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John King, USA

Speaker to Rewrite Deficit Bill

Aired July 26, 2011 - 19:00   ET


JESSICA YELLIN, GUEST HOST: Thank you, Wolf and thanks for joining us. I'm Jessica Yellin. John King is off.

Tonight we have breaking news on the eve of a major milestone in our country's economic future. The House of Representatives is supposed to vote tomorrow on Speaker John Boehner's short-term plan to raise the debt limit and cut about a trillion dollars in spending. But just a few minutes ago the speaker announced he plans to rewrite the bill because it does not cut enough spending. CNN congressional correspondent Kate Bolduan joins us now from Capitol Hill. Kate, what is the latest?

KATE BOLDUAN, CNN CONGRESSIONAL CORRESPONDENT: This is a potentially big headache. You well know the CBO numbers, the Congressional Budget Office, Jessica, this office that scores, gives a cost estimate, for legislation, it's very critical, and this evening it came out the CBO brought out -- gave out its estimate, and it says that the Speaker Boehner's bill falls short of what its target was.

It says that it would only reduce the deficit by $850 billion, rather than the more than a trillion dollars than the legislation said it was going to -- said it was going to. Here's why it's such a big problem. Because of Speaker Boehner, he said that there is one major principle, you'll remember, Jessica, as they moved forward to raise the debt ceiling, that the amount of the cuts be greater than the amount they raised the debt ceiling.

And in this legislation right now is called for raising the debt ceiling by $900 billion, 850 is less than 900 billion -- that's a problem, so we know this evening that aides, policy aides they are scrambling to try to rewrite this legislation to figure out their way forward. And it's unclear exactly what that means for tomorrow's vote. We know they're aiming for it, Jessica. We just don't know if they can promise that quite yet.

We did a statement, Jessica, from Speaker Boehner's spokesman. I can read it to you. This coming from Michael Steele, in response, in reaction to the CBO. Michael Steele said "we're here to change Washington, no more smoke and mirrors. No more phantom cuts. We promised that we will cut spending more than we increase the debt limit with no tax hikes and we will keep that promise."

He goes on to say "As we speak, he says, congressional staff are looking at options to rewrite the legislation to meet our pledge. This is what can happen when you have an actual plan and submit it for independent review, which the Democrats who run Washington have refused to do." So that's House Speaker John Boehner's office, their take on this, but it's a big headache for them tonight, especially as they try to sell this bill to House conservatives who are not happy about it right now -- Jessica.

YELLIN: Absolutely, a big headache for him on the eve of a major vote forced to rewrite his bill tonight. Kate Bolduan reporting for us from Capitol Hill -- thank you Kate.

BOLDUAN: Of course.

YELLIN: So where are President Obama and the Democrats tonight? Well first let's go to White House correspondent Brianna Keilar for that perspective. Brianna, it sure seems like the administration's strategy right now is to ratchet up public pressure and let Congress for the moment do the dirty work.

BRIANNA KEILAR, CNN WHITE HOUSE CORRESPONDENT: Yes, that's right, Jessica. You heard last night listening to the president, it was basically an open call to the American people to pick up their phones, e-mail their members of Congress and honestly it really seemed to work when you're looking at websites crashing, including that of the speaker on Capitol Hill today and reports of many offices fielding just tons of phone calls, tons of e-mails.

On the flip side, though, Jessica, there was a conservative group that tried to do the same thing, kind of in response. Since the president had his open call. There was a report actually from a conservative newspaper that it had jammed the phone lines here at the White House, but I'm told by Deputy Press Secretary Josh Ernest (ph) that actually that didn't happen, that there was an increase in call volume, but it didn't jam the switchboard and we're still waiting, Jessica, just to find out how many phone calls they did get here.

YELLIN: All right, Brianna, looking ahead to tomorrow, from what you're hearing from your sources, what worries the White House the most about tomorrow's big vote in the House of Representatives assuming it comes off now that the speaker has to rewrite the legislation?

KEILAR: Yes, you know I don't know that there are really increased concerns especially from this latest news because we've heard from White House Press Secretary Jay Carney repeatedly that the White House is confident that the Senate would never allow the Boehner bill to get to the president's desk. Certainly I think that when you're looking at votes like we will see tomorrow, and it's so uncertain if it's going to certainly succeed or fail, I think there's definitely a concern about how the markets are going to respond, and this is really kind of the ride that everyone including the White House is bracing themselves for.

Jessica, as you know the president actually -- or the White House -- the executive branch, put out a veto threat today of this Boehner plan. It really struck me that the language was a little weaker than some other veto threats we've seen. It said that the president's advisers would recommend that he veto that bill. But I think that the support for the Boehner plan is increasingly coming under question with some defections from conservative House Republicans and also now with them rewriting the bill because of this CBO number that's not good news for the speaker, I actually think the White House is encouraged.

YELLIN: They would argue that the future of that bill is so much in doubt that they didn't need to issue a full veto threat. We will see.

KEILAR: Exactly.

YELLIN: All right. Thank you so much. Brianna Keilar reporting for us from the White House.

And what has been a big departure from this often quiet White House, officials from the White House were out in full force today selling their message that the president wants compromise on Capitol Hill. They've made it clear that he fears historic damage to the economy if there is no deal. With us tonight to discuss this further is the president's communication director -- communications director, Dan PFEIFFER. Dan, thank you for being here tonight.


YELLIN: First, let's just start with the basics, something that matters to every American. How dire will it be for this economy if the debt ceiling is not raised?

PFEIFFER: Well in the 200-plus years of our country, we've never been in a situation where we have been in danger of defaulting on our obligations. And so what we know is it will create tremendous market uncertainty. It will likely lead to a -- rising interest rates for all Americans. That means people who own homes, who own cars, who have credit card bills, students trying to pay off their college loans, all of their costs are going to go up. That's essentially a tax increase on every American. We don't know what it will do. We know that we have a fragile recovery right now and it would be very bad and there's no reason we should even come anywhere near doing that.

YELLIN: Let me just ask you -- you said today on CBS radio that a failure to raise the debt ceiling could potentially put us back toward a depression, do you stand by that language?

PFEIFFER: Yes. Let me explain what I was talking about there, which is that we are -- we're in a fragile recovery. In 2008, in 2009, right after the financial crisis, we were on the tipping point into -- into something as bad as the great depression. We cannot take a risk like this. We don't know what's going to happen. We just know it's not going to be good for the economy. It's not a risk we should take and it's time for Congress to do its job, pass this bill, and send it to the president so we can get this over with.

YELLIN: So let's talk about next steps because we know that let's assume that the speaker rewrites and has a vote tomorrow, so there's one Republican plan in the House of Representatives, then there's a Democratic plan that could go and move in the Senate. There is no clarity that either version can get through both houses of Congress. We have heard administration officials say that there's a need for compromise. Why hasn't the president come out last night or today and put forward his own plan for compromise?

PFEIFFER: We have put forward enough plans for compromise to fill a room. In fact, they're probably stacked on Speaker Boehner's desk right now, so we've done everything we can. The issue we have right now is the House Republicans refuse to compromise at all. They've adopted a "my way or the highway" approach where they want -- they want only -- they want to balance the entire budget on the back of the seniors and the middle-class. They're unwilling to compromise at all and essentially holding the U.S. economy captive for that and that's dangerous.

YELLIN: You know there's a hunger for leadership in the country and one of the president's senior advisers, David Plouffe said to Wolf Blitzer just a short time ago, quote, "you could see there could be contours of compromise", so I just want to press you on this again. Specifically what is the president doing now to broker this compromise?

PFEIFFER: Well, we're having conversations with leaders in both houses and in both parties to look for what we can do next to bridge this gap. There are multiple paths to compromise. The Reid Bill and the Boehner Bill are not that different, except for one critical difference which is the Boehner Bill will insist that six months from now we're going to have to go through this whole fight again, that would be bad for the economy. It risks a downgrade and so we're looking for ways to do that. We just need a willing partner who is willing to compromise with us. The bill Senator Reid put together is designed specifically for that compromise; it meets the tests as contrived as they may be that the House has put forward for passing a debt limit bill. He has taken off the table revenue increases, something Senator Reid and President Obama both support, revenue increases from wealthiest Americans --

YELLIN: (INAUDIBLE) can live without the revenue increases at this point?

PFEIFFER: We -- the president said last night on national television --

YELLIN: Right.

PFEIFFER: -- that the Reid bill is a better path. It is a missed opportunity that the House Republicans were unwilling to put their money where their mouth is in terms of reducing our deficit because they're unwilling to compromise at all. The Reid bill makes important cuts in domestic spending that we agree with. It protects critical investments and protects the economy, and can pass the House and that's the right thing to do. It also ensures that we don't have to re-fight the same fight a few months from now.

YELLIN: There are new reports out from financial forecasting firms saying that the U.S. has actually taken in more tax money than projected. And they say that come August 2nd we'll actually be able to pay our bills. So, I'm curious, does the White House still believe that on August 2nd we do hit the debt limit and that is the actual deadline?

PFEIFFER: Yes. The reports you're referring to are guesses at best from folks who don't have the full information. I spoke to the treasury secretary before I came over here who said to me that we're still planning for August 2nd being the day. And the fact is there's no reason we don't even have to get to August 1st. Congress has to do its job. We need to stop with these sorts of political statements that we're dealing with in the House right now. We need to get in a room, compromise and move on. That's what the American people want. That's why they're filling up phone lines and fax machines and bringing down websites right now.

YELLIN: Give me the percentages do we have a deal by Augusts 2nd?

PFEIFFER: The president is very confident that we will have a deal. It is unfathomable to think that leaders in Congress that the House Republicans can be so tied to ideological agenda, to the far right of their party that they would allow the country to enter a default. That can't happen.

YELLIN: If there's no deal will the president sign a short-term deal just to get us over the hump?

PFEIFFER: What the president has said is that if we're in a place just like we were at the essential shutdown of the government a few months ago that if we are at a place where there's just a couple of -- we need a few days to dot the "I's" and cross the "T's" we'd obviously entertain something like that, but what we can't do is increase uncertainty in the economy, keep this cloud of default over us for months to come in a way that have another political fight months later. That's bad for the economy. We're not going to do that and frankly that can't pass the Senate, so what we need to do is we need compromise from the House Republicans -- we're not asking them to come all the way to our position, just come a little bit so that we can have -- we can do the right thing for the country here.

YELLIN: Are you guys waiting for the Boehner Bill to fail before you decide what the next move is?

PFEIFFER: I don't think the fate of the Boehner Bill is largely irrelevant, because it can't pass the Senate. It's not -- the president's not going to sign it and so we're basically wasting critical days in a -- with a ticking clock on what's essentially at best a political statement.

YELLIN: So, you just think that the state of play has to move on to the Senate before you can do anything.

PFEIFFER: Well the state of play has to move on to a position where the House Republicans will give up their "my way or the highway" approach and be willing to compromise with (INAUDIBLE) Democrats and the president.

YELLIN: But you said you just spoke to the treasury secretary. There is a -- Social Security bills have to be paid on the 3rd, major payment has to be made to bondholders on the 4th. I know that the Treasury Department is making contingency plans what won't get paid when if this doesn't happen, so when are the American people going to know what the plans are if the deal isn't done? When will you make that public?

PFEIFFER: Well we've already -- the president already talked about both on Friday night in his press conference and then some in his speech last night about the potential consequences of this. The Treasury Department is going through all the appropriate planning to make sure that if we reach this unthinkable position we'll handle it the best way we can.

YELLIN: But you're going to tell the American people what comes first -- you have to tell the people at some point.

PFEIFFER: Absolutely. We will make sure the American people know (INAUDIBLE). That's part of the reason why the president gave his speech last night.

YELLIN: OK, finally the big picture question, all this talk is making everybody very concerned about the economy. Right now the unemployment rate is 9.2 percent. How concerned are you that the debt limit fight will make the job situation in the U.S. that much worse?

PFEIFFER: Well, I think that we have put by being unwilling to compromise and being unwilling to do something serious about our deficits over the last few weeks we've created unneeded uncertainty in the economy. There was no reason to do that. And what we need to do is solve the problem and get back to work to growing the economy and creating jobs and our hope is we can do that as soon as possible.

YELLIN: And with the president heading into a re-election fight, how worried are you that this makes him keeping his job that much harder?

PFEIFFER: Well I think that -- when we get to it we are -- it feels like to me at least 100 years away from the election. So I know that's not always true here on cable television, but -- so we're going to deal with this. We're going to solve this problem before August 2nd. We're going to be working hopefully in a bipartisan fashion to create jobs, cut spending, reduce our deficit and grow the economy and there will be a big debate between the president and (INAUDIBLE) Republican, someone who is running now or someone who may be running soon in the fall next year about what the appropriate vision is going forward and that's a debate I'm confident we'll win.

YELLIN: All right, well we'll see if we get to a deal by August 2nd or not. I hope you're right that we will. Dan Pfeiffer thanks for being with us.

PFEIFFER: Thank you, Jessica.

YELLIN: All right. In a minute a prominent conservative who is against Speaker Boehner's deficit cutting bill, that's coming up.


YELLIN: Tonight we have breaking news on Capitol Hill. Speaker John Boehner just announced that he's rewriting his plan to raise the debt ceiling and cut spending because there just aren't enough cuts in it. A lot of eyebrows went up today when The Club for Growth, a conservative organization that promotes limited government came out against Speaker Boehner's original plan and Brent Bozell is a member of the Club for Growth Leadership Council. He joins me now to discuss it. Thank you for being with us.


YELLIN: So the Club for Growth came out against the speaker's plan. This is before the CBO, the Congressional Budget Office that says how much savings you get out of it, even scored it. I want to read what you all said. You said, quote, "The plan cuts almost nothing immediately. It caps only discretionary spending, and it does not require passage of a balanced budget amendment. Perhaps more importantly, it simply doesn't fix the country's fiscal problems. We strongly oppose it and we urge a no vote." Do you believe it will pass tomorrow?

BOZELL: No. And if it does, it's irrelevant. First of all, I'm not speaking for The Club for Growth. I'm speaking for America, my organization. I'm on the Advisory Board of The Club for Growth, but I know what they're thinking, which is this is insanity. That look, you've got a train wreck that we're facing and a budget -- an idea that cuts spending a trillion dollars over 10 years just isn't serious when you're looking at a $14 trillion debt that we have.

We've got calamity facing us, and there is an idea that's on the table. It's the idea that Congressman Boehner supported. It's "Cut, Cap and Balance", and the reason all three elements are important is because you can't trust Congress. We've seen it over 25 years. They make these promises, and they regularly break these promises, so you've got to have a mechanism in place that holds them to a promise, not that allows them to make a promise.

YELLIN: But would you rather face the consequences of default?

BOZELL: Well look at this. Are we going to have a default? I wish the Obama administration would get its position right and your last speaker was talking about the sky caving and yet they are making phone calls to the banks saying don't worry, we're not going to default, there's not a problem. There's not a problem. Which one is it? These scare tactics that --

YELLIN: Well how do you know that? Because I've heard that they are on the phone with the banks saying look we're concerned, too, but, you know --

BOZELL: But don't worry. We're not going to default. That's what the banks are reporting. That's the stories that are up today. The point is how do we know? We heard last weekend, Jessica, didn't we hear that we have to have a deal in place because the Asian markets were going to collapse Sunday night and the American markets (INAUDIBLE). Well it didn't happen. Two weeks ago we heard that if we didn't have a trillion dollar tax deal on the table there was going to be a massive run on the stock market. It didn't happen. We don't know what's going to happen. We really don't.

YELLIN: We keep hearing that both the plans proposed by the Democrats and by the Republicans may not be enough to avoid a downgrade of the nation's credit rating.

BOZELL: Nope, not true. Not true. Not true, going to have to stop you right there. There is one plan. S&P -- and we just have to have these facts on the table. S&P and Goldman Sachs have both said that you've got to have at least $4 trillion in cuts. The Reid plan doesn't have it. The Boehner plan doesn't have it. There's only one plan that has it, which is C, C, and B, "Cut, Cap and Balance".

YELLIN: -- we know that cannot pass both houses of Congress, so you need an alternative --


YELLIN: -- that can pass.

BOZELL: The president and the Senate -- the Democrats have got some -- as Ricky Ricardo would say, they've got some explaining to do to the American people. There's only one plan that's going to prevent that's going to avert a downgrade and they're against it. Now they got a better plan, they got another plan that diverts it, let's see it. I think it's kind of interesting that you're always hearing that the president is trying to play this centrist road game, but he hasn't put anything on the table --

YELLIN: But you also want something that can get through that can actually get done, you know and so the question is if this could lead, if the lack of action could lead to default, and that leads to economic -- more economic hardship, do you want that on your shoulders?

BOZELL: Why is it on Republicans' or conservatives' shoulders?

YELLIN: No, no --

BOZELL: -- shoulders?

YELLIN: -- it's because you're against the -- you say you're against all the plans that are out there.

BOZELL: No I'm for the plan that's passed the House. That's what I'm in favor of it. Let's reverse it. Why aren't we asking that question of Democrats? Why aren't you asking that question of the Obama Administration?

YELLIN: We ask it of all of them.

BOZELL: Are you asking them that if you don't support this, you are causing a potential financial catastrophe in this country, is that being asked? Why aren't they supporting "Cut, Cap and Balance"? It's the one thing that will prevent it. Why aren't they supporting it?

YELLIN: And do you see a way for "Cut, Cap and Balance" to get through both houses of Congress?

BOZELL: I think that the speaker should put it right back on the table and say this is the only thing. You got a better idea? Let's hear it. But so far no one has a better idea.

YELLIN: So you think that's the solution, he should pull his bill tonight and put "Cut, Cap and Balance" back on the table?

BOZELL: Absolutely.

YELLIN: OK, well maybe he's watching right now.


YELLIN: I think he's rewriting a bill --


YELLIN: I think he's busy rewriting a bill --

BOZELL: It won't pass.

YELLIN: -- but maybe he's watching and we'll see.

BOZELL: Thank you.

YELLIN: All right, Brent Bozell thanks for being with us.

And now that we've heard from a top conservative and the White House and Capitol Hill, who, if anyone, has the upper hand tonight? Some of Washington's top political watchers will be here next to compare notes.


YELLIN: Breaking news tonight, Speaker John Boehner has just announced he's rewriting his deficit reduction bill ahead of tomorrow's high-stakes House vote. Meanwhile the White House keeps calling for compromise, so who has the upper hand in the deficit battle tonight?

Let's talk it over with Jackie Calmes, a national correspondent for "The New York Times" and Daniel Stone a White House correspondent for "Newsweek" and "The Daily Beast". Thanks to both of you for being here and Jackie first to you -- so looking at the landscape today, your assessment, who has the upper hand?

JACKIE CALMES, NAT'L CORRESPONDENT, THE NEW YORK TIMES: Well, it's hard to say at this point. It's been back and forth so often, but one thing's clear, it's not Speaker Boehner who has the upper hand. He's struggling to pass his version of a fallback plan to raise the debt limit with the spending cuts attached. And he's losing Republican votes.

He's not going to get any Democratic votes to speak of. And he's got a full array of conservative groups working against him to defeat it because it's, as your last guest said, it's just not -- doesn't go far enough for them, but what they want can't pass the Senate. Probably couldn't pass the House, and certainly wouldn't get President Obama's signature.

YELLIN: It's a pretty pickle the speaker's in, Daniel, but looking at the White House for a moment, we just heard them say that if the U.S. defaults we could be headed toward a depression or leading in that direction. Does that help the U.S. Congress reach a deal?

DANIEL STONE, WHITE HOUSE CORRESPONDENT, NEWSWEEK AND THE DAILY BEAST: It helps the White House certainly. They're all about urgency right now. They want to put everyone on this clock towards Tuesday and say we need to get something done right now. You just had Dan Pfeiffer on from the White House. They're on a media blitz. They're trying to get something done. But for the markets, no, they're looking for certainty and thoughts of a depression and then a deal and no deal, people walking away from deals, that sort of language isn't helpful, and certainly not a depression.

YELLIN: It speaks to Washington. It does not speak to the markets --

STONE: Absolutely, yes, all about Washington.

YELLIN: Speaker Boehner's plan, Daniel, is coming up for a vote tomorrow assuming he gets it rewritten now. Members of his own party are waiting to see if they're going to vote. Democrats have been pretty quiet on it. Do you think they're waiting to see if Speaker Boehner's plan fails before they decide whether or not to act?

STONE: Absolutely. I think Democrats here -- their tact the entire time has been let's not box ourselves into a corner. They could vote on Speaker Boehner's bill. We saw the Chamber of Commerce throw their support behind Speaker Boehner's bill, so we could see momentum building for that in the coming day, that's why we haven't heard from Democrats.

YELLIN: Right, a lot of Democrats on the Hill keeping their powder dry --

STONE: Exactly.

YELLIN: -- while they're waiting to see what happens with Boehner's bill. Jackie, you wrote today that the debate over spending is shaping up to be a lost opportunity. I just want to listen for a moment to Senate Minority Leader Mitch McConnell and then we can talk about it.


SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: The situation the president described last night bears very little resemblance to the realities on the ground right here in Washington. I know the president would rather give speeches about our problems than resolve them, but he wasn't elected to talk about the United States. He was elected to lead it.


YELLIN: So, Jackie does the president risk looking like a follower rather than a leader in this debate or is that just the way Senator McConnell wants it to seem?

CALMES: Well, I mean, there is a big risk that whatever gets done is going to be far less than President Obama's original goals and it's been a very ugly process. But, you know, it's hard -- this line of -- that Republicans are using about, you know, he hasn't led or more to the point, he hasn't put out a plan, it's -- you know, there -- it can't be both.

There's Democrats on his side that are really unhappy with the level of concessions he's made. You know, hundreds of billions, very specific proposals that he's put on the table in exchange for not -- far from a dollar-for-dollar exchange on tax revenues. And it would be -- you know, it would be interesting if the Republicans would have let it be tested by, you know, taking the president's offer just how hard a time he'd have getting his Democrats to support it. I think in the end he probably would, but it would be pretty tough.

YELLIN: Do you think Democrats have support for the bill Harry Reid has proposed in the Senate, Jackie? If they were to move forward with that, could they get that through both houses of Congress?

CALMES: God, it's hard to tell. I mean -- but I think that something that Majority Leader Reid and the Republican Minority Leader McConnell come up with is, you know, pretty much looking like it's where this is going to be resolved. And then, you know, presumably you would send it over to the House, and they would -- one way or another, have to take it. Now Speaker Boehner would have to bring it to the floor knowing that he'd lose a lot of his Republican members, but one thing that's been missing in a lot of the coverage and the talking about this and attention to the House Republicans is, whatever happens in the House, whatever plan is there, Speaker Boehner needs some Republican votes because on a debt limit vote, he's going to lose anywhere from 20 to more of his House Republicans who are dedicated to voting against any debt limit increase.

YELLIN: It's just such a pretty pickle they're all in.

Daniel, I want to ask you about what David Brooks wrote in "The New York Times" today. The columnist, an opinion columnist wrote, quote, "Obama's Friday appearance had a gigantic unintended consequence. It brought members of Congress together. They decided to take control. The White House is now on the sidelines. Democratic and Republican congressional leaders are negotiating directly with one another."

Does the president really on the sidelines and do you think the White House is concerned about that perception? STONE: I think on Friday, that's where it put him. David Brooks, of course, is the bellwether columnist, tell us where a lot of Washington is, president went out there emotional on Friday and very upset. And with his speech last night, I don't think we saw the effect that he wanted, the effect that his people wanted, that's why they've been all over the networks today trying to make their case.

But I don't think the president is as engaged in this fight as he'd like to be and certainly without as much power as he needs at this point.

YELLIN: Jackie, I know you talk to as many people in this town as anyone. Just your odds -- will this be resolved next Tuesday or not?

CALMES: God, you know, I've been here so long and through so many debt limit fights, but like a lot of people, this has been the ugliest one I've seen and perhaps the most, you know -- the highest stakes. And, I'm not sure. I can't say yes yet.


CALMES: Because there's just enough people like your prior guest who think that there's no -- nothing to fear.

YELLIN: OK. Thanks so much. Jackie Calmes and Daniel Stone for being with us, I'm grateful.

And next, the latest on the Norway terror attacks; and a new State Department warning to U.S. travelers.


YELLIN: Welcome back. Here's the latest news you need to know right now:

Egypt's state-run news agency reports ousted President Hosni Mubarak is depressed and refusing to eat as he awaits trial on charges of ordering police to kill anti-government protesters.

A new travel warning from the State Department says what he calls anti-American violence around the world, including suicide operations, assassinations, kidnappings, hijackings and bombings.

Norwegian police today started publishing the names of the 76 victims of Friday's bombing and mass shootings. Meanwhile, the suspect's attorney told reporters his client may be insane.

At his confirmation hearing, the man in line to be the next chief of staff warned against cutting too many billions from the defense budget over the next 12 years.


UNIDENTIFIED MALE: We are looking at 400 -- I would react in this way, based on the difficulty of achieving the $400 billion cut, I believe $80 billion would be extraordinarily difficult and very high risk.


YELLIN: In an effort to make its Happy Meals healthier, McDonald's plans to reduce the portion size of its French fries and add apple slices.

And in a minute, we'll go back to Capitol Hill for more on tonight's breaking news: House Speaker John Boehner trying to rewrite his deficit-cutting bill.


YELLIN: Tonight, we have breaking news on Capitol Hill. House Speaker John Boehner has announced he'll rewrite his plan to raise the debt ceiling and cut spending because the cuts in his package aren't big enough.

CNN congressional correspondent Kate Bolduan joins us from Capitol Hill.

Hi, Kate. What's the latest there?

KATE BOLDUAN, CNN CONGRESSIONAL CORRESPONDENT: Just that. And that's big news. You can be sure, Jessica, that what the House speaker does not want to be doing right now is having to rewrite his bill. They were aiming to be voting on this bill tomorrow.

So, right now, we're told that they're kind of scrambling to work the options and try to rewrite it in order to make sure it's in line with the pledge that he made that the cuts of this bill be larger than any amount of the debt ceiling increased. And because of this, the cost estimates that just came out by the CBO, the Congressional Budget Office, it falls short of that.

And that's a problem for a couple of reasons, because it goes counter to that pledge that I just said and it's also a problem because they're in the middle of working very hard to try to sell this plan. House conservatives are unhappy about this. House Democrats are trying to get a united front to vote against this plan, and that does not leave the speaker a large margin of error to pass this legislation -- Jessica.

YELLIN: All right, thanks so much -- Kate Bolduan reporting for us from Capitol Hill. I'm grateful.

Let's turn now to Republican Congressmen Scott Garrett from New Jersey who is a member of the budget and financial services committees.

Sir, thanks so much for joining us.

REP. SCOTT GARRETT (R), NEW JERSEY: Sure. Good to be with you.

YELLIN: I understand you've been on the fence about the Boehner plan. Today, the CBO said the plan only had $850 billion in savings. And now, Speaker Boehner's office said they're rewriting the bill.

So, did that influence your vote, first of all?

GARRETT: Well, I appreciate the fact that the speaker has said al along and I think the Republican position has been all along that whatever debt limit increase we talk about -- and, of course, you know that the House Republicans and House Democrats have already passed a bill out of the House that does raise the debt limit, but whichever one we do has to, you know, really cut more money than we -- than we raise the debt limit by and I think in their initial numbers, this bill would have done that by a marginal amount.

But we don't do anything here in Washington without CBO scoring it. And as you said it came in 850, so it's under the trillion dollars in cuts they needed.

Now, I should add to say, at least we have a bill here. Unfortunately, as you know, the White House has yet to give us anything in writing that we can try to compare this against to see whether this is good, better, or worse than the White House is presenting us with.

So, we have nothing from the White House. Here, at least, we have something on paper.

YELLIN: Let me stay on the speaker's plan. How much pressure are you getting right now to support the speaker's plan?

GARRETT: So, the speaker and leadership is saying this is the avenue that they would like to send over to the Senate, even though the president has already said that he would veto the bill essentially, and Harry Reid said he's not enamored with it. At least this would be one more thing in the Senate for the senators to consider. They haven't done anything unfortunately over there.

What I'm doing with our leadership right now is saying, look, we've already sent a bill over there that could cut spending, cap spending and move towards a balanced budget. We can take a look at where the leader is -- the speaker is right now, but we probably want to try to plus up some of the cuts.

You know, right now, the president wants to cut zero in 2012. Speaker wants to cut around $7 billion in 2012, and a number of us think we can up the number. Likewise with the caps and likewise with the balanced budget amendment, all areas that needs to be addressed, we think.

YELLIN: You know, the White House communications director was just on the show a little while ago, and he described the speaker's bill as, quote, "irrelevant," and the White House basically issued a veto threat to the plan.

So, should the House be working on a bill that would never become law?

GARRETT: Well, one of your earlier guests has said whether at this point in time, the White House is really on the sidelines. In one sense, the White House has been on the sidelines all along in this debate. The president never truly engaged whatsoever, never came forth with a proposal that would create jobs and would get the economy moving, never specific as we have here in the House.

We've passed in the House a bipartisan bill that's already sitting in the Senate. Now, we have a second proposal that's literally in form and written down. We may have to -- the leader may want to tweak it or what have you.

But the White House has been on the sidelines. The White House -- I hate to say this -- has been irrelevant in this entire discussion.

Unfortunately, they honestly will be irrelevant going forward until they come to the table, sit down with us, and say, here in writing is what we want to do. Here is how we get the economy moving again. Here's how we get jobs created again. Here's how we can try to cut spending in --


YELLIN: What's it going to take for you to decide whether you're going to vote yes on this?

GARRETT: Yes. Well, the first and foremost, is to see what the next version of this bill is and that won't be for a period of time.

And, secondly, to see whether -- the point I was just making, whether the president now comes forward and said, OK, I want to get engaged, here's our plan. Still waiting for that.

And, thirdly, waiting to see whether the Senate actually does anything. They have one bill sitting over there, they didn't say no to it, mind you, which was a cut, cap and balanced bill. They just said, let's postpone it.

So, I would really encourage, you know, Senator Reid to say, well, we wait for the House move to something else, let's have that come up for debate, let's have a discussion on that, and let's move that for a vote, yes or no would not be a bad thing for the Senate to be doing something while the House continues to act.

YELLIN: You know, the rest of the country is staring at Washington confused. One of the popular topics on Twitter today was blank you to Washington, phone lines on the hill are jammed, 68 percent of Americans and 53 percent of Republicans in a new poll now say they want Congress to compromise and get things done on the debt ceiling.

Why is compromise so hard to achieve on this issue?

GARRETT: Well, one reason it's hard to compromise with someone sitting across the table from you if I say, I stand here, and I lay it all out, and the person on the other side doesn't lay out where they are, then it's hard to reach that middle ground. And I know the president said during his speech he didn't want to get into the details during his last speech -- last night, well, that's the problem. You can't compromise unless he's willing to tell us specifically where does he want to have cuts, where does he want to see increases, where does he want the revenue to grow from? We haven't seen it.

So, it's very -- it is frustrating for me just as it is for the American public.

YELLIN: OK. We have to just point out, I mean, obviously, he was involved in discussions for a number of weeks and then --


YELLIN: And that didn't broker a deal in the end either, so --

GARRETT: But he came -- he came -- no, he came to the discussions with nothing in hand. He came to those discussions with just a broad outline saying we want to move in this direction or that direction. That is not taking part in a critical way. That's not taking part in a fruitful way for discussions.

YELLIN: How concerned are you -- some of the ratings agencies are going to testify before Congress tomorrow. No doubt they'll be asked about the chance of a downgrade. How concerned are you about the U.S. credit rating?

GARRETT: Well, I'm absolutely concerned about that, because that's one of the big issues in any plan that we actually get through Congress. So, it's not enough, if you look at the rating agencies what they've already said -- they've told us, it's not enough simply to raise the debt limit over the next several days to get that behind us. They said we need to make structural changes, significant structural changes in spending so that we're not in this situation down the road. Where our debt-to-income ratio, our principal payments-to-revenue ratios -- they have to change substantially they said otherwise we'll find ourselves with a downgrade.

So, the president's general broad plan of saying raise the debt ceiling won't work. Senator Reid's general plan that he has in a bill form that says let's raise it only this much and cut only this much, generally speaking, won't do it because it doesn't make structural changes. So, I'm very concerned about it.

YELLIN: All right. Thanks so much for joining us. Thank you. We'll look forward to see which way you decide to go --

GARRETT: Appreciate it.

YELLIN: -- on Speaker Boehner's plan. Thank you.

GARRETT: Thank you so much.

YELLIN: And don't go anywhere. In a minute, James Carville and Mary Matalin will join us to take a look at the political ad war sparked by the deficit fights.


YELLIN: Since you watch cable TV news and perhaps listen to the radio, too, you are now doubt aware that all sides in the deficit fight are targeting with commercials.

So, let's check out a few that have caught our eyes and ears.

Joining to us listen and watch are Democratic strategist James Carville and Republican strategist Mary Matalin. They're both CNN contributors.

Hey, guys. Thanks for being with us.



YELLIN: OK. So we're going to take a little bit of a lighter turn on this debt drama.

First, let's listen to the progressive Christian group Sojourners. They put up radio ads that target both Republicans and Democrats saying that -- well, we'll listen. Here's one targeting Speaker Boehner in his home state of Ohio using Scripture to make the case against certain kinds of spending cuts.


NARRATOR: The book of proverbs teaches that where there is no leadership, a nation falls. And the poor are shunned while the rich have many friends. Sadly, Congress has failed to heed these biblical warnings and our own Representative Boehner is risking the health of our economy if America defaults on its debts.


YELLIN: OK. So, you get the point of that. They also have a similar ad up in Kentucky where Mitch McConnell is from, and in Nevada for Leader Reid.

So, James, who is the target audience for an ad like this? And is it really a way to call -- what does it do?

CARVILLE: You know, I'm not sure. I guess that Michele Bachmann said she is talking to God about running for president, so is Rick Perry. And they have the Christian coalition and everything.

So, I guess everybody is looking for divine guidance in here because they can't seem to get together with this temporal approach that we take.

My guess is, is that, you know, this is just trying to add a little more wood to the fire or to try to bring thing into more focus. I don't think these ads are going to be hugely influential. But the people running them are well-motivated people and I'm sure they want to participate in the debate.

YELLIN: Mary, is it a good way to reach evangelical voters?

MATALIN: It's -- the buy is designed to get people like us to talk about it. It's a strange buy and --

YELLIN: It worked.

MATALIN: -- people that are already stake out were talking about. So, that's good.

But the message is stranger. The message is about leadership. Boehner represents one half of one-third of the government. When the president who all Americans consider the ultimate leader had all branches of government for two years, he did absolutely nothing.

So, if there's someone to call out on leadership or the lack there of, it is the president. I'm confused about their message if they're trying to target Republicans.

YELLIN: Well, they target Democrats -- well, they talk to Democrats, too, in another ad.

But let's listen to one that really does go after a Democrat, and a debt ceiling ad hitting in Ohio Democrat, Sherrod Brown. He's a senator there. This one from the conservative group Crossroads GPS.


UNIDENTIFEID FEMALE: Politicians like Sherrod Brown voted for billions in new tax and racked up trillions in crushing debt.

UNIDENTIFIED MALE: Now, President Obama wants to continue to have the reckless spending.

UNIDENTIFIEID FEMALE: And he wants to raise taxes even higher.

UNIDENTIFIED FEMALE: And that cost us more jobs.

UNIDENTIFIED MALE: Tell Senator Sherrod Brown --

UNIDENTIFIED FEMALE: We've got to take away President Obama's blank check.


YELLIN: OK. James, are people going to vote on the budget and the deficit?

CARVILLE: You know, sure, it's a kind of fact. By the way, Sherrod Brown is leading by 12 points of any Republican right now. So, he is doing pretty good in spite of this.

And to be fair, the things that caused the (INAUDIBLE) almost all Republican policies, these charts that come out every day in the newspaper. So, you know, look, there are two sides to every story. I guess -- I think this is Karl Rove's group. Should they be in Ohio a lot? They've got every right to run all these ads.

But Senator Brown is a pretty tough guy and I suspect he'll be able to deal with it.

YELLIN: Mary, former -- another candidate, former Speaker Newt Gingrich went on the record today in New Hampshire, on a radio station. He sounded a little nostalgic with James' old boss.

Listen to this.


NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: Bill Clinton was willing to be practical. And we have very tough negotiations. We were able to sit down face to face and negotiate a deal, and he really went so much further to the center than President Obama is. And he was so much more flexible than President Obama.

I don't think there is any comparison. I don't think President Obama is trying to impose a fairly radical version of America.


YELLIN: Mary, is that a fair assessment?

MATALIN: Well, looking back, we didn't think of it at the time. But now when we compare the two Democratic presidents, of course, Bill Clinton was a far superior president for the country. He passed trade bills. He passed welfare reform. He's been in the course of these discussions, complaining that the President Obama's debt commission was not listened to. He was heard off camera saying to Paul Ryan, he hopes the defeat in New York 26 didn't result in what's happening here, that we don't do anything about Medicare reform.

Yes. President Clinton in hindsight was far more centrist than this president.

I want to go back to the Ohio business though. That state, I don't care what Sherrod Brown's cross fire, he's running against those against vulnerable Democratic senators in competitive states, five competitive states. Everyone is talking about Boehner. It's the Senate that can't get anything passed because none of those Democratic senators are going to vote for a tax increase.

YELLIN: We'll se what happens in the Senate next. We're waiting on that. I agree. We'll see what happens.

CARVILLE: Right. Yes.

YELLIN: But, James, I want to go back to Gingrich and Bill Clinton, because I'm curious. Do you recall that kind of positive statesmanship between Gingrich and Clinton when you were there? Yes?

CARVILLE: I actually recall Newt Gingrich leading the charge to impeach Bill Clinton. You know, in other words, maybe I just don't -- maybe I have a different kind of memory, a view of American history. And I actually remember Newt Gingrich saying that President Obama had an anti-colonial view of the world, wherever that came from. I don't know.

So, I really -- I'm sort of enamored that Newt Gingrich is now professed love for Bill Clinton when he was trying to run him out of office and was encouraged in the $85 million (INAUDIBLE) to try to have a criminal prosecution against him.

But, you know, when you get old, like I am, I just remember too many things and sort of stick with you.

MATALIN: Don't believe him. He doesn't remember anything. He can't hear and he doesn't listen.

CARVILLE: It's like come on, don't you know that we remember that kind of stuff? Please.

YELLIN: I wonder. There's been a rap video that has gone viral via Drew Carrey's libertarian Web site, reason TV. Maybe we can play a snippet of it for a moment.


YELLIN: OK. Is there some way, Mary, in which this debt drama has been good for the country? Because now we're all engaged in policy?

MATALIN: Absolutely, yes. Every poll said over 80 percent of people are following this very closely. It's wonder will for the country to understand the difference between deficits, debt.

We cannot go forward with the debt structure that we have. We have to reform entitlements or it's going to ill gobble up our government, it's going to gobble up our family budget. So, for kids like that, that my kids are going to watch, that teach them about debt --

YELLIN: I'm sorry. I have to wrap you. We're out of time.

But a pleasure to have both of you. Mary, James, thanks to you.

And that's all from us tonight.

Coming up, "IN THE ARENA" starts now with Gloria Borger.