent some of the triggers.
I will be surprised if this works as advertised.
LEMON: All right. Congressman, thank you very much. We really appreciate your joining us tonight.
Now Congressman Raul Grijalva is a co-chairman of the House Progressive Caucus. A main source of the Democratic opposition to the debt reduction agreement and he joins me now.
Thank you very much, Congressman. You doing OK tonight?
REP. RAUL GRIJALVA (D), ARIZONA: Doing fine, thank you.
LEMON: Clearly, the president caved. Why?
GRIJALVA: Well, I think -- I think my friend Mr. Blumenauer put it well. The message and the narrative got defined for the president, he bought into it, and then you could see the trajectory of these whole negotiations. He put -- he put Social Security and Medicare on the table and as it went further and further, you came to the realization that we were going to end up with a deal that was not going to have any revenue generation in it.
That we're going to end up with a deal that was going to be based on spending cuts to discretionary programs. And that deal was going be hard to swallow. And eventually, that's what we got.
LEMON: What would you -- what would you have liked to have seen the president do? Because even Mitch McConnell said on Saturday, he said, listen, the president is the one who decides this. If he agrees with us, then most of the Democrats will fall in line.
What would you have liked to have seen from the president?
GRIJALVA: I think he should have used that pulpit of his. He should have kept the 14th amendment as an optional alive so that he had a bargaining chip in these discussions, that if we didn't reach a point of compromise and balance that he was going to exercise unilaterally his authority under the Constitution.
And the bully pulpit is really important to talk to the American people, get them engaged in the national discussion on what is going on so that they can weigh in and help guide their elected officials in the right decision. And what the American people wanted was balance, and they didn't get it.
LEMON: Congressman, I want the ask you this, really it's about the president's political future and whether or not it's helped him. But let me read this first, and then you can answer. Your colleague in New York Gary Ackerman said the Republicans invited the president, quote, "to negotiate at a strip poker table, and he showed up half naked," and then liberal columnist Paul Krugman calls the deal an abject surrender.
Would to president be better off running as a conservative in 2012?
GRIJALVA: No, I think the president is a -- he's a Democrat, he's a centrist, we know that. But in any process, you know, the president has to lead his party and you saw it today the effect of his position, and our caucus split 95-95 in favor and against this deal.
And there's considerable power, there's considerable willingness on the part of some of my colleagues not to let the president down, and leadership was pushing that was as well. So is he too conservative? The answer is no.
(CROSSTALK)
GRIJALVA: The issue is --
LEMON: The question is not too conservative, but do you feel that he is strong enough when it comes to these issues and fighting for what Democrats want?
GRIJALVA: At this point, I think you'll find a great deal of frustration, anxiety on the part of the Democratic base in all levels, and this is just one in addition to others, and I think there's going to be an increased job that he has on his hands to convince and motivate those voters once again for 2012.
LEMON: Well, so this -- you think this won't matter by 2012, that he's not going to be hurt by this politically?
GRIJALVA: No. He's -- I think he needs to convince voters that through the next actions that he takes that, you know, this fight is not over.
LEMON: OK.
GRIJALVA: And the people that are going to be hurt are small businesses, students, and senior citizens.
LEMON: OK, Congressman --
GRIJALVA: And he has to be engaged in protecting them.
LEMON: I want to move on to this, because there is this chart that's been going around showing that Democrats are twice as likely as Republicans to want their representative to compromise. Democrats. Twice as likely as Republicans to want their representative to compromise.
All right. To get things done. And then that Republicans are twice as likely to want their representatives to stick to their principles.
Would it be better for the country if Democrats were more like Republicans or the perhaps if Republicans were more like Democrats?
GRIJALVA: Well, I think that's a question that I can't answer. I think -- I think that for me and I think for many other people that oppose this deal, we were and wanted a balance. We wanted a compromise. This was not a compromise. This was not the deal that involved all sides sharing in the sacrifice and so the consequence is not to support it.
The American people wanted us to get something done. This deal is something that people are going to wake up to in the next few weeks and months and realize that this was not a deal that involved getting something done.
On the contrary, it's going to set up a continued fight --
LEMON: OK.
GRIJALVA: -- in this Congress for the next six, seven, eight months.
LEMON: And it's not done until it's done, you know how that is.
GRIJALVA: Exactly.
LEMON: There are still more votes to be taken. Thank you very much, Representative Raul Grijalva.
GRIJALVA: Thank you.
LEMON: Appreciate it.
Still ahead here tonight on CNN, just what Washington needs. A new committee and this is super sized. They're to cut the fat from the budget, but who are they? And will they use a scalpel or a cleaver?
(COMMERCIAL BREAK)
LEMON: The all important second stage of the debt ceiling deal involves a bipartisan super committee and it will have to do something that Congress could not figure out how much to cut from programs like Social Security and Medicare.
So, who is this congressional dream team, and how will that process work? Those are good question, and that is why we have people like Tom Foreman who work here at CNN. He knows these types of things. Hi, Tom.
TOM FOREMAN, CNN ANCHOR AND CORRESPONDENT: Hi, Don. You are so generous to use the term dream team and people talk about being in the hot seat all of the time. Well, there will be no hotter seats anywhere in Washington than those on the Special Joint Committee, because it is actually being designed to recreate in close quarters all of the fire and the fury we have seen on Capitol Hill in the past few weeks.
And here is the nuts and bolts of it. I want you to take a close look. What we will have is a committee comprised of 12 member, and three of them picked by the Speaker of the House, John Boehner, and there are three of them picked over here by Nancy Pelosi as a minority leader.
And then you're going to have the head of the Senate over here, the Majority Party Leader Harry Reid will pick three and then Mitch McConnell in the Republican Party will pick three also. That's what's going to stack this up.
In theory, these 12 folks will come up with $1.5 trillion in additional debt reduction plans and that is what they are putting on the Thanksgiving menu, because it is due right before Thanksgiving Day. They have to put this turkey on the table, and I call it that, because I think a lot of people in both parties are going to refer to it as precisely that when it comes around.
Then just before Christmas, the entire Congress has to look on this, and they have to vote yes or no with no modifications, no amendments, but just a straight yes we will take it or no, we won't.
And if the answer is yes, then the president can raise the debt ceiling by $1.5 trillion, and if the answer is no, he can raise it by $1.2 trillion, but an automatic across the board series of spending cuts will kick in equal to the increase in the debt ceiling that means cuts to defense programs and nondefense programs as well. That is the plan, Don.
LEMON: I can't believe you missed this one. You said you were going to have to put the turkey on the table, and there are lots of cuts and carving of that turkey they will do.
FOREMAN: Well, that is nice, and very clever of you, Don.
LEMON: I have to ask you Simpson/Bowles, the gang of six, they failed. So what are the chances that this one working. I mean, the odds really are not in their favor.
FOREMAN: Yes, they are heavily stacked against them, because when you think about it, these folks really have a tough, tough job in front of them. They're going to have to grapple with this notion that they are not working in a vacuum.
They are going to be picked by party leaders as we pointed out, and then they're going to prodded by their parties to toe the party line. For Democrats, that is going to be pushing the tax increases they didn't get this time around.
For the Republicans, it's going to be furiously resisting those increases all amid the rapidly growing tension of the upcoming presidential election, Don.
LEMON: All right, you sit in this chair so I need a quick answer for you on this. When your job is to cut, you're going to tick off a lot of people so who would even want this job?
FOREMAN: I don't know. There are ambitious people on Capitol Hill who will try to take this job, but it is going to be very tough to walk through this mine-field and come out the other side. If you do it, you are a hero and if you don't do it, you keep walking and it is a tough time just in time for the holidays, Don.
LEMON: Yes, talk about what they say, a thankless job. Thank you, Tom Foreman. Great stuff as always.
Up next, they've been invoking Ronald Reagan to support their side in the budget debate. The Democrats that is. Republicans love to quote him too. So what would Reagan say?
His former budget director has a pretty good idea. We will win one for the gipper when we come right back.
(COMMERCIAL BREAK)
LEMON: President Obama folded like a lawn chair. That's not me talking. That is from David Stockman today. He was Ronald Reagan's budget director and he joins me now from Aspen, Colorado.
Welcome, sir. Mr. Stockman, why don't you say how you really feel?
DAVID STOCKMAN, PRESIDENT REAGAN'S BUDGET DIRECTOR: Well, you know, the way I feel is we shouldn't be celebrating because they passed this bill. It is really a travesty. This is another kick the can scam down the road.
And I think that both leaders, the president and Boehner, folded when it came to the tough issues. And let me talk about the Boehner cuts. They say it is $750 billion --
LEMON: Wait a minute. Do one thing at a time. You said both the president and Boehner folded. So number one, how did the president fold?
STOCKMAN: Because he simply walked away from the taxes, and it is utterly unrealistic in the dire straits we are in to think that we can get out of this situation without major tax increases and soon.
We are raising 15 percent of GDP in revenue, and the lowest since the 1950. We are spending 24 percent of GDP. You could put Attila the Hun in charge of the budget cuts and you would not have enough to close the gap.
We need major tax increases and yet he walked away. He didn't fight for it.
LEMON: OK. So, listen, before we get to John Boehner, what would Reagan have done? He had a recession and he had high unemployment, and what would he have done in this situation?
STOCKMAN: Well, it is not a matter of guessing. What he did in an identical circumstance in the summer of 1982, we just had come out of the devastating recession as bad as this one. Unemployment was still over 10 percent. Recovery was not even visible, but we had a massive hemorrhaging deficit.
We went to him and said without major revenue increases, along with the spending cuts, we can't take a chunk out of this deficit, and we can't get a deal on Capitol Hill. So reluctantly he went along and signed the biggest tax increase in history, which would be $150 billion a year in today's dollars.
Now, the thing is Ronald Reagan was as much against taxes as anybody. We all know that.
LEMON: What was the outcome of that?
STOCKMAN: But, the outcome was that the next year the economy recovered. We created 3 million jobs in 1983 and 11 million jobs over the next three years. My point was Ronald Reagan was against taxes, but he also did not believe in credit card government and believed that we had to pay our bills at the end of the day.
And that is totally different than these credit card Republicans today who cite Reagan. They are mis-citing history and this is revisionism. It utterly ignores the real facts of what happens. Now today, they say that --
LEMON: Well, before we end the interview, because we only have so much time, Mr. Stockman, so pardon my interruption. So what did John Boehner do wrong in your estimation?
STOCKMAN: This was just a phony cut. The $750 billion over 10 years is a rounding error. It is 1.5 percent of GDP and it's all backloaded into the distant future. It cuts $25 billion now, which is 2 percent of the deficit in the coming year nothing.
And 2/3, half a trillion of the cuts happen not after the next election, but after the 2016 election. In other words, so they are so far into the foggy future, you can't even see them. So how does he have the nerve to stand before the American people and say we don't need a tax increase?
When the only thing he can come up with is a spending cuts at a half of one percent of GDP that will occur in the fiscal here after and not the real world that we are facing at the present time.
So I think both of them folded. Both of them are faking, and the country at large is going to be the loser, and I don't think that the American people are stupid enough to believe that either one of them did an honest job of trying to come up with the plan that will make a real difference.
LEMON: But listen, you know, I'm not sure if I would use that language to say that the American people are stupid enough, but there are people who are very strong supporters, who are obviously very strong supporters of the Republican Party. But Tea Party members who said, we don't need revenues, and we need to bring it down and so they have already bought into this. And then on the other side, there are the liberals who are saying we need to raise taxes. So, in some way, people have bought in to this.
STOCKMAN: Well, no. I think that the Tea Partiers who are for huge spending cuts were sold down the river by the speaker. They didn't get huge spending cuts. They got comparatively nothing and on entitlements $2 trillion a year worth of entitlement and mandatory spending and there is not a dime cut in this agreement.
It's all based on the super committee that may or may not do something. And the taxes, the same thing. I agree with the progressives. We need major tax increases and certainly the wealthy should be the first ones to pay, and yet this is the second time that Obama has folded.
First at Christmas, he gave an extension of the tax cuts that we cannot afford and they don't need, and now was a chance to remedy that, and he folded again. This is very grim. We are heading down a very bad path if this continues.
LEMON: Listen, can I ask you this and real quickly, because I am up against the break here. So you have been in the situation, you know, what happens when this committee of 12 comes back in November, they going to say, all right, we are going to have to put some revenues here on the table?
STOCKMAN: Well, I hope they do, but on the other hand, I don't have a lot of confidence in a super committee because for decades now, there have been super lies being told by both parties to their constituents, and to the American public.
As long as the hard core Republicans are saying no way no taxes, and the Democrats are saying that you can't cut Social Security when it is already $50 billion in red ink this year.
Then I don't think that a super committee is going to be able to deal with the clash, this paralysis of competing lies that are being told to the public.
LEMON: A man who never really says what is on his mind, and that is sarcasm. David Stockman, thank you very much. Appreciate it.
STOCKMAN: Thank you.
LEMON: Up next, we'll go back to Kate Bolduan in Washington for the latest on the breaking news in Congress tonight. Make sure you stay with us.
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LEMON: The drama continues tonight as a default deadline looms. The House voted not long ago to pass the measure, but it is not over until the Senate votes. So we're going to go back now to Capitol Hill and our congressional correspondent Kate Bolduan. Kate, tell us what is on for tomorrow?
KATE BOLDUAN, CNN CONGRESSIONAL CORRESPONDENT: All eyes turn to the Senate, Don, the vote on the compromise deal that passed the House with a relatively healthy majority considering how contentious it was leading up to this vote.
The vote tomorrow is expected around noon, and while we always say that you can't call the vote until the last vote is cast. I will tell you that the bigger question mark between the two chambers was will this bill pass the House of Representatives.
So there is a sense of relief here on Capitol Hill amongst members as the vote goes to the Senate tomorrow, and we will be watching closely how the votes land.
LEMON: We will be watching because we know you will be there. Thank you very much, Kate Bolduan for that report.
Up next, months of horse trading and wheeling and dealing to get an agreement that nobody likes. We will ask the political panel, was it worth the price? And will President Obama have to pay it?
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LEMON: All right. So how is this for a bipartisan agreement? President Obama is taking heat from both sides. They say he has failed to lead on the debt issue. "New York Times" blasted the president today twice starting with liberal columnist Paul Krugman headline "The President Surrenders."
This conservative colleague columnist Russ Douthat joined the attack, headline "The Diminished President" and over at the "Wall Street Journal" they dismiss him all together flatly proclaiming a "Tea Party Triumph."
Well, just how big of a hit has the president taken? I want ask Republican strategist Margaret Hoover. She is the author of the book "American Individualism" and then also from salon.com is news editor, Steve Kornacki.
Thank you both for joining us tonight. Steve, I'm going to start off with you. The president's critics are piling on tonight. Do you agree he is the big loser in this battle?
STEVE KORNACKI, NEWS EDITOR, SALON.COM: Well, I agree it is the triumph for the Tea Party. It is a triumph for the most conservative elements of the Republican Party, but I think it was a pre-ordained triumph.
When you look at sort of how this dispute, how this debate set up in the first place, it was a president who said, absolutely fundamentally my bottom line is this country cannot default on August 2nd. That's been his position all along and no one has doubted that. But the position of the Republicans is then we hope that the country doesn't default on August 2nd, but a lot of our members are OK with it if it does. And here's a list of demands that you're going to have to sign off on to prevent it from happening.
When those are the stakes of the negotiation and that party controls one chamber of Congress, there's not much --
LEMONS: Let's take what the president - because if you listen to any of the Democratic guests who have come on the night, they are not happy with the president. And they're saying here is what he is going to have to do if he wants to win, quite frankly, in 2012. What could he have done better?
KORNACKI: I think there were realistically, since this is set up, there were two possibilities all along for this thing. One was what we saw, if you are going to cut a deal with these guys, if you're going to cut a deal with the conservative elements of the Republican Party, this is what is it going to look like.
The other option is the one that I don't think he ever really explored and I think that's what the liberals are upset about to a degree the 14th amendment option. If you're going to get a terrible deal, if you're going to get a deal that in your mind actually slows the economy and gives the Republicans so much, then is it really so bad to explore the 14th amendment option?
LEMON: OK. I have to ask can you this, Margaret, because here is what people are saying and people are saying, this is Bush would have stood up to the opposition and said, we are going to do this, and do this and mission accomplished and that sort of thing.
He would have enacted the 14th amendment that is what people have said, and some people say, well, the president should have done that. He should have said, listen if you want to drive the economy off of the cliff, go ahead and do it, but I will be the adult and raise the debt ceiling and you talk out the debts.
MARGARET HOOVER, REPUBLICAN STRATEGIST: Well, I had the privilege of working for President Bush in the White House and while I was a junior staffer and not around the table at the Roosevelt Room, I will say that one thing that President Bush would have done differently and did do differently is to get a plan on paper and send it to Congress.
During immigration reform and social security reform, all of the things, which ultimately didn't work, he still put his plan on paper, and there was always the Senate plan, the House plan and the president's plan, the White House plan.
And that's one failure I think the president, which has fueled the narrative that there is a vacuum in leadership. I mean, Democrats are even saying the president doesn't know how the good negotiate. He sold the farm.
And Bernie Sanders and far left people of the Democratic Party are saying that he has to primary the guy just for the principle and just for the point.
LEMON: She has a point because many people are saying including the Democrats you have heard them. The president, he stands by and he just sort of sits back for a while. He does not emote and then at the last second he comes in.
You know, what other presidents before him, Clinton had the whole thing, I will shake your hand and so sorry and then, you know, Bush was larger than life in the way he would interact with people, but this president really does not show much emotion. He appears to stand back and be pragmatic and has to come in at the last minute.
KORNACKI: Well, there is something to be said for the theatrics of it, and there's also something to be said for --
LEMON: Well, that is absolutely true, but for the American people, sometimes they want to feel that you are involved and that you have a feeling about something.
KORNACKI: Sure, sure, but I think when you look back to other presidents we have a tendency of years and decades after the fact to make them into sort of idealized versions of what they were.
LEMON: We romanticize history.
KORNACKI: Because if you went back to the Reagan era, you would heard an awful lot of grief that these guys took from their own parties.
But the thing I would say on the negotiating front is I brought up the idea of the 14 Amendment. If Obama had actually advanced that as a negotiating chip in this thing, that would have not brought the Republicans to the table.
That would have emboldened the Republicans because secretly they wouldn't have mind if my pragmatic standpoint, if Obama had done the 14th Amendment. It would have extended the debt ceiling and it would have given them an issue that they could run against him on for the next year and a half.
LEMON: OK, let's move on now. I feel like we are beating up on the president. Let's talk about John Boehner now, how did he fair in all of this, Margaret?
HOOVER: I have to tell you. I think he has coming out genuinely with soaring colors. Here's why, this is a man who had a wily caucus, 87 new members of the Tea Party, many of whom were not even going to vote for this last Thursday. He was able to get them to vote for it --
LEMON: Soaring colors?
HOOVER: Well, flying colors and he has come out king of the mountain and not only because he has gotten the caucus together, which is extraordinarily different caucus, including by the way the majority leader who actually undercut him in the early parts of these negotiations.
But he made a deal with the president who has no tax hikes and normally these kinds of reforms have tax hikes in the beginning and then they promise spending cuts that eventually never happen. This is spending cuts immediately and no tax hike, and that is the deal he negotiated though, and that is John Boehner's work.
LEMON: Well, many people are saying that in his own party and the new Tea Party members we wanted it to go further than it did, and John Boehner didn't do that. Both of these guys believe that President Obama and John Boehner may have lost some clout in all of this?
HOOVER: But the reality is that the entire narrative has changed from spending more and more and more to curtailing spending. From even though they did not touch the entitlement reforms and even though the budget balanced amendment may or may not get voted on the entire course of policy making has changed in the last year because of the Tea Party and because of John Boehner's deft ability to negotiate with the wily caucus and with the president of the United States.
LEMON: So what happens if this committee comes back in November and says we cannot accomplish this unless we have some revenues and couple of seconds here.
KORNACKI: It's not going to happen. The same thing will happen as when the grand bargain was proposed a few weeks ago, those Tea Party members who are the backbone of the Republican Party in Congress will say absolutely not.
And if the price is automatic cuts in defense, they will be okay with it. And John Boehner is not going to be in a position to say, that what we are learned about Boehner in the last few weeks is he is not in position to deliver anything.
He couldn't get them to go along with the grand bargain. He had to go that the Tea Partiers wanted him to do and even then they almost voted against him.
LEMON: Margaret, what happens in November?
HOOVER: Look, this has been historic. At the end of the day, they have every incentive to go ahead and find more spending cut. Otherwise, a pox on their parties entitlements and defense spending gets cut and that is not what nobody wants before Christmas.
LEMON: Is everybody will abide by these rules, yes or no?
HOOVER: My bet it works out.
LEMON: All right. Margaret Hoover and Steve Kornacki, thanks to both of you for being here tonight. And thank you so much for joining us IN THE ARENA tonight. Good night from New York. "PIERS MORGAN TONIGHT" starts right now.
