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Election Hangover; Painful Solution; Tax Cuts

Aired November 11, 2010 - 19:00   ET


JOHN KING, HOST: Thanks Wolf and good evening everyone. Tonight embarrassment for President Obama overseas as he fails to seal two big economic agreements, the president says he'll keep at the negotiations, but his Asian trip is now clouded by this question: Is the big election setback here at home dimming Mr. Obama's star on the world stage?

Plus, a statement the president's top political adviser says was nothing new is interpreted by some liberals as a surrender in the debate over whether to extend all of the Bush tax cuts or just those for people with annual incomes below $250,000.

And that bold new plan to slash spending and raise taxes to bring federal deficits under control, well it is declared dead on arrival by liberals and conservatives alike. Keeping this debate alive is yet another challenged facing the president who says it is time now for politicians in both parties to back up all their rhetoric about spending with some courage.


BARACK OBAMA (D-IL), PRESIDENT OF THE UNITED STATES: If we are concerned about debt and deficits then we're going to have to take actions that are difficult and we're going to have to tell the truth to the American people.


KING: More on that debate in just a moment, including a very close look at some of those proposed spending cuts and tax hikes and they'd affect you. But let's first explore whether the Republican route in the midterm election is indeed affecting the president's political standing overseas. A debate in a moment, but first, some firsthand reporting from our White House correspondent Dan Lothian who is traveling with the president in Seoul.

So Dan, no free trade agreement with South Korea and no deal at the G-20 summit on that plan the president had hoped would give a boost to American manufacturers. Not the trip he had been hoping for.

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: That's right. You know no movement on the currency dispute between the United States and China, but most importantly that trade deal between the U.S. and South Korea that the White House had been talking now for quite some time, hoping that they could get it done here but in the final hours realizing that there was not enough time to get it done, so President Obama saying that he hopes that they can do this in the next few weeks not months.

This is critical to the Obama administration because the president has been looking overseas for new markets for U.S. goods to create jobs back at home. The president believing that this South Korea deal could create as many as 70,000 jobs and a trade deal worth $10 billion. But, again, this deal is not getting done here in South Korea, one administration official saying that these kinds of deals are very complex, they're difficult but that progress is being made -- John.

KING: Complex and difficult. But the president did promise last summer to try to get this done by this summit. Dan, what does the White House say when critics say and reporters ask well do you think the leaders are testing the president. Do they view him as weak?

LOTHIAN: They do not view him as weak. In fact that was a question that was asked before the president even came on this trip. That was there any concern at all that because of the midterm elections would that make the president weaker on this trip, the White House knocking that down, in fact, saying that the president would have discussions about the midterm elections with these world leaders. They did not see that as any major hurdle for him. But clearly, there is a little bit of disappointment because they had hoped to leave here with that trade deal. They won't be doing that, but the White House trying to put the best face on this, saying that they are making progress -- John.

KING: Dan Lothian for us on the president's trip in Asia -- Dan, thanks. So that is the White House view, but do his peers now view the president as weakened because of his big election setback or are these just tough negotiations and is the president smart not to give up too much just to make a deal?

In New York John Avlon, CNN contributor and the senior political columnist for the, with me here in Washington, Republican consultant and CNN political contributor Alex Castellanos, Democratic pollster Cornell Belcher, and CNN senior political analyst Gloria Borger. Cornell to you first, in the sense that Democratic president goes overseas right after this election.

They have to know -- they have to know at the White House, there will be a feeling out process. And his peers who are trying to negotiate in South Korea's case, they don't want to let U.S. beef into their market. They want to be very slow and reluctant to let Ford, GM, U.S. auto makers sell cars in that market, of course they're going to test him.

CORNELL BELCHER, DEMOCRATIC POLLSTER: Right -- let me push back on part of this. He is still tremendously popular overseas. I wish some of that popularity was still here. (INAUDIBLE) popular overseas, but that popularity doesn't always equate to sort of being able to move leadership. Look, ultimately I think this deal does get done because ultimately you know what; it is in the interest of the Koreans to also get this deal done.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: You know I think generally Republicans, when you come back you are going to have Republican control of the House. They are generally more receptive to trade deals. The question that I have and I think it's going to be interesting to see it play out and maybe Alex, you know something about this, the Tea Partiers seem to be a lot more skeptical about trade deals because they see them as sending jobs abroad so the Republican Party could have a tough time on this.

ALEX CASTELLANOS, CNN POLITICAL CONTRIBUTOR: I don't know. I think a lot of Americans and Republicans and Democrats were hoping the president would work out a Korean trade deal that would create jobs especially now since there are so many unemployed Democrats (INAUDIBLE) had to get that in.

BORGER: You did.


CASTELLANOS: No. This is I think a president who has been weakened by an election. I mean this is the biggest repudiation of an agenda that any president has had since the middle of the last century. And his inability I think to go out there and cap this election season with any kind of political economic success abroad makes you wonder --

BORGER: He'll get it --


CASTELLANOS: This is the beginning of the 2012 campaign --


CASTELLANOS: -- and he has misstepped (ph) --


BORGER: He'll get it.



AVLON: As Bill Clinton famously said after the '94 election, the president is still relevant. He is the president, and he's on the global stage and that's one of the things that reminds the American people of the primacy of the presidency. Look, he had a hugely successful trip to India, announced a large number of trade deals. And in the case of South Korea a deal at any cost is often a bad deal for the American people.


AVLON: So rather than trying to, you know spin it one way or the other for partisan purposes I think he has had a successful trip abroad overall. This is a disappointing round of negotiations. But I think overall he comes out hugely enhanced by the alliances he formed with India on that earlier part --


KING: Hang on for one second. Hang on for one second. Let's listen to what the president said because to John's point the president is sitting across the table and he knows the Korean negotiations are very tough. George W. Bush cut a deal. The president knew he couldn't sell it to a Democratic Senate. He was trying to make some changes to it and he knows that everybody across the table is going to try to see is he weak, does he need a deal to go back home politically. The president says he wasn't willing to get a deal at any price. Let's listen.


OBAMA: If we rush something that then can't garner popular support that is going to be a problem. We think we can make the case, but we want to make sure that that case is air tight.


CASTELLANOS: It is politically inept for a president to set expectations that he is going to go to Korea and come back with a deal and this is what's going to begin his reelection campaign and this is what's going to reassure the American public that he is going to create jobs and growth. It is a political mistake. It's a governing mistake and when John Avlon --


CASTELLANOS: Excuse me. When John Avlon is sitting there saying that the president is still relevant means the president has got a problem --


BORGER: But are you saying the president --

AVLON: I was making a joke about the fact that the presidency is always relevant --


AVLON: -- political obituaries --

BORGER: But you are not saying-

AVLON: All these political obituaries we see after midterms are always bull. We know that.

BORGER: But you're not saying the president should have accepted a deal that he didn't think was right that can be --

CASTELLANOS: I'm saying that any good lawyer or politician --

BORGER: I agree with you -- (CROSSTALK)

CASTELLANOS: Any good lawyer or politician --


BELCHER: This is the problem, Alex.


BELCHER: We are already --


BELCHER: We're playing politics with it already though, Alex.


CASTELLANOS: No good lawyer --


CASTELLANOS: No good lawyer or politician would ask the question --

KING: But the president -- the president --

CASTELLANOS: -- he didn't know the answer to.

KING: The president --


CASTELLANOS: This president just did.

KING: The president is trying to keep a very delicate balance right now in the sense that in the short term for the next two years at least the Democrats will narrowly control the Senate. Yes, the Republicans are more open to these trade agreements, but he's gone through a drubbing. He's got a bunch of Democratic senators up in 2012 including some big industrial states.

It is his job as the leader of the Democratic Party to protect them to a degree. It is his job as the president of the United States to finish this deal. And he knows that he will have Republican friends, whether it is Colombia free trade agreement or the South Korea free trade agreement if he gets a deal that he can come home to his party and say look, you may not love it, but I got you a better deal than George W. Bush got.

BORGER: And don't forget this is a bad economy so you have to be extra careful -- I'm not saying you shouldn't have worked (INAUDIBLE) I get that.

KING: He did say --


KING: He did say in Toronto last summer that he thought by the time he got to this meeting he would have a deal. That is a tough one for the president. He did lay it out --

BORGER: Right.

KING: -- that he thought he would --

CASTELLANOS: And if you are looking at the politics of this you are looking now to a president who has to argue well I know I said unemployment would be at eight percent, but it is actually at nine. I know the economy would have recovery summer and we'd start doing better. I know I said we would get this trade deal but we haven't. You begin to connect the economic dots here and there's a record that just doesn't auger well for a president going into an reelection --

AVLON: But what's interesting in the micro sense is that you do see a neo-protectionist movement creeping up not only on the Democratic left, but among some folks on the far right. That is the reaction of the economic crisis we are in, but that is one of the (ph) shifting fault lines in American politics there at the heart of this debate and debates we're going to have going forward.

BELCHER: And very quickly, one interesting thing to me is when the president does deliver this deal what are the Tea Partiers and your party going to do to sort of --


BORGER: Are they going to vote for it?


KING: (INAUDIBLE) one of the fascinating questions. Does Mitch McConnell go to the floor and say good for you Mr. President or does he see pressure from the Tea Party movement.

CASTELLANOS: Whenever party, Republicans or Democrats come up with an agenda for growth. It's not just deficit reduction. But who's going to put on the table an agenda for jobs and growth for 2012? That's who's going to win the --

BORGER: Let's see what the unemployment rate is --

KING: All right, well a quick time-out because when we come back we are going to focus on another big economic issue, tax cuts. And we'll explore this debate -- excuse me -- about whether the president is somehow surrendering now to the Republicans on extending the Bush tax cuts.

But first, since Mr. Obama is overseas it was Vice President Joe Biden who led this morning's Veterans Day ceremonies at Arlington National Cemetery. You see the wreath laying ceremony there; it is always a very solemn occasion. The vice president paid special tribute to the spirit of wounded warriors he says he visits frequently at Veterans hospitals.


JOSEPH BIDEN, VICE PRESIDENT OF THE UNITED STATES: You know what I most often get asked and I am not exaggerating one scintilla. In almost every case they say Mr. Vice President, can you help me get back to my unit?


KING: Sometimes in politics it is not just what you say. Sometimes it is where you say it. And Washington is buzzing today, especially the left, because of an interview David Axelrod, the president's top political adviser, gave to the liberal Web site "The Huffington Post". In that interview discussing whether or not to extend all of the Bush tax cuts or if the president prefers just some of the Bush tax cuts David Axelrod said this.

"We have to deal with the world as we find it. The world of what it takes to get this done. We don't want that tax increase to go forward for the middle class. But plainly what we can't do is permanently extend these high income taxes." Now people are trying to parse these words and let's get back to our conversation here.

Cornell Belcher, he says what we can't do is permanently extend these high tax cuts and on the left people are saying aha, what he is saying is we can temporarily extend these high income tax cuts. Do they have a choice?

BELCHER: I think -- I think --


BELCHER: This is amusing to me because the reality of the situation is you have got to stake out your place of negotiation and then you got to go negotiate. That is what the president said. The reality is there is a GOP Congress right now so they are going to have to negotiate. We can't have everything that we want.

BORGER: Yes and you know, he said -- I spoke with him today. He said it wasn't news.


BORGER: David Axelrod, he said it wasn't news. That he was just essentially reiterating what the president had said when the president said in his first press conference after the midterms that he was absolutely --

KING: One word, absolutely.

BORGER: -- absolutely open to negotiations. But I think it is just an indication of reality. They are going to end up doing something temporarily on all fronts.

CASTELLANOS: The president just lost 60 percent of the Independent vote in a midterm election. Look at your calendar. It is now 2012. He's looking at that. All he's got to do --

BORGER: Is this 2012?

CASTELLANOS: He's got to let those Independents know he heard them this election. He's got until next November --

KING: But John is that what they said?

CASTELLANOS: -- to get his base back.

KING: Did the Independents say extend all the Bush tax cuts?


AVLON: The Independents are very concerned about deficit and debt reduction. And while I think they repealed (ph) at raising taxes in a recession is a bad idea, all Axelrod was doing is reaffirming the fact that you know what, there was just a huge election lost by Democrats and guess what, it is a new political world --


AVLON: -- negotiations.

KING: Let's show people what we're talking about. Let's show them the math because all the Bush tax cuts -- you remember that President Bush won a contested election and got these through in his first months in office. The Bush tax cuts are due to expire on December 31st at the end of the year. What the president wants to do is renew those tax cuts for individuals making $200,000 or less or couples making $250,000 or less a year. The president's plan, if you did that, would add $3 trillion to the deficit over 10 years.

The president says that's worth it to help the middle class. What the Republicans want to do is renew all of those tax cuts permanently. That would add $4 trillion to the deficit over that brief period of time and the president's argument is we can't afford that extra $1 trillion. That it's tough enough the deficit spending, but here's the choice. Here's the choice.

They have a lame duck Congress coming into town next week still controlled by the Democrats. He can cut a better deal now or we can let the tax cuts expire. The Republicans will say aha the Democrats just raised your taxes and then he'll have to cut a deal with the Republican House in January.

BELCHER: It is in no one's interest to allow this to happen. If taxes go up (INAUDIBLE) I'm -- the Republican Congress (INAUDIBLE) to happen. The White House doesn't want this to happen. It's not going to happen.

CASTELLANOS: There's a difference between 3.2, which is -- trillion which is what the president's plan would cost and then another 700 billion which is what the Republicans would add. However, the economic --


CASTELLANOS: -- and -- no the economic argument is this. We are in a connected society now. Can you tax just the rich people's side of the water bucket? Can you take money out of that? We've just seen Wall Street melt down and everybody's homes lose value. I think both sides have an economic as well political argument here that is this the time to take that much money out of the private sector --

KING: And so -- and so is the deal forget it? Remember the president campaigned on this. This is not a surprise. He campaigned on this in the 2008 presidential election. But the economy has been bad so he has said before I'll wait, I'll wait. It is not a good time to raise taxes. Is the deal now all right fine? Let's extend them all for two years and let's have another presidential election about this in 2012?



BELCHER: It becomes a conversation because my retort (INAUDIBLE) would be you have a tax base right now that is benefiting the rich. By the way, the rich who made off like bandits over the last couple of years while the middle class has been squeezed. Now are we going to let the middle class now pay for more --


CASTELLANOS: Here is the political issue though. If you take a trillion out of the economy, it is an anti-stimulus. You do this the year before Barack Obama runs for reelection?

BORGER: Yes, but you know what --

CASTELLANOS: It is not good politics --

BORGER: You do it all temporarily --

CASTELLANOS: -- or good economics.


BORGER: You do it all temporarily, but we have a deficit commission coming out --



BORGER: The background to all of this is the fact that OK, you are going to extend the tax cuts even temporarily, cost you a fortune and by the way --

KING: You make the deficit challenge a whole lot harder.


BORGER: And that job -- and that already looks like it's DOA, so --

KING: And so -- and we are going to debate -- we're going to debate this deficit commission in a little bit, but John Avlon, that is part of the problem in the sense that we have -- we're having a conversation right now five minutes about tax cuts and then in a few minutes we'll have a conversation about the deficit.

But when are we going to have in Washington with the leadership having a big global conversation that says we have to make some choices because these two don't get along. And if you want to do this, you don't get this.

AVLON: And they are allergic to that reality. We have a Congress that is essentially afraid of math. They want to focus on tax cuts but they don't want to talk about budget cuts. And the reality is there's too many politicians in Washington are content to demagogue the deficit and the debt but they're afraid to deal with it because it's politically unpopular.

So you have a deficit commission that came out with an initial draft report and already it's getting shot out by both sides. It shows the fundamental un-seriousness of too many folks in Washington and the American people sent a pretty clear message this election in large part about spending, the deficit and the debt.

BORGER: Actually John, it is getting shot at much more by the liberal Democrats, Nancy Pelosi who called it simply unacceptable.

AVLON: That's true.


BORGER: The Republicans have backed off because guess what, now they are going to control one House of the Congress --

KING: I think -- I think they back up (ph) because they want the left to blow this up so they can blame them --


KING: If the left -- if the left were quiet, it would be the right blowing up.


BELCHER: No, it's also interesting that this was leaked out because guess what? I'm guessing there wasn't enough commissioners to vote on this --


KING: But it's -- but it's the president's commission. Would the leaders have leaked out their plan without the White House approval?

CASTELLANOS: Here is where we need --


CASTELLANOS: Here's where we need a president -- I wrote a piece about a week ago in "Politico" saying -- arguing that the first step in this discussion should not be what do we cut or what taxes do we raise? Because what happens -- Republicans go to their usual corner, Democrats go to their usual corner. Nothing gets done.

There's a better way. A president could bring everybody together and say let's have a discussion about the role of government, the size of government, what it should do and a budget. How much --


CASTELLANOS: In your family, John, if you decide hey we've got this much money, then you can allocate priorities --

KING: But that's what --

CASTELLANOS: We'll take this and not that. We have to do that in Washington --

KING: But that is what everybody at home is so mad about, whether you're left, right or in the middle is that in the past two years they have had to do these things and make tough choices and do things they didn't want to do --

BORGER: Right.

KING: -- and they see nobody in this town willing to say --


KING: -- a Republican saying we might need revenue --


KING: A Democrat saying we might have to touch Social Security.


BORGER: Seventy percent of the voters --


BORGER: -- in a CBS poll out tonight --


BORGER: -- 70 percent of the voters say we want to see both sides compromise.

(CROSSTALK) BORGER: That's what the voters --


BELCHER: But here is the problem because it all -- it all -- all that makes sense until you actually have competing interests here who are going to lose something. Because then for better or worse, our system is set up for competing interest. It's a market place of competing interests. Now all these interests are going to sort of work to make sure their side doesn't lose and that's what Congress fundamentally is.

UNIDENTIFIED MALE: But we can't --

AVLON: But the problem --


AVLON: Yes, the problem is, is we keep forgetting about the national interest cause Washington politics is too preoccupied and dominated by special interest. This is not about -- look if we have a national issue with deficit and debt, it needs to be dealt with and everything has to be on the table.

So rather than Speaker Pelosi firing off a press release immediately saying it's simply unacceptable, we have to engage in that. The president should lead -- people forget, even before he had took office he was talking about entitlement reform. And -- and he needs to lead on that issue. There is a Nixon in China opportunity here. Because that's the only way you are going to deal with the deficit.


KING: I am going to call a time out right here, but we're going to continue this conversation. I will just make this point, before we can deal with the financial deficit, the fiscal deficit to Mr. Avlon's point and I think everybody in the room would agree, we have a trust deficit we have to deal with.


KING: The politicians and the parties don't trust each other and the American people don't trust any of them. You deal with the trust deficit maybe you can have a grownup conversation, but shall I say I'm not all that optimistic that's going to happen.



KING: All right, everyone thanks for coming in. We are going to continue this conversation a bit later in the program. You hear us talking about this bold new proposal, what to cut, what to tax, well among the things they want to cut, yes there is a lot of big spending items like the Pentagon. But also money for the Corporation for Public Broadcasting, that's "Sesame Street". That's Big Bird and it's NPR.

And you go to the National Zoo to see the pandas right now you don't pay. Under this plan you would. That's something we'll talk about. And we'll get the latest on the update, the write-in ballots are being counted up in Alaska -- it looks good for the incumbent Lisa Murkowski at the moment. We'll check the new numbers and we'll talk about whether this one might end up in court.

And later tonight "Pete on the Street" -- have you seen these -- these new labels proposed to go on cigarette labels, cause cancer, kill you. We'll check the warning labels out and talk them over with our friend Pete Dominick.


KING: Welcome back. Let's check in with Joe Johns for the latest news you need to know right now -- hey there.

JOE JOHNS, CNN SENIOR CORRESPONDENT: Hey John. A top leader with the Tea Party Express says a Romney bid for the White House could face pushback because of the health care plan enacted when he was governor of Massachusetts.

An unusually reliable Russian newspaper says an assassin has been dispatched to deal with the Russian agent who controlled that spy ring the U.S. cracked back in June. Other reports say the one-time spy master is on the run and may defect to the U.S.

The Tea Party is already thinking about 2012 and that could be bad news. And once again it is in the prompter, so what can I say. The other story I was supposed to tell you about, of course, was this issue of the egg that was thrown at the former White House Chief of Staff Rahm Emanuel. Apparently it fell just short, it didn't hit him. It would have been quite a photo-op if it did --

KING: He was campaigning in Chicago. We have that video, don't we?




UNIDENTIFIED MALE: An egg. Someone just threw an egg.

UNIDENTIFIED MALE: OK, don't worry about it.


KING: Now --

JOHNS: There you go.

KING: Now Rahm didn't see the egg obviously.

JOHNS: Right.

KING: Somebody threw an egg. He's in that little gaggle with some citizens there. He is in a Latino community talking to citizens, some reporters nearby. He just sort of turned his head -- pretty cool under fire.

JOHNS: Right.

KING: I was waiting for the Bush moment you know when they threw the shoe --

JOHNS: It is really funny -- I know -- it's really funny with this guy, he always seems to be where the trouble isn't, you know. House of Representatives goes over Republican control, he just happens to be out of the way. Rahm Emanuel.

KING: Well we'll watch Rahm in that campaign. We'll see if any more eggs come his way. But don't go anywhere. You know George W. Bush -- here's another moment on tape for you -- George W. Bush is out promoting his new memoir "Decision Points" and he sat down for an interview with Sean Hannity of FOX.

As you know, when we tape things sometimes you stumble a little bit. Watch this.


UNIDENTIFIED MALE: And thank you for joining -- joining -- can we do that again?



GEORGE W. BUSH, FORMER PRESIDENT OF THE UNITED STATES: They never let me do it you know.



BUSH: It would have been underestimate (ph), not --


UNIDENTIFIED MALE: This is all included. We're (INAUDIBLE).

BUSH: Strategy not strategery (ph), I mean come on.



KING: You know I know that -- what do we used to call that -- the other -- the other -- the other network.


KING: But let's give Sean and the president both points for a good sense of humor --

JOHNS: Absolutely.

KING: That's pretty funny stuff.

JOHNS: He seems a lot looser now though --

KING: "W"?


KING: Well you know you don't have the burden of the presidency whether you like them or don't like them out there the ex-presidents are a lot looser than presidents. Yes, that is a fact -- Joe that's a fact.

Up next here, a very close look at that new proposal to get the federal deficit under control, not only suggests major spending cuts at the Pentagon, it would end federal funding for Public Broadcasting, little "Sesame Street" and NPR and you would for the first time have to pay to see the pandas at the National Zoo or those cool planes at the Air and Space Museum.


KING: It is a safe bet that over the past two years you have had to make tough decisions to keep the family's budget balanced. What about Washington? Will the politicians here put ideology aside or defy special interest groups and work in a bipartisan way to bring some fiscal sanity to the nation's budget?

We'll debate the choices in a moment but first, let's take a closer look at what the leaders of the president's deficit commission have just proposed. Here's some of the reforms suggested by the commission. Raise the retirement age and social security from 67 to 68 by 2050 then to 69 in 2075. They also propose some legal reforms in the federal system. Some major tax changes in this new plan, limiting the mortgage deduction. That one is very unpopular and controversial.

Lifting the amount of payroll, the amount of income, subject to the social security payroll tax, eliminating the alternative minimum tax, most people don't like that, cutting corporate tax rates to 26 percent and taking some loopholes out along the way and capping taxes, the federal government cannot take in more than 21 percent of the gross domestic product. There are a number of tax increases and fee increases here. Raising the gas tax by 15 cents, that's controversial, increasing some Medicaid co-payments. This one will be very hard politically. Establishing some co-payments for those veterans in the VA health system and charging for entry at the Smithsonian museums, the National Zoo, the Air and Space Museum, the History Museum and things like that. Some of the freezes called for here, a lot of spending cuts and freezes, noncombat military pay would be frozen for three years to 2011 levels, that's always controversial, and they would freeze all federal salaries for three years. That one there facing opposition from some of the labor unions involved. There is a long list of cuts and reductions in this plan. Lowering social security cost of living adjustments, cutting domestic and defense spending by $200 billion by 2015, cutting the white house and Congressional budgets by 15 percent, not a lot of money but they say it's an important symbolic gesture, closing about 1/3 of overseas military bases, cutting the federal work force by 10 percent over the next few years, eliminating all earmarks, reducing foreign aid, eliminating any federal spending to support commercial space flight funding, reducing farm subsidies, good luck with that, cutting corporation for public broadcasting funds.

That's not a ton of money but again that's the money that goes to create Big Bird, Sesame Street, National Public Radio. If you were watching last night, you saw the immediate partisan divide. A leading conservative right here says no way because this plan includes tax increases. And a key player in the labor movement called the plan dead on arrival because it changes social security and Medicare. Halfway around the world in South Korea the president admonished both sides.


OBAMA: And so before anybody starts shooting down proposals, I think we need to listen, we need to gather up all the fact. I think we have to be straight with the American people. If people are, in fact, concerned about spending, debt, deficits and the future of our country then they're going to need to be armed with the information about the kinds of choices that are going to be involved. We can't just engage in political rhetoric.


KING: Any hope for that or is that hopeful thinking on the president's part? Let's debate the road ahead. Joining me from Phoenix, Arizona is the former U.S. comptroller general, David Walker. He kept the government's books. And with me here in Washington is Robert Kuttner, co-editor of the American Prospect magazine. Mr. Walker, to you first. You have been screaming for some time about what you consider to be the fiscal insanity in Washington. I have the outline of the leadership draft here. When you look at this proposal, it is a serious document, it doesn't eliminate the deficit but is this the place to start the debate or did these guys get it wrong?

DAVID WALKER, FORMER HEAD, U.S. GOVT. ACCOUNTABILITY OFFICE: It is just a beginning. It is a courageous and a comprehensive proposal where everything is on the table, budget controls, social insurance reforms, defense and other spending cuts, tax reform and tax increases. I commend the president for saying that people shouldn't shoot prematurely. I think it is irresponsible for leaders on either side of the political aisle to be condemning anything at this point. They don't have plan. If we don't have a plan, we don't have a prayer to solve the problem. KING: Yet, Bob, you are one of the leaders in the liberal movement of America who says no way. Why?

ROBERT KUTTNER, CO-EDITOR AMERICAN PROSPECT MAGAZINE: First of all, just because a plan is unpopular and just because it inflicts a lot of pain, doesn't make it is a good idea. The question I raise is what is this plan a solution to? We are in a very severe prolonged recession, the most serious recession since the great depression. Most standard economics would say you don't cure a recession by more austerity. You don't take a situation where people have 15 million Americans out of work, 9 percent or 10 percent unemployment and that is what is predicted by the way for a year from now when this starts to bite and tighten belts even more which is just going to throw more people out of work. This is about sequencing. I'm all in favor of bringing the budget closer to balance but let's get a recovery going first.

KING: Well part of the question though is we live in a democracy. The American people just took the House of Representatives away from the Democrats and gave it to the Republicans in part because they're concerned about all the spending in Washington. You make a point but the liberal reaction was it touches social security. Forget about it. Unacceptable the speaker of the house Nancy Pelosi said. If we have divided government which is what we will have in January, Democratic president, Republican House, narrowly Democratic Senate, if people just decide forget about it and won't start the conversation saying, okay, it is too much cuts here or the tax increases are too big. Why can't we come to the table and discuss it before we say forget about it?

KUTTNER: We can. John, this is about sequencing. You don't inflict austerity when you're still in the middle of a very dire recession. I'm all in favor and I think most liberals are in favor of bringing the budget closer to balance. People voted the Democrats out of the House of Representatives because of the depth of the recession and the depth of joblessness not because an idealized conception the budget ought to be balanced. People are hurting. People are out of work. That is why the Democrats lost 60 some seats.

WALKER: John, quite frankly, with all due respect to Speaker Pelosi, her comments were irresponsible. Secondly I agree with Bob, we need to separate the short-term from the structural. By the way, most proposals in this mark didn't end up calling for tax increases or cuts right away. They delayed them. We need to do what it takes to make sure that we have a recovery. We need to make sure we get unemployment down. We need to have a plan that we can phase in that will end up not undercutting this economic recovery while at the same point in time showing our foreign lenders that we are serious about putting our federal financial house in order.

KING: You are shaking your head.

KUTTNER: This phases in much too quickly. This phases in less than a year from now when most economic projections said unemployment is 9 percent, 10 percent. Everything is not on the table. KING: Would you say that they should have a serious conversation about this and the left should say we need to push the effective date back a little bit but will talk about social security and Medicare as long as the Republicans will talk about revenue increases.

KUTTNER: Let's separate out social security. Social security is going to be in surplus for the next 27 years. Social security has nothing to do with the budget deficit.

WALKER: That is just false. That is false. Social security is running a cash flow deficit. It is adding to the deficit. It will be in a permanent cash flow deficit starting in 2015. That is just false.

KUTTNER: I'm sorry. It is not false.

WALKER: I'm a trustee. I know what the numbers are.



KUTTNER: This commission was charged with -- the report says social security has nothing to do with the current deficit and the cuts are not going to take effect for decades. I don't know why social security is part of this at all except ideological opposition to the whole idea.

WALKER: It is a chance to see the expectation of every generation of Americans. What was proposed here was very moderate. By the way, the fact of the matter is I agree hat we need to look at when these cuts should take place. I respectfully suggest we look at once we are sure we are not going to have a double-dip recession and once unemployment gets to a reasonable level. I agree with you on that, Bob. But we have to have everything on the table.

KUTTNER: Everything is not on the table the Bush tax cuts cost $4 trillion over a decade. They're not on the table. Before the Bush tax cuts the budget was balanced.

KUTTNER: They should be.

KING: Thank you. We can agree on that. Let's end on the point of agreement. We will continue this conversation, on that point, the Bush tax cuts your problem may be in the short term with a Democratic White House. We'll see how that one plays out. Bob Kuttner, thanks again, David Walker as well. This was a good conversation. We will keep at it.

Next we'll go live to Alaska for new numbers from the write-in ballot count in that Senate race. But first, Veterans Day was once called armistice day, the day World War I ended. On November 11, 1918, there were nearly 5 million Americans served in that war still alive. Today there is one. 109-year-old Frank Buckles spent the day in West Virginia. He is hoping Congress will designate a 1930s memorial on the Washington Mall and another one in Kansas City, official national monuments. He hopes that happens while he is still around to see it happen. Wow. We salute that hero and all the heroes on this Veterans Day.


KING: It is Veterans Day. Not a holiday for the vote counters up in Alaska. They are going through the 92,000 or so write in ballots from the U.S. Senate contest. CNN's Shannon Travis is in Juneau with the latest numbers and new reaction from Joe Miller's campaign. Shannon?

SHANNON TRAVIS, CNN PRODUCER: That is right, John. Right now as I speak there is dramatic development. There is a press conference right beside me right now. This is Floyd Brown. He is an advisor to Miller's campaign. He is laying out the way forward for his camping. Two key points. They are saying even though a lot of the sorting that has happened so far with 89 percent toward Murkowski, they feel the absentee ballots and other ballots will help tip the scales in Miller's favor. Secondly and this is one explosive charge, they are alleging widespread voter fraud in this race. They will go to court to make sure people accurately voted and that there was no fraud involved.

KING: That is an explosive allegation. As that goes forward Shannon, I want to show some of our viewers. You have the people behind you counting the votes. We have pictures of ballots, people wrote in Lisa Murkowski's name. Sometimes they didn't get it exactly right. The question is, if it is close enough, we see these ballots. I remember going in, they said if it is close enough and the intent was clear they would count it. Is that the practice going forward and is the Miller campaign upset about that or do they think there are people who are just ineligible voters?

TRAVIS: Excellent question and a key point here. As you just mentioned, as our viewers are seeing, some of the ballots are showing a version, a variation of Murkowski's name. In some cases, the election officials here are counting them as solid votes for Murkowski. Maybe they're being challenged the Miller campaign. But another really key thing here, we are seeing ballots right now even some ballots clearly spelled for Lisa Murkowski, with her entire name spelled correctly, some of those are being challenged on the grounds by the Miller count, it is illegible, there are smudges.

KING: Shannon Travis for us on the scene; Shannon, nice work. They are counting behind you, a news conference on the other side. That is a man who keeps his focus. For us in Juneau, Alaska, Shannon keep watching the count. We'll be back with you as this story develops.

Floyd Brown, that is a blast from the past. Put that in your search engine.

Next a story just in here, Congressional sources in both parties are telling CNN a compromise is emerging on extending the Bush era tax cuts and later our Pete Dominick looks at the new warning labels the government wants on cigarettes. (COMMERCIAL BREAK)

KING: Breaking political news on the debate to extend all or some of the Bush tax cuts, a big challenge facing the president post midterm elections. Let's get the news and talk it over with our senior Congressional correspondent Dana Bash and our national political correspondent Jessica Yellin who joins us from Los Angeles. What are you hearing?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: I'm hearing that there is talk on how they can compromise on the Bush tax cuts which expire at the end of the year and the most likely scenario at this point, emphasize at this point, is temporarily extending all of the tax cuts. Two, three years for everything, for the wealthiest Americans and those making $250,000 and less. I'm told by Democrat and Republican sources in this scenario both sides would give a little. Why would they do that if everyone agrees on extending all of the middle class tax cuts permanently and the reason is especially on the Republican side I'm told by the GOP sources they think it is not politically beneficial to do one without the other. That's one of the many reasons. Unclear if this is going to get very far. This is some of the talk.

KING: If those are the talks Jessica Yellin going on now, it might be the best deal the president can get. If he waits until January, the Republicans control the house and you know many liberals will say surrender.

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: Many liberals will be outraged. They are starting petition drives. This is the final straw if the president caves on this. This is what the liberal groups are saying. It's done. Whatever that ultimately means to them. It seems inevitable the president has to do this because the new Republican house will not make it easier to get a deal. He has to address the political reality and deal with the liberal base, give them something else down the line.

KING: This deal or any deal would then immediately become a big debating point in the already beginning 2012 campaign whether it's for the presidency, Mr. Obama running for reelection or for all the senators and house members up for re-election, again. As we look forward to that campaign, Jess, you are not just in Hollywood to party with the stars. You have been digging deep into the data that tells us who voted and who didn't vote last Tuesday.

YELLIN: What was astonishing to me, a couple of things. First of all, the president overwhelmingly lost the independent vote. For the first time since polling began, Democrats lost the women's vote. I should say Democrats lost that, not the president. What's fascinating is fewer -- the Obama voters turned out at far fewer numbers than McCain voters. Old McCain voters got more of a turn out this time. But John, the whole argument that if the president was more liberal in his policies, he would have excited his base and got them out in bigger numbers, it doesn't seem to wash. When you look at the numbers, liberal identified Democrats turned out at the same rate they historically turn out for midterm elections. The moderate Democrats are the ones he lost or they went over and said they are independents. They raised questions to who he has to appeal to do great in 2012.

BASH: That's a great point. It brings it back to the beginning of the discussion and what to do about tax cuts. The other question is not just what Democrats and Republicans can agree to, it's what Democrats can agree to among themselves and that data that Jessica was talking about is perhaps confusing for Democrats is you know are the liberals going to be okay with compromising. Are moderates going to be okay with compromising? A big question now is can Democrats compromise among themselves on what the best strategy is on tax cuts or anything else in the next few weeks when they have to do it?

KING: Watching the electorate swing, it's fascinating. In 2006 when President Bush's numbers went down, Republican identification, when you call people and say what party are you, dropped off the planet. A lot of those Republicans didn't want to say I'm a Republican when Bush was down. They said I'm an independent. Now maybe we're having the same dynamic among Democrats saying I'm an independent. I'm not going to join. I don't want that label now. Watch the middle. The middle goes like this in politics. Here's another big story in politics and the question is will the Congress deal with it in this so called lame duck session? Next week the Democratic Congress, Nancy Pelosi is speaker. Harry Reid of course will still be the Senate leader come January. The lame duck Congress still controlled by the Democrats meets and one question, will they vote to repeal don't ask, don't tell. There's a study in the Washington Post today, the Washington Post got a hold of this still confidential Pentagon study in which it says this. "More than 70 percent of respondents to a survey sent to active duty and reserve troops over the summer said the effect of repealing the don't ask don't tell policy would be positive, mixed or nonexistent." Essentially the thrust of the study saying not as big of a deal or disruption as some military leaders and some conservatives in Congress have warned. Will they vote on it next week?

BASH: I talked to Republicans and Democrats who said it's very unlikely. They are not totally closing the door on it. The votes or lack thereof have not changed very much from before they went home to campaign to where they are now.

KING: This is a bit -- go ahead.

YELLIN: This is one of the areas where the Democrats could give something to the liberal base. If they could get the votes together, it would be a big gift to keep them satisfied for a little while.

KING: But how then? Does the president want to pick this fight right now? Does he want to push the lame duck Congress to do this or is it better for the president to regroup and not deal with the issue?

BASH: They have so many items on their agenda. So many. We are talking just in a number of weeks. I've talked to senior Democratic sources who said they have to put it on the list and see where it falls and the very, very hard things that we can do. It's probably not going to make it. YELLIN: Dana, don't you think it was leaked to prod Congress to act on it?

BASH: I think it's entirely possible.

KING: How cynical of you people.

BASH: Entirely possible. I haven't talked to anyone that thinks it will move the ball.

KING: Jessica Yellin in L.A., Dana Bash here, thank you.

Before we go to break, I want to show you something. This is Veterans Day and we want to take a closer look at the veterans population here in the United States. Number one, there are 23 million, more than 23 million veterans in the United States right now. 92 percent are men, 8 percent are female. Here's an economic portrait. If you are a veteran in America, your average annual household income just above $35,000. Unemployment rate above the national average at 10.6 percent but that is down from 15 percent at this point a year ago. Federal spending on veteran's benefits last year, $96 billion. Veterans who were wounded in Iraq, they live all across the country. The darker the color, the redder the state, the higher the number of wounded Iraq veterans, 31,000 there. And quickly let's look here, wounded in Afghanistan as well, 7200 plus wounded in Afghanistan, those veterans across the country. If you haven't today taken a minute to say thank you, please, please, please do.

How much is it? How much is too much when it comes to cigarette warning labels? Pete on the street investigates, when we come back.


KING: So, we all know smoking is bad for your health. How far should the government go in warning those about to buy a pack? Our offbeat reporter Pete Dominick, he's in Atlanta tonight and he's investigating. Pete?

PETE DOMINICK, OFFBEAT REPORTER: John King, that's right. They have a bunch of new warning labels. We can look at some of them here. I have an idea, John King, not everybody is motivated by the fear of death. Some of us want to be accepted and not be lonely. You have time for a couple of my ideas for a label?


DOMINICK: How about this one, John King? If you smoke your breath will smell like crap and there's not enough gum in the world to hide it. I mean that's a good motivator. How about, if you only smoke because you drink it's because you are lonely and codependent? And lastly, smoking will alienate you from your co- workers and will cause you to stand outside in the dead of winter, shivering over your addiction. And I'm thinking the president is rumored to be a smoker. Maybe the first lady can slip a label in his cigarette box that says getting caught smoking may cost you re- election. Finally, John King, why not put the warning labels on the foods that are unhealthy. It's no secret that smoking is bad but the fatty foods, why not put a label on there that says keep eating this and you will need to buy two seats on the airplane? I mean it's just that obvious.

KING: There's a feisty crowd in that food court down there. I want you to go down there and try to put some labels on all the bad food in that food court and we'll see if you are still with us by this time tomorrow night.

DOMINICK: No way, sir. That's an Atlanta Falcons Ravens crowd.

KING: We've got to go. That's all for us. "PARKER SPITZER" starts right now.