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State of the Union

Interview with Timothy Geithner; Interview with Senators Ayotte, Warner

Aired December 02, 2012 - 09:00   ET


CANDY CROWLEY, CNN ANCHOR: An offer they can't accept.

Today, Republicans say the White House plan to avoid the fiscal cliff is a Thelma and Louise strategy. We talk to the president's Treasury secretary Tim Geithner.


TIMOTHY GEITHNER, TREASURY SECRETARY: What we're trying to do is to get these guys to come together and reach an agreement that's going to be good for the country and for the economy.


CROWLEY: Then what now? With Democratic Senator Mark Warner and Republican Senator Kelly Ayotte.

Plus, the fiscal cliff, Benghazi and Obama's second term with Montana Governor Brian Schweitzer, the Hills A.B. Stoddard, former Hewlett-Packard CEO Carly Fiorina and Susan Page of USA Today.

I'm Candy Crowley. And this is State of the Union.

Among other things, Republicans called the administration's fiscal cliff plan a joke, an insult, a break from reality. Suffice to say it is unacceptable to them. The president's opening round offer includes $1.6 trillion in new taxes, $400 billion in savings from Medicare and other entitlement programs, $50 billion in new stimulus spending, and an additional $285 billion to fund depreciation and mortgage programs, unemployment insurance benefits, and payroll tax cuts.


REP. JOHN BOEHNER, (R) OHIO: This extra spending, that's actually greater than the amount they're willing to cut. I mean, it's -- it was not a serious proposal.


CROWLEY: While his aides were on Capitol Hill offering up the opening bid, the president was making his case in Pennsylvania campaign style.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: At the end of the day, a clear majority of Americans, Democrats, Republicans, independents, they agreed with a balanced approach to deficit reduction.


CROWLEY: After the president's remarks, I spoke with his main man on the fiscal cliff, Treasury secretary Tim Geithner.


CROWLEY: Let me ask you, the reaction to your going up on the Hill and saying, hey, this is basically the White House position has been -- Mitch McConnell saying I think it was just demeaning for them to ask the Treasury Secretary to come up here and give a proposal like this, and by this we have people saying it's a sham, it's -- you know, ridiculous, it's a nonstarter.

When you went up there, you didn't think Republicans were going to go good idea.

GEITHNER: You know, what we're trying to do is get these guys to come together and reach an agreement that's going to be good for the country and good for the economy.

CROWLEY: By these guys you mean you all and the Republicans.

GEITHNER: And Democrats together.

CROWLEY: And the White House.

GEITHNER: That's what we're trying to do. And what we did was put forward a very comprehensive, very carefully designed mix of savings and tax reforms to help us put us back on the path to stabilizing our debt and fixing our debt and living within our means. We've been very detailed about how to do that both on the spending side and revenue side, and we think this is a good plan for the country. And it does the most important thing, Candy, which is it gives 98 percent of Americans the certainty your taxes aren't going to go up, and it gives us the chance to make sure we're protecting Medicare for future generations and it gives us the ability to lock in a set of carefully designed reforms that put us back on the path to fiscal balance.

So its a very good plan, and we think it's a good basis for these conversations.

CROWLEY: It's a starting point because when you look at it, the president said in September I am still willing to deal with Republicans and, you know, $2.50 worth of cuts for every dollar's worth of revenue raising. And this, of course, is nowhere near that.

GEITHNER: No, that's not true. What we are proposing is very consistent with that. Which is we have roughly $2 of spending cuts if you include what's already been enacted.

CROWLEY: Well, does that count here? I mean, if it's already enacted.

GEITHNER: No, of course, it counts.

CROWLEY: This is now -- that was your debt ceiling deal, correct?

GEITHNER: No, that was - again let's just go back. And we've been having this conversation with Republicans for about 18 months. And from the beginning what we all agreed is we need roughly $4 trillion in savings over ten years. Now we've been doing that in stages. We did $1 trillion in spending cuts up front. And we proposed a balanced mix of change on the tax side and spending side to go beyond that, and look at it together, it's roughly two to one spending cuts versus tax increases.

Now, we've been very detailed about what we can do on the spending side. We proposed $600 billion in cuts in health care programs, other mandatory programs over ten years. Now Republicans are -- we don't expect them to like all of these proposals, but all we can do is lay out what we belief in and then ask them to come back to us and tell us what they would prefer to do.

CROWLEY: One of the things that the senate Republican leader Mitch McConnell said was, listen, if you take higher premiums for the wealthy in Medicare, you increase the eligibility age in Medicare to eventually bring it to the parody of Social Security. If you slow the costs of living in Social Security and other entitlements thing we're at the table, we're dealing with revenue. That good with you, those things?

GEITHNER: Well, you know, there are a lot of ideas out there - a lot of idea from Democrats, from Republicans.

CROWLEY: Right, but how about these specific ones?

GEITHNER: Well, you know again there's a lot of ideas out there, but what i can do today is explain to you what we think makes the most sense and what's in the proposal today. And again, we're prepared to listen to what Republicans suggest we do, but we can't react until they've given us a proposal we can look at and see how it all fits together.

CROWLEY: Because they have your proposal? They put on a piece of paper. We were told there wasn't an actual plan that you just sort of told them. So there's an actual plan on a piece of paper saying here it is.

GEITHNER: Again we've laid out a very comprehensive detailed framework of how we do it and in what stages with $600 billion of spending cuts spread over ten years in entitlement programs. And you I think right now the best thing to do is for them to come to us and say, look, here's what we think makes sense. We've told them what we think makes sense. What we can't do is try to figure out what's going to be good for them. They have to come tell us.

CROWLEY: Well, and by that you mean in terms of cutting, because you know what they want in taxes. They don't want to have tax rates go up on the wealthy. You know that they want to do something about entitlements. And the way this looks to them, if you take the Republican side of this having seen your plan today, the administration's plan today, is they're asked to do $1.6 trillion in revenue raising or tax increases, however you want to say it, and there is no certainty of any cuts here. There's sort of -- here's this $400 billion, and, you know, it's not guaranteed but we'll talk about it next year. If you're a Republican, you don't take that deal. $50 billion in stimulus, so that's more spending, not less. There's just a lot of things in the air, and not to mention you all want to control the debt ceiling. That's just not -- I mean, you can understand how that's a nonstarter for them.

GEITHNER: No, it shouldn't be.

Again let me -- that's not what we're proposing. Let me explain what we're proposing. We're proposing a balanced mix of detailed changes on tax policy -- higher rates and limited deductions for the wealthiest Americans alongside detailed measurable up front reforms on other government programs, so that together...

CROWLEY: Such as?

GEITHNER: Again, in Medicare, in health programs, other mandatory programs. We've just laid out $600 billion in details. I'll give you a couple of examples, but you can look at the details. We proposed to reform and limit farm subsidies, which can save a significant amount of money. And in health care we proposed things, like, for example, raising premiums modestly for higher income Medicare beneficiaries. We propose to get the government much smarter in how it purchases medicine. So those are just three examples,. But there's $600 billion of detailed policy in that basic program which along side the trillion we did together that's already in place and the savings we get from winding down these wars is a very substantial package of reforms.

Again, roughly...

CROWLEY: But you have got a $16 trillion debt, and you did $1 trillion of it. And that was in order to get your debt ceiling raised. So, how does that count...

GEITHNER: It counts because it reduces the deficit. What we're here trying to do is to reduce the long-term deficit. So the test...

CROWLEY: Because they want new ones, as you know, the Republicans?

GEITHNER: Yeah and again, and we're prepared to do these on the spending side. But what we're not going to do is extend those tax cuts for the wealthiest Americans. Remember those cost $1 trillion over ten years. And there's no possibility that we're going to find a way to get our fiscal house in order without those tax rates going back up.

Now again, alongside that, we're prepared to do some very detailed things on the spending side, and we're prepared...

CROWLEY: But there's no guarantee, right? Didn't that say that in that thing, at least according to the read-out we got of your plan, so you can feel free to correct me because you haven't given me a read-out of it. GEITHNER: Guaranteed up front measurable savings scored by CBO enacted into law. The only guarantee on this side, as you know, when congress enacts policies.

CROWLEY: Right, but you would be willing to go for specific things and guarantee that there would be a specific amount of cuts?

GEITHNER: Of course, of course.

CROWLEY: But that's next year?

GEITHNER: No, that's not true. We're prepared to do up front alongside a deal that includes raising rates on upper income Americans included in those. We are prepared to do a meaningful amount of savings on the spending side, not just to avoid the damage of the sequester, but to help reduce the long-term deficits.

CROWLEY: But you want them -- you want them to come forward with the cuts.

GEITHNER: No, I think again in general we've laid out a detailed plan. We would be happy to look at an alternative plan, but they have to lay that out for us, both on the revenue and rates side, but also on the spending side. Again, that's just a reasonable way.

What we can't do is sit here and trying to figure out what works for them. They have to come tell us what works for them.

But, Candy, let's go to what's at stake in this context. This is something we can do. And I think we're going to get there, because there's too much at stake not to get there not just for the American economy, but for the world economy. And we have a chance to do something very good for the country now, very good for the country now. Again, not just protecting 98% of Americans from seeing an increase in their taxes, not just preventing the threat of default hanging over the country in the future, not just preventing deeply damaging spending cuts up front in this context, but doing something to create room to invest in infrastructure, strengthen the economy, get more people back to work and putting our long-term fiscal house in order. And that's what we're going to work towards.

Now there's no surprise. You're a pro at this.

GEITHNER: There's going to be a lot of political theater between now and when we get there.

CROWLEY: And is this a part of that political theater? Meaning your...


CROWLEY: You know, this is your opening gambit here. It's not -- you know you're not going to get what you went up there and put out there for Republicans.

GEITHNER: No, what we're trying to do -- and this is the only way I know how to do these things to solve problems is you have to be very clear and direct with people about what you want and what you need and what's important for the country, and that's what we did.

And in those proposals, no surprise. There are the things the president campaigned on. The country has had a chance to think about the merits of those proposals. They're overwhelmingly supported by the American people and the business community, and that's why we think that ultimately they're going to be the basis for an agreement.

CROWLEY: So the $50 billion in stimulus, let's take that, that's in there for roads and infrastructure, et cetera. If you don't get that, then no deal?

GEITHNER: Again, huge support in the business community for that.

CROWLEY: OK. But if you don't get that?

GEITHNER: Huge support. And it's good for the economy because, again, it makes the businesses more competitive, gets more Americans back to work. It's something we can afford. And those proposals we made to strengthen growth are things we pay for in this plan.

We show how to pay for it, how to make sure that we're using the savings from the wars, for example, to invest in things that are important to America. And, again, what we're asking people to do is to make a modest investment in making this country stronger.

CROWLEY: Right. And but again, you know where this is going. John Boehner, again, the speaker, said, we're at a stalemate. Is that how you would describe where things are?

GEITHNER: No, I think we're far apart still, but I think we're moving closer together. Again, remember...

CROWLEY: Where are you closer?

GEITHNER: Well, they -- the Republicans have said for the first time in decades, if I'm not mistaken, the leaders of the Republican Party, that they are prepared to raise taxes as part of a deal that helps reduce our long-term deficit.

Now what they haven't said to us is how far they're willing to go both on rates and revenues, and that's something we're going to need to see from them if we're going to have an agreement.

CROWLEY: But they've said no increase in rates. They've said that repeatedly. GEITHNER: Yes, but there's going to be -- but they know this. I mean, Candy, there's not going to be an agreement without rates going up. There's not going to be...

CROWLEY: So you'll go off the fiscal cliff in the Republicans say, sorry, no way are we going to raise rates for the -- on the wealthy? You guys are willing to go off the fiscal cliff?

GEITHNER: If Republicans are not willing to let rates go back up and we think they should go back to the Clinton levels, a time when the American economy was doing exceptionally well, then there will not be an agreement.

CROWLEY: So you would be willing to let that happen?

GEITHNER: And, again, let me explain why, again, if they are going to force higher rates on virtually all Americans because they're unwilling to let tax rates go up on 2 percent of Americans, then, you know, that's a choice we're going to have to make. But they'll own the responsibility for the damage to the American people.

CROWLEY: But it's kind of the choice that the country will have to pay for, correct? So is there some responsibility for you all? Like, you would let that happen, say, OK, fine, you guys don't want to do tax rates, we're out of this?

GEITHNER: Again, what we're trying to do is to get them to come together and join us in doing something that's good for the American economy. And we recognize that's going to require spending savings, not just revenue increases on the top wealthiest 2 percent of Americans. We recognize that...

CROWLEY: And you would like them to propose on the spending side. You would like to see what they want?

GEITHNER: Well, again, no, we proposed detailed proposals on both sides. If they want to go beyond that, then they should tell us what they would like to do. If they want to do it differently, they should tell us what they want to do.

CROWLEY: Whose turn is it? Where are we in this? GEITHNER: The ball really is with them now. And, again, they're in a hard place. And they're having a tough time trying to figure out what they can do, what they can get support from their members for. That's understandable. This is very difficult for them.

And we might need to give them a little more time to figure out where they go next. But...

CROWLEY: We don't have a lot of time.

GEITHNER: We don't have a lot of time. I agree. We can't wait very long. Again, what we are trying to do is be as clear as we can with what is essential to us and what we would like to have, what we think is good for the American economy, and what we need to hear from them now is, what do they think makes sense? CROWLEY: In terms of cuts, because you know what they think makes sense in terms of revenues.

GEITHNER: No, they haven't told us. They haven't told us yet what they want to do on revenues or on rates or even deduction limitations. There has been nothing from them on that except for a vague recognition, which we welcome, that rates are going to -- that revenues are going to have to go up. That's part of it, but that's just the...

CROWLEY: I mean, they've been pretty adamant on no rate hikes. But, I mean, my final question, because you're going to leave us at some point, I guess, after this -- you get this fiscal cliff thing is cleared up in some way, shape, or form.

When you look back over your four years here as treasury secretary, when you look back at the stimulus plan, the $7 trillion- plus, and where we are right now in the economy, in the economic recovery, is this honestly where you thought you would be when you started out trying to fix the economy you got?

GEITHNER: I think we're in a much stronger position today as a country than we were in '07 -- in '08 when the president came to office, a much stronger position.

CROWLEY: Sure, folks see that for sure. I just wonder if you think looking forward that this was where you thought we would be. Didn't you think we would be better off?

GEITHNER: And to me, I think we're in a much better position than actually I thought was realistic, in those darkest days of this financial crisis, when there was a real risk of catastrophic collapse, and I think all Americans can be much more confident today than any time in the last four, five, six years that we have a better foundation for broad-based growth than we had in -- and I'm proud of being part of that, even with all the challenges we have ahead.

CROWLEY: Mr. Secretary, thank you for joining us.

GEITHNER: Thank you. CROWLEY: Will Congress beat the clock on the fiscal cliff?


REP. JOHN BOEHNER (R-OH), SPEAKER: There's a stalemate. Let's not kid ourselves.


CROWLEY: Democratic Senator Mark Warner and Republican Senator Kelly Ayotte are here next.


CROWLEY: Joining me are Democratic Senator Mark Warner of Virginia and Republican Senator Kelly Ayotte of New Hampshire. Thank you both for being here.

AYOTTE: Great to be here.

WARNER: Thanks, Candy.

CROWLEY: Senator Warner, first to you. You heard the Republican reaction to what Timothy Geithner brought to Capitol Hill. It seems to me it kind of moved things backwards. There was sort of this, OK, OK, we're -- you know, we'll put revenue on the table, and suddenly people are saying, well, we're really far apart. We're at a stalemate.

Did it do more harm than good?

WARNER: I don't think so, Candy. I mean, when they first met, the president laid out his opening offer many terms of a down payment. Let's go ahead and have the rates go back up, which, by the way, was the assumption that was made in the Simpson-Bowles plan, was the assumption that was made in the gang of six plan.

WARNER: You can still do tax reform off that higher base.

Then they said, no, that's not enough, give us your full plan, because as somebody who has spent more time doing business deals than I have in politics, you lay out a term sheet. Well, the president laid out a term sheet with all the details.

I think in any negotiation I've been involved in, you put down a term sheet, the other side comes back and says, no, I like this part, I don't like this part. And my hope would be they would actually get to those negotiations because every day that clicks off, we are hurting the economy as we go into the Christmas retail season, as people are probably not buying because they may not know all the details of the cliff, but they know bad stuff is going to happen if we don't get our act together and get this done.

CROWLEY: And, Senator Ayotte, you heard the treasury secretary say, well, now it's up to the Republicans, they have got to bring us something. What would that something be?

AYOTTE: Well, Candy, let me just say I was disappointed by the president's proposal. I think it's essentially a rerun of his budget proposal. I mean, the revenue proposals are, you know, $1.6 trillion in revenue and tax increases. It's a massive tax increase.

But also not significant and meaningful entitlement reforms, which is -- as you know, the speaker came forward and put revenue on the table and said, you know, for Republicans, we really want to solve this.

And I want to commend Senator Warner for the work he has done on the "gang of six" and also the "go big" principles because that has contained really three components. You know, revenue, spending cuts, meaningful entitlement reforms. Obviously, we need to give that certainty to our economy as well. We want to solve this, and I think the speaker earnestly wants to solve it. I was disappointed by the president's initial proposal here.

CROWLEY: Do you think the president has to get more involved in this? We've seen -- you know, some Republicans are saying, where is he? You know, well, he was up in a sort of campaign style event on Friday while Geithner was presenting this thing.

And honestly, Senator, there's -- as you point out, there are three kind of critical business weeks coming, certainly for retail, and it has taken us almost a month since the election for the president to put out what everybody already knew he wanted, so what...

WARNER: The first meeting, the president laid out let the rates go back up. The assumption that Simpson-Bowles had, the assumption the "gang of six" had, and then said to our Republican colleagues, give us back what you want for a down payment, because we're not going to solve all of this by the end of the year.

Then they said no, give us more detail. And through Secretary Geithner, they've laid out more detail. I think it's also incumbent...

CROWLEY: But it wasn't new detail, and it has taken so long.

WARNER: But it's also incumbent upon the president to realize this is a conversation he needs to have not just with Washington, but with the fact of everybody in the country. So bringing in business leaders, bringing in small business owners, going out across the country.

One of the reasons why I think this time it's going to be different from the failures of the past, you know, the debt ceiling debacle, the failure of the super committee, is I think the American people and particularly the American business community, realize what's at stake, and I think there is an awful lot of us, frankly, in both parties who are willing to get there. And I want to commend Kelly as well.

There has been a big group of us, well in excess of the majority in the Senate, who said, we're willing to do our part. We want to give the president and the speaker room to get the framework, but we'll be there to get -- to help fill in the details as we go forward.

CROWLEY: Senator Ayotte, it has -- there's not much time left here, and it does seem like an inordinate amount of time, almost a month has passed, and we have a description of stalemate and way far apart.

AYOTTE: Candy, I see that as very disappointing, a big problem. That's why I didn't like seeing that essentially it was a rerun of his budget that couldn't get support from either party in the House or the Senate.

So it is time. I see, you know -- for the speaker to come forward and put revenue on the table, that was a big...


CROWLEY: That was a big thing, would you agree? The speaker put revenue on the table the day after the election, I think.

AYOTTE: That was very difficult. But let's -- I mean, I know that Mark has been -- understands that, but the primary drivers of our fiscal crisis, when we think about it, we don't want to go bankrupt. We don't want to be like Greece. Entitlement reforms, the majority of our spending, and also to make sure that those programs are preserved, 2024 Medicare is insolvent, Social Security, 2033. These are important -- it is time for us to come together and solve the big problems.

CROWLEY: Do you agree entitlements absolutely positively have to be on the table?

WARNER: I think entitlements have to be part of the mix. But saying you're putting revenues on the table versus specificity is really two different things. As a business guy, you've got to have a term sheet with details.

If the Republican leadership...

CROWLEY: If Senator McConnell said, hey, you know what, let's raise the...

WARNER: If the Republican leadership doesn't like the details in the term sheet that Secretary Geithner laid out, come up with a counter term sheet.

You know, we've got to get past the kind of Washington decoder- speak and say specifically, how do we get there? I also believe that one of the things we need to get to is major tax reform, but we need to go ahead and lay down what we're going to get done before the end of the year, and then how we get to that. I believe at least $4 trillion in net deficit reduction.

CROWLEY: Let me stop both of you there, because I have got to take a quick break. So they'll stay with us after a short break. I do want to come back and ask you about President Obama's U.N. ambassador, Susan Rice. Has the Benghazi incident ruined her chance to come the next secretary of state?


CROWLEY: We're back with senators Mark Warner and Kelly Ayotte.

Final wrap-up question on this fiscal cliff. Do you both agree with the following? This deal has to happen and this deal will happen before the end of the year?

AYOTTE: It has to happen, Candy, and I truly hope that it does happen. And -- but I'm really disappointed by the president's initial proposal, and I think that we've got to get beyond, you know, the tax rate issue.

I just want to say one thing. Republicans have offered closing loopholes, deductions, or capping deductions. There is more revenue there. The tax rate issue is more of a political trophy than an economic solution. And so it's time for us to get to the table and resolve it.

I think there's some will, though, among both parties to get this done. CROWLEY: Hoping it will happen is not the same as saying it will happen.

WARNER: It will get done. And quite honestly, getting this done will do more to jump-start jobs and the economy than any single policy proposal that either Governor Romney or President Obama put out during their campaign.


Let me turn you to Benghazi. You've been quite outspoken, senator, I know about Susan Rice, the UN ambassador, the things that she said on the Sunday following the Benghazi attack which turned out not to be true. Are her chances to become Secretary of State should the president nominate her, and we expect something to happen this week on that, are her chances over? Is she a nonstarter for you?

AYOTTE: Well, Candy, I did meet with her this week. I remain very troubled not only myself, for example, the ranking Republican Susan Collins of the homeland security committee raised some very important questions after meeting with her.

But here's where we are. If after the meeting with her - I think there was an impression left that she just went on and repeated some unclassified talking points on all the Sunday shows, but she had the daily intelligence briefings, including the classified talking -- materials that basically had the references that individuals with ties to al Qaeda were involved.

CROWLEY: So you think she knew al Qaeda...

AYOTTE: She did. That information was -- she had reviewed it before going on Sunday shows, and went on the Sunday shows went well beyond the talking points saying we have decimated al Qaeda, that was no where in the talking points, said things like the attacks were a result of the -- direct result of our heinous and offensive video, that was want in the talking points, said that the security at our consulate was substantial, strong, significant. That's not in the talking points and frankly, not supported by the record.

I mean, what happened that day?

CROWLEY: So has Susan Rice disqualified herself...

WARNER: Nothing I have heard in my mind would disqualify her thus far. Now, that's amazing to me that we should be focusing on not so much what was said about which talking points, but how did the tragedy where four Americans were killed in Benghazi happen? We've got a State Department investigation headed up by Tom Pickering and former General Mullen. We've got on the intelligence community on which I serve, we're now in a series of hearings looking at that.

How do we make sure? I'm sure Kelly and I would agree that we have got appropriate protection for our State Department personnel. How do we make sure if they come under assault that we have got assets to be able to come in and protect them. What I find remarkable is the president hasn't even nominated anyone yet. Why are we spending all this time if you nominate Secretary Rice or Ambassador Rice, we ought to have these discussion. What we ought to be looking at is what happened in Benghazi, how do we make sure it never happens again?

CROWLEY: Do you find it interesting - I mean it is, that happened September 11. It is now December 2, and we still don't know what happened. Why there wasn't any security. I mean, isn't it part of that overall discussion?

AYOTTE: And I agree with what Mark said in terms of the big picture question here. Why don't we know yet? First of all, why was the consulate so unsecure given the prior attacks, given that the British left, the Red Cross left? And also during a seven-hour attack why couldn't we help those individuals?

But also, this talking point issue, I hope that our intelligence was not politicized because there have been some intelligence questions and failures here. We've had three stories on the talking points, so that's important just for making sure that our intelligence is solid going forward.

WARNER: Well, remember these talking points came at the request of the House intelligence committee. If there was a way to make sure we get those cleaned up and they were amended four days later. Again, we'll get into this if this individual is nominated, but I think at the end of the day we make sure we never have this kind of tragedy again.

And candidly, back to the issue before, in 30 days we have to decide whether this country is going to go over a cliff that would be dramatic not only to our economy but to the world's economy. That's where we ought to have our focus right now.

CROWLEY: Senator Warner, Senator Ayotte, thank you for joining us.

AYOTTE: thank you, Candy.

CROWLEY: Ahead, President Obama back in campaign mode. And, later, the election ended four weeks ago, but some people are still voting. How one lingering race might affect Speaker Boehner's future negotiations with the White House.



OBAMA: Of course, Santa delivers everywhere. I have been keeping my own naughty and nice list for Washington. So you should keep your eye on who gets some K'nex this year. There are going to be some members of congress who get them and some who don't.

(END VIDEO CLIP) CROWLEY: President Obama traveled to Pennsylvania for a campaign style event on Friday where he toured a local toy factory and delivered remarks on the looming fiscal cliff. Joining me around the table AB Stoddard, associate editor for The Hill, Montana Governor Brian Schweitzer, former Hewlett-Packard CEO Carly Fiorina and USA Today Washington bureau chief Susan Paige.

Thank you all.

I wanted to start with that soundbyte, because the president was talking about - he is in a toy factory - he was talking about who is naughty and who is nice. And I talk to lawmakers, both Democratic and Republican afterwards who went, really, is this how we're going to -- we're kind of offended by it. Is this idea of going out and gathering up public support working for the president right now?

AB STODDARD, ASSOCIATE EDITOR, THE HILL: Well, as you discussed with Secretary Geithner, these discussions at least to Republicans are moving backwards now. He is inflamed the situation on the Republican side making John Boehner's challenge much deeper. They see it as a waste of four weeks, as you also pointed out, because they've known what their ultimate opening bid would be all along. They need to get down to business.

Going out on the campaign -- on a campaign style trip and calling them Scrooge is really not going to help. And I think at some point they have to get into a room and get going. A deal takes more than an hour to put together, and serious talks have to begin.

Republicans are really very angry about the way this week unfolded.

CROWLEY: Governor, I mean, it does seem like -- I mean, we understand that you need the public behind you and the president's best energy has always come from outside Washington, but it doesn't seem to have helped with the negotiations, at least where we see them right now.

What is the point of a proposal that pretty much they say, oh, yes, well, we knew all this stuff before the election?

SCHWEITZER: Well, let's not forget how this started. It was Congress that lit a fire to the barn with the expectation that they would get credit putting the fire out later. And the president was elected by all of the people in this country. We have 535 members of Congress who were elected from all over the country.

CROWLEY: But wait, 49 percent of the people did not vote for him. And I think a lot of folks think he is now governing in -- or at least putting proposals out there as though 100 percent of the vote.

SCHWEITZER: Just remember how this started. Congress created this so-called cliff. They decided that there would be a date certain where everything would unravel. It wasn't the president that did it, and now he has laid something on the table. It's time for Congress to act. And to say that their feelings are hurt? You know, let's put on the big boy pants for girls and boys and let's get this job done.

FIORINA: You know, there has been a lot of talk around this town about the movie "Lincoln." And in that movie Lincoln, in the service of a big idea, expended enormous political personal capital and negotiated a deal.

And what we have here is a president in the service of a small idea, taxing the wealthy, who has put forward no personal political capital to actually get a deal done with these guys. You had Senator Warner on earlier who said, rightly so, you know, when you negotiate a deal, certain things happen.

I negotiate a lot of deals too, and what I know is for a deal to get done, it has to feel like win-win. The president has to give Republicans something that they can say they won. If he is going to insist on not investing his own personal skin in the game and insist on a win-lose, we're not going to get a deal.

CROWLEY: Susan, to the Democrats side is, wait a second, we did win. We did win the election. They consider that this was a public support for them, the exit polls proved, an increase in taxes on the wealthy. So that's kind of their position at this point.

I was interested when I asked Secretary Geithner -- he said, well, you know, there's a certain amount of political theater. Is that -- are we just in the political theater stage and none of this is serious?

PAGE: Well, and you know, look at the date. It's December 2nd. It's not December 29th. That might be when things get serious. If you were planning to make New Year's Eve plans, I would suggest you cancel them because under what circumstances would this -- would Washington act by December 15th if the deadline is not until the end of the year?

You know, I heard something else interesting, though, in what Secretary Geithner told you. He said there will not be a deal unless rates go up on the top 2 percent. But he didn't say rates have to go up to the level...

CROWLEY: To Clinton levels.

PAGE: To Clinton levels, right? And that's where I think you begin to see the outlines of the deal that we will end up having, hopefully, at the end of the year.

CROWLEY: I mean, do you see signs of Republicans that -- yes, I have heard this too from actually Republican aides. I haven't -- not anybody that was willing to kind of put their name on it and would vote on it, but who said, you know, we sort of see that there probably will be something around tax rates, but it won't be back up to the Clinton levels, and it may be for not the $250,000 limit.

Is there anything up there that makes you think Republicans would give on the rates?

STODDARD: Republicans have told me privately they will give on the rates. They are not in the interest after this election in defending millionaires. If the rates go -- if the threshold for tax increases moves off of 250,000 to 500,000, 750,000, 800,000, a million, they are going to budge on rates. They will budge. It will probably end up being somewhere around 37 percent.

But to Carly's point, it's time for some give. They don't want to say it at the mikes, but they've been saying it all along, we know we're going to have to budge on rates. So if they're going to budge on revenue and they're going to budge on rates, what is the president willing to give? That's how the deal gets done.

What happens is -- what Republicans are saying is, if the final hour if he has given us nothing, we'll just budge on rates, and then that's still not enough to close the deal. And that's all he'll get. He will not get a debt ceiling increase, and without that we're back at this four weeks later.

SCHWEITZER: There will be a deal. I think we all know there will be a deal. It won't be the grand deal. It will be a mini-grand deal. And most Americans have been involved in deals. You've either bought a car or you've bought a house.

And if you make an offer on a car and they immediately accept it, there was a damned fool that showed up that day. We don't know which one. There has always got to be a little bit of a give and a take when you do a deal. You make an offer, they say no, you make another offer, they say maybe.

So that's what we're doing right now.

FIORINA: Yes, but the problem is that the president isn't yet making offers that people know how to deal with. I don't -- I think you were brilliant in trying to get Secretary Geithner to acknowledge that. He obfuscated rather wonderfully.

But the truth is...


FIORINA: Actually, you're not confused. But he was on his talking points. But I think the point is that what I worry about now, I don't think anyone on Capitol Hill is going to let us go off the cliff, but I think what might happen is people come to the brink and say, we've got to punt another time, we've got to push the deadline out, we can't get there yet, and I don't think that's particularly good for the country either.

And honestly, I think people say, my gosh, we've known this is coming for, what, 18 months? Why is it down to the last three weeks?

CROWLEY: Susan, I'm going to give you the next -- last word after this, but next up, the front-runners for 2016. Only 47 months until the next presidential election day. (COMMERCIAL BREAK)

CROWLEY: We are back with A.B. Stoddard, Governor Schweitzer, Carly Fiorina, and Susan Page.

And, Susan, I promised to let you button this up. Where does this all end? What are we searching for here?

PAGE: You know, let's not forget that neither President Obama nor Speaker Boehner have all that much running with them. There are conservative Republicans who are not going to vote for whatever deal is reached. There are liberal Democrats in the House who are not going to vote for whatever deal is reached.

So the question is, is there a path that -- where their interests intersect closely enough so you can get enough votes on both sides to get this through the House?

CROWLEY: So I want to turn to 2016 because, I mean, it's been ages since we've talked about the presidential election.

(LAUGHTER) Because what caught my fancy was that Congressman Ryan and Senator Rubio are both going to be at the Jack Kemp Center as guests of, I believe, Rubio or Ryan. One of them is receiving the award from the -- and it just -- 2016 came to mind.

So if you're looking at either -- you know, which ever one catches your fancy, the Democratic landscape or the Republican landscape for 2016, these are pretty prominent names, right?

STODDARD: Oh, yeah, and I think they're both the top contenders on the Republican side. Paul Ryan is, sort of, the de facto leader, among conservatives is beloved, doesn't get blamed for Romney's loss, and really will be an interesting figure. He's supposed to be very influential and a part of the daily negotiations on this fiscal cliff deal, although he's hiding that from the press, which is an interesting game.

But as he, kind of, emerges, we know that Marco Rubio is running. He's running hard. He's already been to Iowa.

So they both have these roles. What will a fiscal cliff deal look like? Will Romney -- will Ryan support it? Will he get blamed if he does by the purists in the party?

And will Marco Rubio turn the party around? The sum push for immigration reform also very risky with the base.

CROWLEY: It always is interesting in these kind of years where the Republicans have now suffered a loss. Clearly Mitt Romney is not going to be the party leader. They don't actually have one. And you watch the wilderness fight for a while.

FIORINA: You know, Candy, I hate to say this because I know we all want to play along with 2016. But, honestly, I think part of the problem in Washington is everyone is so focused on the next election, it's always an excuse not to get something done.

I think the American people think, we just went through an election; now, please, now that you all have jobs, could we actually solve problems and get something done?

So, you know, 2016 will be here way too soon and people, to your point, are already running for office on both sides. But, honestly, I wish people would remember, whatever party they're in, you got elected this time a month ago to do a job and there's a big job to do.

CROWLEY: Governor, hard to take the politics out of Washington?

SCHWEITZER: Washington is so dysfunctional. Only Washington, D.C. is talking about 2016. The rest of this country, they're trying to create jobs. They're trying to get their kids off to school. They're trying to make payments on their house and their car. Washington, D.C., 2016, completely out of touch.

CROWLEY: So, Susan, I know you attended the dinner last night that I unfortunately was unable to go to, and they had some guest speakers. And there was some mention of some people on the Democratic side.

PAGE: Guest speakers, right. You know, this was the Winter Gridiron dinner. This was the dinner at which President Barack Obama first met Mitt Romney, the first time the two men had ever set eyes on each other. And, Governor Schweitzer, you were the Democratic speaker last time. And I'm telling you, maybe it's not time for 2016 politics, but it sounded like somebody who was interested in talking to the national press. Montana has never had a presidential nominee. Does that mean -- tell us about that.

Are you talking about that?




PAGE: You don't have your hat with you, but go ahead. Throw it.


SCHWEITZER: Look, again, it's way too early to talk about 2016. I'm governor of Montana until January. At that point, I'll no longer have a governor's mansions. I won't have a driver. I won't have security. So I'll have a little time on my hands. I think I did mention that I have a warm regard for the people of Iowa and New Hampshire.


CROWLEY: Which we would all like to say is not a no.

(LAUGHTER) A.B. Stoddard, Governor Schweitzer, have a nice couple of weeks left for you.

Carly Fiorina, thank you. Susan Page, thank you as well.

Up next, the last remaining race of election 2012 and what's at stake for Speaker John Boehner.


CROWLEY: And, finally, we know, in this holiday season, many of you and honestly a number of us continue to be thankful the election is over, except, of course, our viewers in the Third U.S. Congressional District of Louisiana.

Election 2012 lives on in the Third, and maybe it's fitting that it's an intramural race fitting a conservative Republican against a slightly different conservative Republican.


Where is the compromise?

CROWLEY: Four-term Congressman Charles Boustany, an ally of Speaker John Boehner.

REP. CHARLES BOUSTANY, R-LA.: I offer, with my experience, conservative leadership that gets results and has credibility and conservative leadership you can trust in this district.

CROWLEY: Versus one-term Tea Party type Republican Jeff Landry.

REP. JEFF LANDRY, R-LA.: We are the conservative candidate in this race, and we're out there looking for people who are interested in sending conservative leadership to Washington.

(UNKNOWN): Without objection, the gentleman is recognized for one minute.

CROWLEY: They are victim of a political version of the game of musical chairs. Redistricting forced two sitting congressmen to compete for one seat. Neither reached the 50 percent mark November 6, so state law sends them into a runoff and that sends Third District Louisianans to the polls one more time this week.

BOUSTANY: Enough is enough.

CROWLEY: The two, let's call them, former House colleagues, voted identically 92 percent of the time in more than 1,500 recorded votes.

BOUSTANY: I have a consistent conservative voting record.

CROWLEY: Now they are locked in a nasty second-round election fight. LANDRY: If we don't get rid of those people who fail to solve the problems and continue to kick the can down the road, we're going to go nowhere in this country.

CROWLEY: The candidates and outside groups have spent a combined $6 million so far, the costliest House race in Louisiana.

BOUSTANY: Mr. Landry did go negative early. We had to defend our voting record. We've done that. And I want to continue to promote what I offer.

CROWLEY: So in the end Louisiana's rather unusual race turns out to be rather conventional, very expensive and nasty. Boustany holds the lead in the polls going into this Saturday's race, and hopefully this time next Sunday, we can officially put a period on Election 2012.

Thanks for watching "State of the Union." I'm Candy Crowley in Washington. If you missed any part of today's show, find us on iTunes. Just search "State of the Union."